Why are shipping stocks up in Asia?
Demand for container ships has been stuck in the doldrums, yet in Asia several big publicly-traded shipping companies are enjoying a boom in their stock price. Steve Henn reports.
A U.S. Coast Guard vessel passes a container ship near the Verrazano-Narrows Bridge in New York City. (Spencer Platt/Getty Images)
More on International, Wall Street, Asia
TEXT OF STORY
Kai Ryssdal: You know how we look at things like UPS and railroad freight loads when we're trying to get a handle on the economy? The more stuff that's being moved, the better, right? Same principles apply worldwide.
One of the telling indicators there is, container-ship usage. A global recession means demand for those ships has been stuck in the doldrums. Not enough cargo to fill 'em. Yet over in Asia some big publicly traded shipping companies are enjoying a boom in their stock prices. We asked Steve Henn to unravel this post-bust paradox for us.
STEVE HENN: When millions of Americans suddenly stop shopping, thousands of container ships around the globe are rendered useless. But those ships are still out there, bobbing off shore somewhere waiting for trade to come back.
DOUG MAVRINAC: Maybe 700-plus ships sitting idle off the coast of Singapore right now.
Doug Mavrinac is a shipping analyst at Jefferies and Company. He says there are few industries in the world that have been hit harder by this recession than shipping. Before the bust, the industry went on a ship-building binge. Then trade collapsed and now most container ships are operating at a loss.
MAVRINAC: You have such excess tonnage available that it's preventing rates from really rising appreciably, and it should until those 700-plus ships are no longer there.
Mavrinac believes the industry is probably years away from any real recovery. So it's odd that a couple big east Asian shipping companies are experiencing a bit of a boom in their stock price.
Fred Doll is an industry consultant.
FRED DOLL: Vessels, for example, that were averaging say $34,000 a day in 2007, are right now being chartered for around $6,500 a day.
With prices that low, Doll says most firms can't cover costs. And he's expecting a wave of bankruptcies.
DOLL: People are going to be in some difficulties financially -- that's clear.
But low interest rates have set off an investment boom in Asia. In Hong Kong, asset prices are soaring on everything from real estate to shares of stock in struggling firms in an industry still adrift at sea.
I'm Steve Henn for Marketplace.
Comments
Comment | Refresh
From San Antonio, TX, 11/19/2009
It's interesting that people are so interested in cigar butt shipping companies. Who is going to buy the ships when they aren't needed? I'm thinking we'll see some "oops, the pirates took my tanker" insurance schemes.
From Edina, MN, 11/19/2009
Steve, this was a great story about the state of the maritime industry. Container shipping is vital barometer of our economy because it illustrates business confidence in consumers (both B2B and B2C). I track this industry on a daily basis and blogged on October's results here: http://www.zepol.com/blog/post/2009/11/10/US-Customs-Trade-Data-October-Import-Data-Update.aspx.
Once again, thanks for the story and keep talking about the shipping industry.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.