BT: Shipping to recover in 3-5 years: Cosco chief

Business Times - 10 Nov 2010

Shipping to recover in 3-5 years: Cosco chief

(GUANGZHOU) The global shipping market will recover in 3-5 years, led by the container industry, which has already started to return to profit, a top executive said yesterday.

The shipping industry is seen to be returning to pre-crisis levels with the help of soaring consumer consumption in China, said Wei Jiafu, head of China Ocean Shipping Company (Cosco), the world's largest dry bulk firm.

'China's internal demand is huge, external demand is also growing and we will see another spring in 3-5 years' time,' he told reporters at an industry conference in China's southern port hub of Guangzhou.

Mr Wei forecast that the Baltic Dry Index would average 3,500 points in 2011, up from Monday's close of 2,482 points.

A flood of new dry bulk and oil tanker vessels may weigh on the freight market in 2011, slowing the industry's recovery from the global financial crisis two years ago.

Signs of a recovery were already becoming evident in the container industry, a sector closely linked to world economic growth, since it does not face the same oversupply problems as dry bulk and tankers.

Mr Wei urged the freight industry to avoid 'irrational fleet expansion' that could threaten to burden the market for years.

The global fleet of dry bulk carriers is expected to outpace economic demand in 2011, a result of the industry's buying spree two years ago before the financial crisis slashed sea trade.

'We should pursue a more rational growth model, restricting irrational fleet expansion and staying on the right course,' he said. 'This is our only choice to sustain growth in this highly volatile market.'

Outstanding bulk cargo ship orders represent more than half of the existing capacity, according to Clarkson Research.

Dry bulk freight supplies were expected to increase to 616 million deadweight tonnes next year, a 15 per cent rise from this year's 537 million dwt, analysts said.

That would surpass a 5 per cent rise in expected demand growth in seaborne trade to 413 million dwt from 395 million dwt\. \-- Reuters