Shipping chief warns of ‘insane’ charter rates

One of the biggest operators in the booming dry bulk shipping market has warned that conditions where charter rates for ships have nearly tripled in a year, were “insane” and “unsustainable”.

In a rare interview, Nobu Su, chief executive of family-owned Taiwan Maritime Transport, said he was concerned about the situation because it was putting pressure on the industry’s customers – such as mining companies – to pass on inflationary price increases to customers.

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TMT has a fleet of 130 ships, about a third of which are dry bulk carriers. The fleet is a big force in the highly-fragmented dry bulk industry. TMT is also an important player in the global market for freight derivatives, accounting for about 30 per cent of global trading volume, according to its advisers.

“We believe it’s unsustainable and shipping people forget about their own business, which is providing shipping services,” Mr Su said of the market conditions, where owners of the largest, Capesize ships, can command about $180,000 a day in charter rates. “TMT has been in the shipping business for 50 years. We continue to do the basic business.”

At present, soaring shipping rates threatened to create inflation in every economy in the world, he added.

He said“I think it’s insane. It’s a very, very bad situation.”

He justified his gloom by pointing to the high level of ship orders, with ships of about 80 per cent of the current fleet’s capacity on order for delivery over the next four to five years.

“Nobody in the industry can survive with the capacity doubled in such a short time,” Mr Su said. “There will be overcapacity.”

Few shipping industry professionals share as gloomy an assessment as Mr Su. Dry bulk ship owners have struggled to find space at overstretched yards to place orders for new ships, meaning that deliveries are due to arrive relatively steadily.

Howard Bright, director of Dry Bulk at Braemar Seascope, a London-based shipbroker, said: “We’re quite convinced there’s no need to panic in the next couple of years”.

Trade publications have claimed TMT could benefit from a fall in rates because it has bet – so far unsuccessfully – on a fall in rates through its positions in the freight derivatives market. Mr Su declined to discuss his trading positions but insisted there was a general market feeling rates would have to fall.


Source: FT.com