The forward freight market gets ever tighter.
The latest numbers from Sempra Metals show the forecast freight queues outside Australia’s Newcastle coal loading terminal, based on projected ship arrivals, remaining high for the remainder of the year and likely to rise in the short term - taking more vessels out of circulation.
Activity is at a high - the Baltic Dry Index, a key measure of commodity shipping costs, has more than doubled in the past year.
But China to the rescue? At least seven Chinese shipbuilders are planning share offerings, underlining the country’s efforts to build up its domestic fleet and branch out into the construction of more advanced vessels.
The largest of the anticipated IPOs is likely to come from state-owned China Shipbuilding Industry Corporation, which wants to raise about $900m on the mainland A-share market. The other major state-owned shipbuilder, China State Shipbuilding Corporation, is considering a share sale in Hong Kong. Five privately-owned shipbuilders are also looking at selling equity to fund expansion.
A Lex note wonders if it’s time for investors to jump ship. Share prices of Asian shipbuilders are rising even faster than their order books.
Much of this is underpinned by the commodities boom - itself in part driven by China. But raw materials such as steel plates and marine engines are becoming more expensive and difficult to procure, contributing to lengthy delays at the Chinese yards.
Part of both problem and solution, and then another problem? Will rampant capacity expansion mean that the favourable dynamics for Asian shipbuilders recedes? In any case, with a handful of issues slated, says Lex:
You don’t need to be a seasoned sailor to know that a glut of paper is a signal of a market close to its peak.
