Monday, November 03, 2008
Editor: Bruce Meng
31 Oct 2008 10:02:20 GMT
* Sticks to plan to buy new ships
HONG KONG, Oct 31 - Hong Kong-based bulk shipping firm Pacific Basin Shipping <2343.HK> will stick to its plans to buy new ships and have all financing ready for future capital commitments of more than $720 million, a senior executive said.
But the firm will be cautious toward any new investments due to uncertainties in the international shipping market, which has seen an unprecedented fall in freight rates amid the global financial crisis, said Klaus Nyborg, deputy chief executive officer, on Friday.
"It's a very drastic and deteriorating market we have been facing and there are a lot of uncertainties for the immediate future," he told Reuters in an interview at his office in the commercial Central District.
Its relatively small position in forward freight agreements (FFA) was "predominately for hedging purposes," he said.
Shipping is a notoriously cyclical business and a lengthy industry boom in the past few years, partly fuelled by China's demand for energy and raw materials, has amplified the impact of the recent downturn, Nyborg said.
With a long-standing order for new ships in the market, Pacific Basin played safe and sold 13 ships in 2007 and 7 in 2008.
"We have $800 million at hand in cash and we have addition bank credit facilities," he said, adding that would be enough to cover its capital expenditure requirements of $721 million for dry bulk and non dry bulk assets.
Pacific Basin is expected to post a record profit in 2008 with average forecast earnings of $621 million by 14 analysts polled by Reuters Estimates.
Orders for its core handysize fleet services were covered by 93 percent in 2008 and 43 percent in 2009. But the average daily time charter rate fell about 28 percent to $22,580 in 2009 from $31,340 in 2008.
Traffic demand for its core handysize ships was weaker as trade credit restrictions curbed demand. But the wide varieties of cargoes that the ships carry, ranging from ore to sugar and fertilizers, could help mitigate the impact, he said.