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Thursday, May 21, 2009

Dry bulk ship buyer looks for bargains

Thursday, 21 May 2009

After years of sky-high order books, a surfeit of dry bulk ships in the current recession means that companies like Ultrapetrol Bahamas Ltd should be able to buy vessels at bargain prices, the company's top executive said on Monday.
'We expect that dry bulk ships will be substantially underpriced in the next couple of years,' chief executive Felipe Menendez told Reuters in a telephone interview. 'The opportunities for us from this are going to be tremendous.' Ultrapetrol has a fleet of four dry bulk ships hauling goods such as grain and coal.
Unlike many dry bulk shippers that went all out to buy new vessels during the recent economic boom - resulting in shipyard order books being backed up for three years - the company opted to stick with its older vessels.
'We decided the prices were just too high for us,' Mr Menendez said. 'The market always has a tendency toward self-destruction and the bubble was so enormous that ship prices will have to come down significantly.' The company has US$200 million of cash and available credit to buy new vessels, he added.
Ultrapetrol runs a fleet of five tankers hauling oil and petroleum products in South America and expects to add at least two new vessels over the next two years as many of the vessels serving these markets are very old.
'We think that this represents a very nice niche for us and an opportunity for us to grow our market share,' Mr Menendez said.
Ultrapetrol also has a fleet of 600 river barges operating on the Hidrovia river system and has six ships - with six more on order - servicing offshore oil-drilling platforms.
The company is building its own US$30 million shipyard in Rosario, Argentina, which should open later this year.
Ultrapetrol plans to build 400 large barges at the yard over the next five years to take advantage of growing trade on the river system and increase its market share.
'Smaller barge companies are not in a position to do what we're doing because they lack our resources,' Mr Menendez said.
But trade on the Hidrovia river system - serving Brazil, Paraguay, Argentina, Uruguay and Bolivia - will be down substantially this year due to severe drought in the area that has affected soy beans, Mr Menendez said. Soy beans are the biggest commodity hauled by Ultrapetrol's barge fleet.
The company's main customer for its offshore business is Brazil's Petrobras. Ultrapetrol's ships provide supplies for deep-sea platforms. With oil trading at close to US$60 a barrel, Mr Menendez said he expected that all deep-sea platforms under construction will be completed and go into production as planned.
'It may mean that where construction hasn't started some platforms will be delayed, but oil at current prices can support the platforms due to start production in 2009 and 2010,' he said
Source: Reuters