December 02, 2008

Shipping firms see continued Chinese commodities boom

According to executives of shipping companies Genco and Teekay, the soaring demand for oil and steel in the developing world, particularly in China is a huge plus for the world's ocean shipping industry. And neither executive expects a slump in development anytime soon.

Mr John Wobensmith CFO of Genco Shipping & Trading Limited said Genco a dry bulk shipper is heavily exposed to China. He said that "Their steel industry has been growing 10% YoY to 12% YoY. Iron ore going in is about 30% of our business."

Mr Wobensmith said although some of China's recent development is tied to the upcoming Olympic Games in Beijing, the growth shouldn't stop when the games are over. He expects another upward boom to occur after the Olympics due to the growth of Chinese cities, and the infrastructure they need. He said that China's growth is a significant factor in the growth of the entire shipping industry.

Mr Wobensmith said "The last real boom in dry-bulk shipping was really post-World War II, with the rebuilding of Europe and Japan. China is obviously a much larger piece of real estate than Europe and Japan."

Mr Peter Evensen Executive Vice President and Chief Strategy Officer of Teekay said "I'm not sure why the oil prices are so high. If you look at it from our standpoint, there's plenty of oil out there, and our ships are moving it all. He said that the oil market is worldwide, but the real growth market is 'China. The marginal barrel of oil is being produced in the Atlantic Angola, Russia, Brazil whereas you're finding the marginal barrel of oil is being consumed in China and India. He even sees the situation as a net positive for his business.”

He added that "I think we make more when oil prices are higher. When the price of oil is high, then you don't find traders are beating us up so much over the rates."