Shipping boss confident over tanker returns

Booming Chinese demand and cancelled orders for new vessels should ensure continued strong returns for owners of tankers and dry bulk ships, one of the most successful shipping entrepreneurs of recent years has predicted.

Peter Georgiopoulos’ comments follow the listing of his latest shipping venture, a dry bulk operator known as Baltic Trading on the New York Stock Exchange in March. A number of less high-profile shipping figures have subsequently called off planned initial public offerings because of investor scepticism. Both the dry bulk sector – ships that transport bulk commodities such as iron ore, coal and wheat – and tanker shipping have suffered losses since the start of the economic crisis because of falling demand for commodities and excess ship supply.

However, Mr Georgiopoulos said he was heartened by the return of growth to the world economy, in spite of warnings by some sceptics that China, the motor of the growth, might be growing unsustainably fast.

Mr Georgiopoulos founded and listed one tanker owner – General Maritime Corporation – and a dry bulk operator, Genco Shipping. He also chairs Aegean Marine Petroleum Network, which owns barges that take fuel to ships. “We don’t see China slowing down at all,” Mr Georgiopoulos said. “We think this market is going to continue to grow over the next few years.”

There were also signs that orders for many of the huge numbers of new ships scheduled for delivery were either being cancelled or postponed. At one point ships with a capacity equivalent to 64 per cent of the existing dry bulk fleet were on order. There had been concerns that the deliveries would drive down ship earnings.

“In the last 18 months, I would say half the order book in the dry cargo side has not been delivered,” Mr Georgiopoulos said.

China is the world’s largest importer of iron ore and a net coal importer. The largest dry bulk ships, known as Capesizes, can earn about $40,000 a day. China’s growing oil demand underpins rates for very large crude carriers, the largest commonly-used oil tankers, of about $60,000 a day.

Baltic Trading is unusual among listed dry bulk operators in concentrating on the volatile, short-term spot market tracked by the Baltic Dry index. Most listed dry bulk operators, including Genco, concentrate on longer-term contracts to reduce their risks.

Baltic has limited its risk by assuming no debt in acquiring the six ships it has bought or signed contracts to buy.

“We felt there was an area of the market that was underserved,” Mr Georgiopoulos said of listed companies exposed to the spot market.