Stimulus plans launched by the Chinese, US and European governments over the past few months are beginning to buoy demand and lift the troubled dry bulk market.
Stimulus plans launched by the Chinese, US and European governments over the past few months are beginning to buoy demand and lift the troubled dry bulk market, the head of China"s largest shipping company said.
But Wei Jiafu, China Ocean Shipping (Group) president and chief executive, said the fallout from the economic tsunami would continue to affect other sectors, including the liner industry, car carriers and shipbuilding.
He directly attributed the recovery in the Baltic Dry Index to the stimulus packages, particularly the initiatives announced by China that focus heavily on infrastructure spending.
Welcoming US President Barack Obama"s $800bn spending package, with its committment to support 3.5m jobs, Capt Wei said: ?I think it"s good. If people have jobs, then demand and supply can restart.?
Turning to the Chinese government"s Yuan4,000bn ($588bn) stimulus plan, Capt Wei said the first phase, involving Yuan100bn and allocated among different provinces in the fourth quarter of last year, has already had an effect in boosting demand.
?The stimulus plan is effective. It strengthens people"s confidence,? he said.
Pointing the early impact on shipping of the stimulus plans, Capt Wei said the Baltic Dry Index stood at its lowest ever level of 663 on December 5, but had recovered to 2,057 points on February 19. Capt Wei said China"s domestic steel price indexes have also risen, suggesting steel demand is increasing.
He said the recovery in the shipping sector was also being taking seriously by the Chinese government and related how China"s premier Wen Jiabao had asked about the recovery in the BDI at a meeting with the Cosco boss last week.
Speaking at Cosco headquarters in Beijing, Capt Wei told that he thought the worst was over the dry bulk market.
The market is expected to continue to slide
But for container shipping and car carriers, the market is expected to continue to slide.
A recovery would depend on ?how fast the US and European Union will walk out of this recession, for consumption will be the decisive factor to be considered?, he said.
Turning to other markets, Capt Wei said: ?I am quite puzzled with the tanker business. Hopefully, by the year 2010, with the gradual phasing out of single-hull tankers, the market would be much better than today.?
But he warned: ?For the shipbuilding business, the worst has not come.? He thought shipbuilding would hit rock bottom, possibly next year, ?as we know newbuilding orders are shrinking rapidly from quarter four last year?.
Capt Wei said South Korean shipowners and shipbuilders had recently had talks to lengthen the delivery schedules of vessels on order by another three years. Instead of the ships being delivered between now and 2012, delivery would be extended to 2015.
On Cosco"s own shipbuilding ambitions, Capt Wei said he had curtailed plans by Cosco group companies to order a total of 126 bulk carrier newbuildings last year, despite dissent from Cosco executives.
He said staff questioned his decision to cancel the newbuilding proposals when the market was still rising. Justifying the move, he told them his belief that the market would ?go sharply down in the near future?.