Dry-bulk shipping is in a period of intensive growth with exceptional medium- and long-term prospects, said the heads of four Greek shipping companies listed on the New York Stock Exchange, despite the negative forecasts published. A recent event held by the financial consulting firm Capital Link hosted Giorgos Economou of Dryships, Christoforos Georgakis of Excel Maritime Carriers, Giorgos Gourdomichalis of FreeSeas and Stamatis Molaris of Quintana Maritime. This forum came just a few weeks after the downgrade of the sector’s stocks by international analysts such as Fortis Bank, who expect a decline in freight rates and a growth in ship supply. Georgakis suggested that, for 2006, the rise in demand of products shipped by dry-bulkers will range between 4.5 and 5.5 percent. In the 1999-2004 period the increase in the trade of bulks by sea came to 24 percent. In 2004 alone, 2.5 billion tons of goods were shipped, while in 2005 this was expected to go up by 4.5 to 6 percent. Gourdomichalis even cited survey forecasts for further increases in demand next year. Among the commodities shipped, the top spot belongs to coal with 685 million tons or 28 percent of the total, while demand by 2007 will rise to 731.1 million tons. Iron ore is second covering 25 percent or 630 million tons, with demand expected to reach 685 million tons by 2007. Demand for minor bulks that include sugar products, fertilizers and steel products came to an estimated 930 million tons last year; by 2007 it is expected to reach 994 million tons. Asia is now the greatest importer, absorbing 59 percent of the global raw material bulk imports, followed by Europe with 24 percent. The global fleet has increased considerably. Gourdomichalis stated that in 2005 the number of dry-bulkers (with a capacity in excess of 10,000 deadweight tons) came to about 6,000, with a combined capacity of 340 million dwt. With the number of dry-bulkers under construction to be delivered within 2006, the combined capacity will expand to 370 million dwt, but this also includes ships to be written off the global register due to age. Dry-bulkers are divided into four main categories: Capesize ships, over 100,000 dwt, cover 32 percent of the global capacity. Panamax ships, from 60,000 to 100,000 dwt, take a 27 percent share. Handymax vessels (from 40,000 to 60,000 dwt) take 19 percent while handysize (up to 40,000 dwt) represent 22 percent of global capacity. The dry-bulkers under construction that will be delivered in the next three years (by 2008) equal about 20 percent of the existing fleet. But companies in the sector suggest that there is no great risk of oversupply (which would send rates lower) – firstly because shipyards have covered almost 200 percent of their production potential until the third quarter of 2008 with only few boat cradles left open for deliveries in end-2008, and secondly because they are reluctant to commit cradles for dry-bulkers that do not offer them a big profit margin, unlike big tankers for instance. At the same time, shipowners have also lowered t¨he rate of orders for new ships. In the third quarter of 2005 orders for new ships came to a total of 1.8 million dwt against 2.8 million dwt in the previous quarter. Another reason tipping the demand-supply balance in favor of shipowners is the aging of the existing fleet. This year ships of about 40-41 million dwt will exceed 25 years of age, while the vessels to be delivered total just 26 million dwt. In 2007 some 14 percent of the existing fleet, or 55 million dwt, will have exceeded the age of 25 years. As company officials note, the average age of scrapping for a capesize ship is 23 years, and for a panamax ship it is 25 years. Profit margins Hurricane Katrina that hit the southern states of the US last year had a direct impact on the dry-bulk trade, negatively affecting the shipping of wheat quantities. This, along with some other factors, resulted in a significant drop in chartering rates. According to Georgakis of Excel Maritime, the decline in rates for capesize vessels was on average at 5 percent in 2005, while the price of used ships fell by 18 percent. The same figures for panamax ships came to 50 percent and 35 percent respectively, while for handymax ships rates dropped by 40-42 percent and the ships’ price fell by 30-35 percent. Yet despite the decline in rates, the profit margins of companies involved – especially those with a relatively young fleet – remain excellent. Molaris, of Quintana Maritime, said the average January rates for capesize and pamanax ships ranged around the average of the last decade – about $29,100 per day for capesize ships and $16,250 for panamax vessels. While the average of the last five years ($19,000 for panamax ships and $32,000 for capesize vessels), when the phenomenon of China came about, shows rates currently in decline, the profits of shipping companies are considerable. Molaris said the average daily operating costs of a capesize is just $5,500 and of a panamax $4,500. As a result many capesize ships operate with earnings before interest, tax, depreciation and amortization (EBITDA) of 72 percent and panamax ships enjoy EBITDA of 63 percent.