Billionaire Ross Raises $100 Million to Expand Shipping Bet
By Isaac Arnsdorf - Nov 8, 2013 12:19 PM CT
Wilbur Ross, the billionaire investor in struggling industries, raised $100 million to buy ships hauling coal, iron ore and grains, betting that accelerating growth in emerging markets will boost trade.
WL Ross & Co. and its partners ordered four Ultramax vessels with options for four more, Ross said by phone today. He declined to name the other investors in the venture, Nautical Bulk Holdings Ltd. The ships will be delivered in 2015 by China’s Jiangsu Hantong Ship Heavy Industry Co.
Ross Says Shale Gas `Game Changer' for U.S., World13:30
June 20 (Bloomberg) -- Billionaire Wilbur Ross, chairman of WL Ross & Co., discusses Federal Reserve monetary policy, U.S. shale gas production, U.K. banks and the outlook for the container shipping industry. He speaks with Anna Edwards on Bloomberg Television's "The Pulse." (Source: Bloomberg)
The 65,000 deadweight-ton ships will have fuel-efficient designs and be equipped with their own cranes, allowing them to collect and unload cargoes in less-developed ports, Ross said. The company may buy more ships, he said. Ross’s company also has stakes in tankers that haul refined fuels and liquefied petroleum gas. Private equity firms invested $4.32 billion in shipping so far this year, the most since at least 2008, according to Marine Money, an industry researcher and publisher.
“Since we think a lot of the demand for dry commodities is going to develop in the emerging markets, we think they’re well-suited to that,” Ross said by phone. Shipping rates will recover by the time the new ships are built, he said.
The Baltic Dry Index, a measure of costs to ship iron ore, coal and grains, more than doubled to 1,581 this year, rebounding from the lowest annual average since at least 1993, according to the Baltic Exchange, the London-based publisher of freight rates. World trade in dry-bulk commodities will expand 5 percent to a record 4.5 billion metric tons next year, estimates Clarkson Plc, the world’s largest shipbroker.
Rates slumped since 2008 as owners ordered too many ships before the global recession. Outstanding contracts for new bulk carriers equal 18 percent of the existing fleet, down from as much as 74 percent in 2009, according to data from IHS Maritime, a Coulsdon, England-based research company.
The cost of a new China-built Supramax, a dry-bulk vessel typically fitted with cranes and in the same size range as the ones Ross ordered, rose 5.7 percent to $28 million this year, according to Simpson, Spence & Young Ltd., the world’s second-largest shipbroker. That’s heading for the first annual gain since 2010 and the biggest since 2007.
Ship owners spent $13.1 billion on new bulk carriers as of September, compared with $9.6 billion in all of 2012, Clarkson data show. Investment in Handymaxes, also in the same size range as Ross’s Ultramaxes, more than doubled to $4.4 billion, according to the shipbroker’s figures.
The 12-member Bloomberg Dry Ships Index rallied 22 percent this year, compared with a 16 percent advance in the MSCI All-Country World Index of equities. The shipping index is still 83 percent below its 2007 record.
Ross was part of a group of investors who spent $900 million on 30 oil-product tankers in 2011. His company also has a majority stake in Navigator Holdings Ltd., which controls one-third of the world’s midsize LPG carriers.
Economic growth in developing countries will accelerate to 5.1 percent in 2014 from 4.5 percent this year, compared with 3.6 percent globally, the International Monetary Fund estimates. Imports will expand 5.9 percent and exports will grow 5.8 percent, compared with 4.0 percent and 4.7 percent in advanced economies, according to the Washington-based lender.
World trade in iron ore, the biggest commodity transported by sea after crude oil, will rise 7 percent to 1.27 billion tons in 2014, with China accounting for 88 percent of the increase, Clarkson estimates. Shipments of coal used for power generation, the next-largest cargo, will advance 4 percent to 897 million tons, with Chinese and Indian demand amounting to 62 percent of the gain, data show.
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BOJ Struggles to Convince on 2% as Abenomics Shine Fades
By Masahiro Hidaka - Nov 5, 2013 1:30 AM CT
Half a year after Bank of Japan Governor Haruhiko Kuroda unleashed record monetary easing, economists see the bank failing to meet its inflation target, underscoring the case for stronger steps to revive the economy.
While the median estimate of BOJ board members released last week showed the bank expects consumer prices to rise 1.9 percent in the 2015 fiscal year -- in line with a 2-percent-in-two-years goal laid out in April -- just two of 34 analysts surveyed by Bloomberg News see the target met in that timeframe.
With the central bank seen standing pat on the pace of asset purchases until it can assess the impact of an April 2014 sales-tax bump, the onus is now on the government to sustain confidence in the Abenomics project. Prime Minister Shinzo Abe has yet to introduce legislation such as corporate-tax cuts that companies have advocated to boost Japan’s potential.
“Progress on the growth strategy has been slow,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “If the delays continue, foreign investors could lose confidence in Abenomics, and stocks could fall.”
Japan’s benchmark Topix index of stocks -- still the best performer among 24 developed markets this year in the aftermath of Kuroda’s easing and a tumble in the yen that made exporters more competitive -- trailed counterparts last month, signaling waning enthusiasm with Abenomics. The Topix advanced less than 0.1 percent, the worst among the group tracked by Bloomberg.
The Topix fell less than 0.1 percent in Tokyo today, a third day of decline as investors weighed corporate earnings and a stronger yen drove down exporters. The Japanese currency gained 0.2 percent to 98.45 per dollar at 4:00 p.m.
Fifteen of the economists surveyed said the lack of bolder steps on the growth strategy is undermining the central bank’s reflation campaign.
Bond investors’ inflation expectations haven’t changed much, said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. He cited a Quick survey carried out Oct. 29-31 that showed the average core consumer price inflation expectation of 140 respondents over the next 10 years edged down to 1.28 percent from 1.35 percent at the end of September.
“The BoJ’s target looks far away, at least if one asks bond investors,” Adachi said in a report today.
Growth slowed to an annualized 2.1 percent in the three months through September from 3.8 percent the prior quarter, Nomura Securities Co. estimated. BNP Paribas SA said the expansion likely slumped to 1.7 percent.
Japan is on a path to achieve 2 percent inflation, Kuroda said today in Osaka. The BOJ will adjust its policy as needed to achieve stable 2 percent price increases, he said.
Abe said the current extraordinary Diet session would be one for “getting things done,” reflecting a focus on pushing through legislation for his growth strategy -- the “third arrow” of his Abenomics project.
On the table are steps to encourage corporate restructuring to boost industrial competitiveness and the introduction of zones for deregulation in fields from medical treatment to urban development. The cabinet today approved the special zone bill, Economy Minister Akira Amari told reporters.
The yen’s about 12 percent slide against the dollar this year has induced nascent inflation by boosting import costs. Yet price gains remain distant from the BOJ’s target with core prices excluding fresh food, the central bank’s key gauge, rising 0.7 percent in September from a year earlier.
Regular wages excluding overtime and bonuses fell for a 16th straight month in September, showing the potential squeeze on households should inflation become embedded.
The 3-percentage point increase in the sales tax next year is set to cause an annualized 4 percent contraction in the second quarter even as Abe prepares 5 trillion yen ($50.7 billion) in stimulus to cushion the blow. A further two-point rise to 10 percent is scheduled for October 2015.
Japan needs fresh demand to offset the restrictive fiscal policy, and Abe comes up short when it comes to measures to spur business investment, said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo. The scale and speed of efforts to remove international trade barriers, lower corporate taxes and deregulate are inadequate, he said.
“If the growth strategy continues to lag, the economy will turn down in April and I wouldn’t be surprised if stock prices started to fall heavily,” said Okubo, who formerly worked at Goldman Sachs Group Inc.
The BOJ in April said it would double the monetary base in the next two years by stepping up purchases of government bonds and other financial assets. The measure stood at 189.8 trillion at the end of October, up 45.8 percent from a year earlier, the BOJ said today. It forecast in April that the monetary base will increase to 270 trillion by the end of 2014.
Board members Takehiro Sato and Takahide Kiuchi said last week the median 1.9 percent price view, which strips out the effect of the sales-tax increases, was too optimistic. Sayuri Shirai, another BOJ policy maker, urged the central bank to more clearly reflect downside risks in its outlook report.
The central bank should be prepared to ease further in the case that growth plunges more than expected, Etsuro Honda, a top economic aide to Abe, said in an interview last week.
The BOJ is likely to step up stimulus in the April-June quarter to support the economy after the levy rise, according to 20 of the economists surveyed.
“The BOJ will need to fire another arrow aimed at devaluing the yen if the Abe administration is unwilling to risk a sharp economic slowdown,” Credit Suisse Group AG economists Hiromichi Shirakawa and Takashi Shiono wrote in a report.
Elsewhere in Asia, the HSBC China Services PMI rose to 52.6 in October from 52.4 in September, according to a report compiled by Markit, indicating a gain in services activity after official data last week showed a manufacturing gauge increasing to an 18-month high.
Premier Li Keqiang said China’s growth has entered a stage of medium-to-high speed, meaning about 7.5 percent a year or above 7 percent, according to the text of an Oct. 21 speech to the All-China Federation of Trade Unions, posted yesterday on its website. China needs growth of 7.2 percent to keep the urban registered jobless rate at about 4 percent, Li said.
In Australia, the central bank left its benchmark interest rate unchanged at a record low of 2.5 percent and said a weaker currency will be needed to achieve balanced growth.
Data in the U.K. today are forecast to show house prices rising in October at a faster pace than in the previous month.
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Fed Keeps $85 Billion QE Pace Awaiting Signs Economy Picks Up
By Joshua Zumbrun & Jeff Kearns - Oct 30, 2013 12:59 PM CT
The Federal Reserve decided to press on with $85 billion in monthly bond purchases, saying it needs to see more evidence that the economy will continue to improve.
“The recovery in the housing sector slowed somewhat in recent months,” the Federal Open Market Committee (FDTR) said today at the end of a two-day meeting in Washington. “Fiscal policy is restraining economic growth.”
Ben S. Bernanke is pushing unprecedented accommodation into the final months of his Fed chairmanship as he seeks to shield the four-year economic expansion from the impact of higher borrowing costs and this month’s partial U.S. government shutdown. The 16-day closing resulted in the furloughs of as many as 800,000 federal workers and delayed release of data the Fed says it needs to evaluate the economy.
“Taking into account the extent of federal fiscal retrenchment over the past year, the committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy,” the committee said. The Fed repeated that it will “await more evidence that progress will be sustained before adjusting the pace of its purchases.”
The Fed’s purchases will remain divided between $40 billion a month of mortgage bonds and $45 billion in Treasury securities.
The central bank left unchanged its statement that it will probably hold its target interest rate near zero “at least as long as” unemployment exceeds 6.5 percent, so long as the outlook for inflation is no higher than 2.5 percent.
The Fed repeated that inflation “has been running below the committee’s longer-run objective but longer term inflation expectations have remained stable.”
Price gains have lagged below the committee’s 2 percent long-run target. The cost of living rose as projected in September as fuel charges climbed, capping the smallest year-to-year gain in five months.
The consumer price index increased 0.2 percent after rising 0.1 percent the prior month, a Labor Department report showed today. The Fed’s preferred gauge of inflation, the personal consumption expenditures index, rose 1.2 percent in August and hasn’t breached 2 percent since March 2012.
The Fed removed a sentence from the previous statement that had said tighter financial conditions could slow the improvement in the economy. Kansas City Fed President Esther George dissented for the seventh meeting in a row, citing the risk the Fed’s stimulus could create financial imbalances and cause long-term inflation expectations to rise.
Economists forecast no change to the Fed’s bond buying today. The FOMC won’t reduce the pace of purchases until its March 18-19 meeting, according to the median estimate of an Oct. 17-18 Bloomberg News survey.
President Barack Obama has nominated Vice Chairman Janet Yellen to succeed Bernanke, whose term expires on Jan. 31. If confirmed by the U.S. Senate, Yellen would take on the challenge of dialing down so-called quantitative easing and withdrawing stimulus while maintaining growth.
Central bankers are waiting to see how the economy weathered the budget impasse and debt-limit debate earlier this month. The shutdown reduced growth by 0.3 percentage point this quarter, according to the median estimate in an Oct. 17-18 Bloomberg survey, as businesses from Capitol Hill eateries to Florida Everglades charter boats lost customers while workers were furloughed and national parks were closed.
Some data measuring the strength of the economy in the months before the shutdown still hasn’t been released, and delays to other reports may distort the figures, according to economists. A report on economic growth in the third quarter, originally scheduled for release today, was postponed until Nov. 7.
“The quality of the data may be suspect because of disruption to the normal survey routines,” said Dana Saporta, a director of U.S. economics research at Credit Suisse Group AG in New York.
“When we look back on this quarter in the future, we might not see much evidence of the government shutdown in the aggregate data,” she said. “But we don’t know that, and it will be several weeks before we can analyze the impact of the shutdown and debt-ceiling debate.”
Some private reports and delayed government indicators for September showed the economy was having trouble accelerating prior to the shutdown.
Employers in the U.S. added 148,000 jobs last month, down from 193,000 in August. Factory output rose less than forecast, and existing-home sales fell for the first time in three months as rising prices and mortgage rates damped demand.
At the same time, American consumers kept spending on most types of goods last month, a Commerce Department report showed yesterday. Sales at retailers excluding auto dealers rose 0.4 percent after a 0.1 percent increase the prior month.
The government shutdown took a toll on consumer and business confidence in October, recent reports suggest. The Bloomberg Consumer Comfort (COMFCOMF) Index sank to the lowest level in eight months in the week ended Oct. 20.
Companies this month added fewer workers than projected, a private report based on payrolls showed today. The 130,000 increase was the smallest in six months and followed a revised 145,000 gain in September that was weaker than initially estimated, according to the ADP Research Institute in Roseland, New Jersey.
The monthly figures are the first to show how employment fared during the government suspension. Limited employment and wage gains, along with the prospect of another fiscal battle early next year, raise the risk of restrained retail sales during the holidays.
Still, gains in stock prices and home values are shoring up household balance sheets. Equities have rallied, pushing the Standard & Poor’s 500 Index (SPX) to records, on rising corporate profits and expectations that the Fed will maintain stimulus.
General Electric Co. is among companies beating analyst estimates. GE, the conglomerate that is the world’s largest maker of jet engines and diesel locomotives, said Oct. 18 that profit margins on its industrial businesses grew 1.2 percentage points as orders climbed in China, sub-Saharan Africa and Russia.
“Our third-quarter results were very strong in an improving global business environment,” Chief Executive Officer Jeffrey Immelt said in a statement. “Our industrial strength was broad-based.”
The Fed unexpectedly refrained from tapering at its meeting last month, seeking more evidence the economy is strengthening. Economists surveyed by Bloomberg before the gathering predicted the Fed would begin reducing the pace of purchases. Fed Governors Jerome Powell and Jeremy Stein both characterized the September decision as a “close call.” The Fed cited the risk that higher interest rates could slow the economy.
Borrowing costs have since declined. The yield on the 10-year Treasury (USGG10YR) note fell to 2.49 percent late yesterday from as high as 3.01 percent on Sept. 5. The average 30-year mortgage rate fell to 4.13 percent last week from as high as 4.58 percent in August.
“There are some question marks about growth in the U.S. economy,” said Nathan Sheets, the global head of international economics at Citigroup Inc. in New York and a former top economist at the Fed board. “The Fed is inclined to watch and wait until they’re comfortable that we’ve seen a meaningful rebound.”
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China Signals ‘Unprecedented’ Policy Changes on Agenda at Plenum
By Bloomberg News - Oct 27, 2013 11:01 AM CT
Chinese Politburo member Yu Zhengsheng said reforms to be discussed at a Communist Party meeting next month will be unprecedented, adding to signs that leaders are resolved to spur far-reaching policy changes.
Yu’s comments, made in a speech at a forum to promote relations with Taiwan, were reported by the official Xinhua News Agency on Oct. 26. Yu is ranked fourth in the seven-strong Politburo Standing Committee headed by party chief and President Xi Jinping.
Premier Li Keqiang has pledged to cut the state’s role in the economy, change the financial and fiscal systems, and overhaul land and household registration rules to sustain growth. Analysts surveyed by Bloomberg News this month said policies flowing from the meeting, called the third plenum, will reduce the odds of a severe slowdown and help China become a high-income country by 2030.
The meeting “will focus on studying comprehensive and deep reform,” Yu was quoted as saying in Xinhua’s report. “The depth and strength of the reforms will be unprecedented and will promote profound changes in every area of the economy and society.” The report didn’t refer to any policies or measures.
Yu’s remarks follow comments Xi made to foreign business executives last week that “comprehensive reforms” would be “planned out” during the plenum, according to an English-language Xinhua report on Oct. 23 that didn’t specify any policies. Dates for the meeting haven’t been announced.
“We must properly handle the relations between reform, development and stability, and with greater political courage and wisdom, further open our minds, unleash and develop social productivity, and enhance the creative forces of the society,” Xi was quoted as saying.
Next month’s gathering will be the third full meeting, or plenum, of the party’s current Central Committee, including Xi, Li, ministers and the heads of the biggest state firms and banks, who took over in a once-a-decade power transition that started in late 2012. Thirty-five years ago, a similar Communist Party gathering saw Deng Xiaoping and his allies inaugurate a series of reforms that began to open up China to foreign investment and loosen state controls over the economy.
“I don’t expect to see concrete measures announced at the meeting, but I do expect to see concrete setting of a clear direction and objectives,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong who previously worked for the World Bank in Beijing. “It’s clear that in the financial and monetary areas there’s a full mandate to move ahead, but so far we haven’t had the same signals in other key areas of reform.”
The government has already made progress in areas including cutting regulation, “but that’s low hanging fruit,” Kuijs said. “Some recent statements, such as on the fiscal front, seem to indicate it’s going to be pretty tame.”
China has pared its growth ambitions, targeting annual expansion of 7 percent this decade, compared with the 10.5 percent average pace of the last 10 years.
Bloomberg’s survey of analysts conducted from Oct. 11 to Oct. 18 indicated that the odds of a severe slowdown in China or a credit crisis will fall after the summit as leaders tackle local-government debt and financial reforms.
Fifteen of 23 economists and political analysts said policies flowing from the meeting will reduce such risks, and a majority said the plans will help China become a high-income economy by 2030.
Asked which reforms are most needed now and most likely in the next 12 months, survey respondents ranked changes in financial markets and local-government funding as both most urgent and probable. Expectations were lower for reforms to the residence-registration or hukou system, which limits labor mobility, the rule of law and state-owned enterprises.
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Capital Goods Orders in U.S. Unexpectedly Declined in September
By Jeanna Smialek - Oct 25, 2013 7:59 AM CT
Orders (DGNOXTCH) for U.S. equipment such as computers and machinery unexpectedly declined in September for the second time in three months, indicating business spending was weakening ahead of the partial government shutdown.
Bookings for non-military capital goods excluding aircraft decreased 1.1 percent, the Commerce Department reported today in Washington. The median forecast in a Bloomberg survey called for a 1 percent gain. A surge in aircraft demand led to a 3.7 percent jump in total durable orders.
Durable Goods Orders Increase on Aircraft Demand
Oct. 25 (Bloomberg) -- Orders for U.S. durable goods rose in September by the most in three months as stronger demand for commercial and military aircraft outweighed a drop in business equipment. Michael McKee reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)
“The more you look into it, the more disappointing it gets,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “It kind of raises doubts about the sustainability of the manufacturing sector to continue to underpin economic growth.”
Faster growth in manufacturing, which accounts for about 12 percent of the economy, depends on how quickly confidence is restored in the aftermath of a budget battle that shut down the government for half of this month. Results from Ford Motor Co. (F) and Whirlpool Corp. (WHR) show stronger domestic auto and housing markets remain sources of strength for the expansion.
Stock-index futures were little changed after the figures, with the contract on the Standard & Poor’s 500 Index expiring in December falling less than 0.1 percent to 1,748 at 8:51 a.m. in New York.
Orders excluding transportation equipment, where demand is often volatile month to month, fell 0.1 percent after a 0.4 percent decrease in August.
Forecasts for total durable goods orders in the Bloomberg survey of economists ranged from a 0.3 percent decline to a 7.5 percent increase. Demand rose 0.2 percent in August.
Demand for non-defense capital goods excluding aircraft decreased in September after a 0.4 percent gain in August and a 3.5 percent slump in July. Such orders are considered a proxy for future business investment in computers, electronics and other equipment.
Shipments of those products, a measure used to calculate gross domestic product, fell 0.2 percent in September after rising 1.1 percent the prior month. Sales were down 2.9 percent over the past three months at an annualized rate, compared with a 0.9 percent decline at the end of the second quarter.
Caterpillar Inc. (CAT), the biggest maker of construction and mining equipment, cut its 2013 sales and profit forecast this week after a slump in orders from commodity producers.
“There are encouraging signs, but there is also a good deal of uncertainty worldwide as we look ahead to 2014,” Chairman and Chief Executive Officer Doug Oberhelman said in a statement.
Today’s report showed bookings for commercial aircraft increased 57.5 percent in September after a 5.4 percent gain. Chicago-based Boeing Co. said it received 127 aircraft orders in September, up from 16 the previous month.
Orders for military aircraft and parts rose 15.2 percent after an 11.5 percent decrease, today’s report showed.
Demand for motor vehicles has also been a bright spot for manufacturers, with cars and light trucks selling at a 15.2 million annualized rate in September after climbing in August to the fastest annualized pace since 2007, figures from Ward’s Automotive Group showed.
“The vehicle fleet has aged, so really vehicle assembly has nowhere to go but up,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, adding that Boeing, the world’s largest planemaker, is also looking at “a bottomless pit of orders.”
Ford earned a $2.3 billion profit in North America in the third quarter and raised its forecasts for pretax profit and operating margin for the full year. The Dearborn, Michigan-based company said yesterday its automotive sales rose 12 percent to $33.9 billion. It also earned a rare profit on overseas operations on rising demand for Focus compact cars in China and B-Max vans in Europe.
Benton Harbor, Michigan-based Whirlpool is also seeing signs of stronger demand in some parts of the world, while progress in the U.S. housing market boosts demand for its washers and dryers.
“In North America, we are increasing our industry demand assumption to approximately 9 percent for the year as we continue to see positive trends in U.S. housing,” Chief Executive Officer Jeff Fettig said on an Oct. 22 earnings call. In Latin America, “we’re now seeing a pickup in demand and we expect that positive trend to continue during the fourth quarter.”
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Economy · U.S. · Manufacturing