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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