Global shipping slump on fears of trade crisis
The biggest ships carry 15,000 containers — enough for 745 million bananas Lined up, the 2 million containers owned by shipping giant Maersk would stretch halfway around the planet Some 20 million containers are in transit at any time Seafarers are 98pc m
THE world’s largest ship broker admitted its business has been battered by weak global trade – underling the crisis engulfing the shipping industry.
In a grim trading update that raises questions over the outlook for the global economy, London-based Clarkson said it expects profits for this year to be ‘materially lower’ than they were last year.
The warning took investors by surprise and sent shares tumbling 16pc, or 355p to 1850p – wiping more than £100m off the value of the company.
Smaller rival Braemar Shipping Services fell more than 4pc, or 19p to 410p.
The shipping industry has been rocked by subdued levels of world trade as major exporting nations such as the US, China and South Korea suffer weak demand for their goods.
The cost of shipping freight around the world has also tumbled, partly due to an earlier shipbuilding boom that increased the supply of vessels available to transport goods at a time of weak demand.
Clarkson said the offshore oil and gas industry ‘remains depressed’ due to the slump in the price of crude.
A lack of confidence in the outlook has also taken its toll on Clarkson’s finance business which helps shipping companies raise funds.
The crisis facing the shipping industry has fuelled fears that the global economy is heading for the rocks. Clarkson, which was founded in 1852 and has 1,379 staff in 46 offices in 20 countries, made profits of £50.5m last year. Stockbroker Panmure Gordon slashed its projections for the company’s profits this year by 21pc to £43.1m. It said it now expects Clarkson to make profits of £47.1m in 2017 and £62.5m in 2018.
‘Effectively our former full-year forecast has become our full-year 2018 forecast,’ said Panmure analyst Colin Smith. ‘Shipping is a cyclical business, so the timing of recovery is uncertain but we believe it is prudent to assume that it is likely to be delayed into 2017.’
He reduced the target price for Clarkson shares from 2800p to 2550p but said ‘we remain buyers’ of the stock. Clarkson pointed out that the Clark Sea Index – which measures earnings for vessels – has fallen 10pc in recent weeks and was 30pc lower in the first half of 2016 than in the first half of 2015.
It also noted that the Baltic dry Index – which measures the cost of shipping raw materials such as coal, iron ore and grain – has hit all-time lows this year.
This index, one of the key indicators experts look at to determine the outlook for the global economy, fell from 1,200 last summer to below 300 this spring although it has picked up since then to 677 yesterday.