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

Scottish Daily Mail - - City & Finance - by Hugo Dun­can

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.

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