Industry demand exceeds supply: Ultrapetrol CEO

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

17 May 2008

As oil nudges US$127 a barrel and creates huge potential for deep-sea drilling, overloaded shipyards cannot keep pace with demand for ships that service platforms, the top executive at Ultrapetrol (Bahamas) Ltd said. 'Frankly the potential for deep-sea drilling seems to be unlimited. This is the new frontier,' chief executive Felipe Menendez told Reuters. 'But with shipyards and engine makers working at capacity, planning any order for marine equipment means a two-year wait. That means fresh capacity is hard to come by. But on the positive side that's good for prices,' he added.
Mr Menendez said in a telephone interview the company's dry bulk shipping business should also benefit as demand outstrips supply of new dry bulk vessels hitting the water.
Mr Menendez spoke the day after the company reported a jump in first-quarter net profit.
Ultrapetrol runs a fleet of five ships that service deep-sea drilling platforms, with a total of seven more on order.
The company has an option to buy two additional ships, but Mr Menendez said the company has not disclosed whether it will use that option. 'But it is a very interesting option to exercise,' he said.
The company's main customer in its deep-sea drilling business is Brazil's Petrobras, which is also a major customer in its barge shipping business on the Hidrovia river system in South America. The barges mainly haul iron ore and soya beans for export.
Ultrapetrol is currently building its own shipyard in Rosario, Argentina. That yard will become operational in 2009 and will add 50 per cent to Ultrapetrol's barge capacity by 2010 to met rising iron ore output on the Hidrovia, Mr Menendez said.
Ultrapetrol has a fleet of four ships hauling oil and petroleum products in South American markets and plans to add two more ships to that fleet in the next year and a half. It also has four dry bulk carriers that haul goods like iron ore and coal.
Sea freight markets for natural resources have largely been been impervious to financial market turmoil and the weakening US economy, thanks in part to strong demand for bulk commodities from India and China.
This has pushed the Baltic Exchange's chief sea freight index to near-record highs, and Mr Menendez said there was little sign that demand for dry bulk goods would slacken in the short term.
'We believe the scenario in 2008 is that demand will outstrip supply,' he said.

Source: Reuters