Shipowner bails out of shipping futures

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31 Mar 2009

The shipowner who once controlled about 15 per cent of global trading in shipping futures has pulled out of the market to concentrate on building up his physical fleet. In a Financial Times interview, Nobu Su said TMT, the privately-held company he owns, believed the shipping futures market was “finished”. “We didn’t trade anything for the last year,” he said. “Basically, this time the world has gone back to the real economy, not paper economics. People must go into real business and we’re doing it.”
TMT had closed most of the positions it kept open during last autumn’s shipping market crash, when it is thought to have made significant profits from correctly betting that earnings of dry bulk ships would fall and rates for tankers would hold steady. Average earnings for the largest dry bulk ships fell 99 per cent from their peak in June to the low in December and are still down 80 per cent.
“We have a few [positions] left but very small and the market is dead,” Mr Su said.
Market participants believe Mr Su must have made profits of hundreds of millions – if not billions – of dollars from his aggressive bets on the direction of shipping markets, as well as comparable losses when the market moved against him. He struggled to meet his obligations to other market participants last summer when the dry bulk market hit all-time record highs and he was betting on falls.
Mr Su declined to say how much TMT had made from the paper market but said the company had been lucky always to have been proved right eventually in its bets.
“We want to use the capital to build a new generation of ships and return the money to the industry,” he said.
The dry bulk market – ships that carry coal, iron ore, wheat and other bulk products – had now hit bottom, Mr Su said. Demand would be helped by China’s economic stimulus package and consequent spending on infrastructure. Many older ships were also being scrapped and 50 per cent of orders for new ships had been cancelled – a far higher figure than most market analysts give.
The market now represented a good “bottom-buying opportunity”, said Mr Su.
“It’s a good time to make innovative investments.”
TMT again controlled 130 ships – including dry bulk ships, oil and gas tankers and car carriers – after briefly cutting the number of ships it chartered from other owners last year, Mr Su said. Around 30 of the ships are owned directly, a figure that will increase as the new ships are delivered.

Source: Financial Times