Platou lowers dry sights


Concerns over China’s reduced appetite for coal has led RS Platou Markets to slice its capesize rate expectations and shift its outlook for the entire dry sector.

Frode Morkedal of RS Platou Markets.

Frode Morkedal of RS Platou Markets.

Platou dimmed its rating on dry bulk from positive to neutral noting the second quarter had seen supply growth exceed demand improvements for the first time in over a year.

In its latest quarterly report the finance house also downgraded some of the largest names in the sector, including capesize giant Knightsbridge and Danish owner Norden.

Coal burning market

Platou Markets says it has lowered its previous rate guidance significantly due to lower demand growth, mainly due to reduced Chinese coal shipments.

It is now projecting capesize rates of $20,000 to $22,000 daily in 2015 and 2016, down from the $29,000 daily it previously had chalked up.

“Chinese coal imports are now expected to drop around 25 mill tons this year (vs. +15 mill tons in our previous report) due to weakening in industrial activity and lower coal use in energy generation relative to other energy sources,” Platou Markets said.

“We expect a small rebound in Chinese coal imports in each of 2015 and 2016. Downside risks are looming, however, should China reduce coal consumption growth further.”

Supply demand shift

It also notes a fall in nickel ore and bauxite shipments from Indonesia due to a ban has contributed to the considerably weaker market in recent months.

In the second quarter dry cargo demand enlarged by 5\% year-on-year, while supply grew by 5.4\%, the report said.

This is the first time since the first quarter of 2013 that supply growth trumped demand, the report said.

Giants downgraded

Platou has cut Knightsbridge, the largest capesize owner listed in the US, from buy to sell.


Analysts Frode Morkedal and Herman Hildan (pictured) say Knightsbridge is an attractive investment vehicle long term. But in the near term weaker rates will bring lower dividend., Platou’s analysts say.

Norden was downgraded to neutral amid the expectation a marginal rate improvement will pull its operating numbers back to black in 2015 but not to a level which justifies a higher stock price.

The weaker dry cargo market has also seen Platou Markets downgrade both Diana Shipping and Golden Ocean from buy to neutral.

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