Wilbur Ross: Shipping Will Be the Next Bull Market for Commodities

Thursday, 02 May 2013 01:44 PM

By Dan Weil

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While many commodities are taking it on the chin, shipping is one with the potential to rise, says Wilbur Ross, chairman and CEO of WL Ross and Co.

"It's supply and demand," he tells CNBC. "Ships are a strange kind of commodity because they're very lumpy, very big individual units, but they're commodities."

The supply-demand balance has gotten out of whack, Ross says. "Rates have come down around 80 percent. What's been causing that is a few years ago rates were extremely high, so then they over-ordered ships, because Wall Street and the banks were throwing money at them."

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But that part of the cycle is over, Ross explains. "They haven't really been ordering for a while. And now because of the low rates, there's a lot more scrappage."

So a rebound is on its way, he says. "I think in 2013, they'll start to come more into balance, and you'll finally have recovery sometime in 2014."

Shipping industry participants lament the low returns of their industry — currently around 3 percent, according to industry estimates.

"Container shipping made globalization a reality, but we have reaped very limited benefits as an industry," Jakob Stausholm, chief strategist at Maersk Line, a Danish shipping company, tells The Wall Street Journal.

"We have to learn how to run an effective business and make money out of it," Stausholm notes, acknowledging that Maersk Line's return on investment is "too low."

Editor's Note: How to Pay Zero Taxes . . . Legally

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