HONG KONG: Sinotrans Shipping Ltd, the dry-bulk arm of the country's third-largest shipping group, expects a "surge" in iron-ore and coal imports to last through the year.

The country's June iron ore imports soared 47%, year-on-year, to 55.32 million tons, 3.5% higher than in May, according to data released by the General Administration of Customs in late July. As for coal, the General Administration of Customs showed coal imports reached 9.43 million tons in May, more than double that in the same period last year.

"We expect the trend will continue," General Manager Tian Zhongshan told reporters in Hong Kong yesterday, adding that the demand jump in the first half shows that Beijing's stimulus plan is working.

The forecast comes after the Baltic Dry Index, a measure of commodity-shipping rates, declined for nine days in London on concern that Chinese iron-ore demand may be weakening. The country imported a record amount of the mineral in the first half as a 4 trillion yuan ($585 billion) stimulus plan helped revived the nation's economic growth.

"The worst is over," Tian said.

The growth in iron ore and coal imports has been offset by expansion of the global dry-bulk fleet, which has damped rates and caused Sinotrans and Pacific Basin Shipping Ltd, Hong Kong's largest dry-bulk line, to report lower profits. The Baltic Dry Index has tumbled 63 percent over the past year.

"We expect the market to remain soft for a while," Pacific Basin's Chief Executive Officer Richard Hext said yesterday.

Sinotrans, a unit of China National Foreign Trade Transportation (Group) Corp, fell 3.8 percent to HK$3.76 at 3:45 pm in Hong Kong trading. Pacific Basin lost 2.7 percent to HK$5.75. Sinotrans has gained 91 percent this year, outperforming Pacific Basin's 63 percent rise.

Parent Sinotrans Group will also get a capital injection from the government as it merges with China Changjiang National Shipping (Group) Corp, Tian said. China Business News reported yesterday that the funding would be 1 billion yuan, without citing anyone. The combined company's assets will total about 100 billion yuan, Tian said.

Sinotrans expects to see opportunities for buying vessels and other acquisitions this year after purchasing four ships in the first half, he said. The company plans capital expenditures of $381.9 million through 2011. It will spend $174.1 million in the second half on new orders.

Beijing is encouraging state-owned shipping groups to buy more vessels as foreign carriers scrap orders to ease overcapacity. Shipping lines ordered the ships during a trade boom that ended last year.

Sinotrans has secured contracts for 79.5 percent of dry-bulk revenue days for this year and 21.5 percent for next year, Tian said.

Bloomberg News

(HK Edition 08/13/2009 page4)