Shipping industry charts a recovery course

SINGAPORE, Feb 7 (Reuters) – The shipping industry is poised to emerge from its longest downturn in three decades, buoyed by an end to years of overcapacity that have depressed freight rates since the end of a shipping boom in 2008.

Dry cargo ships are likely to see the strongest recovery, say owners and analysts, as growth in bulk commodity cargoes such as iron ore and coal outpaces supply of new tonnage for the first time in seven years.

But tanker rates will also rise as fleet growth is slowing, while strategic oil reserve projects in China and India should boost already solid Asian demand.

The recovery will bring some respite to shipping firms that have endured years of losses as freight rates failed to cover costs. Global shipper TMT Group filed for bankruptcy protection last June, shortly after South Korea's STX Pan Ocean filed for court receivership, while Indonesian shipper PT Berlian Laju Tanker narrowly avoided bankruptcy.

“While there will be potholes, here and there, as always, the worst is over based on the market fundamentals,” said Ong Choo Kiat, president of U-Ming Marine Transport, one of Taiwan's largest listed shipping companies.

Prices of new and secondhand ships started to rise last year on expectations of a recovery, though experts warn some shippers will still only break even this year and any recovery may fade after 2016 when overcapacity could again dampen freight rates.

Key drivers of the pick-up will be China's continued urbanisation and falling iron ore prices, experts say, which should support import growth even though the commodities super-cycle that drove a 2003-2008 boom in shipping markets is over.

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