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Pacific Basin sees brighter prospects in second half of 2014

After bouncing back into the black last year, the shipper expects huge Chinese demand for grains and building materials to buoy its prospects

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Pacific Basin Shipping says rising affluence on the mainland means more demand for food and building supplies, which account for two-thirds of its cargoes. Photo: Bloomberg

The mainland's seemingly insatiable appetite for grains, oilseeds and construction supplies should see demand in the dry bulk shipping sector stay strong despite the still uncertain outlook for the global economy.

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Food imports are being fuelled by the twin engines of rising household incomes and the vulnerability the country's food supply chain faces from extreme weather hitting its major crops.

That is all good news for Pacific Basin Shipping, the world's largest operator of handysize dry bulk vessels, which last week posted a huge turnaround in earnings. From a loss of US$158.5 million in 2012, the company made a net profit of US$1.5 million last year on the back of a cyclical upswing in the sector which it sees getting even stronger this year.

Pacific Basin benefits as increasing affluence on the mainland, the world's second-biggest economy, sees consumers buy increasingly large amounts of meat and homes for their families, which use vast raw material inputs.

Nearly two-thirds of the cargoes shipped by Pacific Basin are construction materials, such as logs and cement, and agricultural goods, such as grains and oilseeds.

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Given steady growth rates even in a slowing economy, the pace of those agricultural and construction imports is not expected to slow appreciably.

Pacific Basin's chief executive Henrik Berglund said shipment of these products normally peaked in the second half of the year, and the outlook for business was more positive this year.

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