Bloomberg News

Cars Sent to U.S. Rise Aiding Wilhelmsen: Freight

March 30, 2012

Toyota Motor Corp. automobiles sit parked ahead of shipping at the port of Sendai, Miyagi Prefecture, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

Toyota Motor Corp. automobiles sit parked ahead of shipping at the port of Sendai, Miyagi Prefecture, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

(Corrects estimate of cost of shipping a car to the U.S. from Asia in 19th paragraph of story published March 27.)

The fastest growth in U.S. demand for imported cars since 2006 is boosting rates for the vessels delivering them, spurring analysts to predict a 68 percent gain in profit for Wilh. Wilhelmsen ASA, the largest fleet operator.

Americans will buy 3.07 million imported light vehicles in 2012, 7.8 percent more than in 2011 and the biggest advance in six years, according to data compiled by Kevin Tynan, an automotive analyst at Bloomberg Industries. Global sales growth of 10 percent will boost daily shipping rates by 13 percent to a four-year high of $17,000, estimates RS Platou Markets AS, an investment bank in Oslo. Shares of Wilhelmsen will rise 29 percent to 48.90 kroner ($8.59) in 12 months, the average of 11 analyst estimates compiled by Bloomberg show.

An accelerating U.S. economy is boosting demand for car carriers at a time when global shipments are already expanding faster than the fleet. The global cargo forecast from Platou is more than twice this year’s 4.3 percent fleet growth seen by London-based Clarkson Plc, the world’s biggest shipbroker. That contrasts with most other types of vessels, where gains in capacity are outstripping additional shipments.

“As the market continues a more pronounced recovery in 2012, that’s additional volume that hasn’t been there for several years,” said Jeff Schuster, the senior vice president of forecasting at LMC Automotive, a Troy, Michigan-based research company producing seven-year outlooks for global vehicle sales. “The car-carrier business is going to benefit along with this market recovery.”

Dry-Bulk Shipping

U.S. demand for imported cars won’t come at the expense of domestic models, according to Bloomberg Industries. Growth in car purchases will reach 8 percent, bringing total American sales to 13.5 million units, its estimates show.

Shares of Lysaker, Norway-based Wilhelmsen jumped 33 percent to 38 kroner in Oslo trading this year. That compares with a 26 percent advance in the six-member Bloomberg Tanker Index of oil-shipping companies and a 22 percent gain in the Bloomberg Pure Play Dry Bulk Shipping Index of 14 firms hauling coal, iron ore and grain. The MSCI All-Country World Index of equities appreciated 12 percent and Treasuries lost 1.4 percent, a Bank of America Corp. index shows.

Wilhelmsen will report net income of $240 million for this year, compared with $143 million in 2011, the median of 10 analyst estimates compiled by Bloomberg show. Ten of 11 analysts tracked by Bloomberg recommend buying shares of the company, which operates 133 ships, equal to 22 percent of the global fleet, according to data on its website.

Mitsui O.S.K.

Nippon Yusen K.K., based in Tokyo, operates 115 car carriers, according to data on its website. It may not benefit as much as Wilhelmsen because they represent 3.5 percent of its total capacity. Mitsui O.S.K. Lines Ltd., based in Tokyo, has 74 of the ships, out of a fleet of 515 vessels, according to Clarkson.

The trend for Japanese carmakers to produce more vehicles in the markets where they are sold may curb profit for car carriers. North American plants produce almost 70 percent of the cars that Toyota Motor Corp. (7203), Japan’s biggest automaker, sells in the U.S., from 55 percent in 2008, according to the company. Honda Motor Corp., Japan’s third-largest carmaker, produced 74 percent of its vehicles outside the Asian nation last year, from 73 percent in 2010, company data show.

U.S. production rose 12 percent to 8.65 million light vehicles last year, after jumping 36 percent in 2010, according to data compiled by Bloomberg Industries from the International Organization of Motor Vehicle Manufacturers.

European Commission

Slowing economic growth is already damping sales in some regions. The 17-nation euro economy may shrink 0.3 percent this year, the European Commission said Feb. 23. A manufacturing gauge in the area fell to 47.7 in March, signaling contraction, Markit Economics reported March 22. Sales of cars in Western Europe declined 11 percent in February from a year earlier, LMC Automotive estimates.

World trade in goods and services will expand 3.8 percent this year, compared with 6.9 percent in 2011 and almost 13 percent in 2010, the International Monetary Fund forecast in January. About 90 percent of world trade goes by sea, the Round Table of International Shipping Associations estimates. Growth in the U.S. and emerging markets may be enough to compensate for a contraction in Europe.

China, the world’s biggest car market, will have an annual growth target of 7.5 percent, Premier Wen Jiabao said in a state-of-the-nation speech on March 5. While that’s the lowest since 2004, it’s still more than twice the 3.3 percent global growth predicted by the IMF. Emerging markets will gain 5.4 percent in 2012, the Washington-based group forecasts.

Emerging Markets

While Clarkson expects seaborne trade in oil to expand for a third year and record iron-ore and coal cargoes, rates for the ships carrying the commodities slumped because of a capacity glut. The supertanker fleet expanded 22 percent since the end of 2006 and the number of ore-carrying Capesizes rose 81 percent, data from Redhill, England-based IHS Fairplay show. The car- carrier fleet advanced 33 percent.

The Baltic Dry Index, a measure of the cost of hauling bulk commodities, fell 42 percent in the past 12 months, data from the Baltic Exchange in London show. Rates for very large crude carriers, each holding 2 million barrels of oil, are 82 percent below the peak reached in 2007, Clarkson data show.

Shipments from Japan, the largest car exporter, to the world’s biggest economy rose 24 percent to 129,587 units in January from a year earlier, according to the latest data from the Japanese Automobile Manufacturers Association. Latin America bought 7.3 percent more and Africa 18 percent more. The U.S. accounted for 15 percent of global seaborne trade in cars last year, Platou estimates.

Logistics Operations

Car carriers hired by Toyota are being fully used again after disruptions from April to October last year caused by the earthquake and tsunami, said Joe David, the Torrance, California-based national manager of international logistics operations at Toyota Motor Sales USA Inc.

U.S. sales of imported cars in February were the highest for all but one month since July 2008, according to industry data compiled by Bloomberg. The exception was August 2009, the last month of the so-called cash for clunkers program, which offered rebates to people who traded in old cars for new and more fuel-efficient vehicles.

Imports are also rising as Japanese carmakers replenish U.S. inventories, depleted after supply was disrupted by last year’s earthquake. Shipping a car to the U.S. from Japan costs more than $500, according to Tian Tollefsen, an Oslo-based analyst at SEB Enskilda, an investment bank.

Financial Officer

Toyota, based in Toyota City, Japan, had enough vehicles in reserve last week to cover about 43 days of U.S. demand, compared with 53 days in January 2011, according to data from the company. Honda (7267), located in Tokyo, had enough for 49 days, from 64 days a year ago, Automotive News data compiled by Bloomberg show. Japanese carmakers had to halt production for almost two months after a magnitude-9 temblor and subsequent tsunami struck the country March 11, 2011.

“With the pick-up in volumes we have seen utilization increase,” said Benedicte Agerup, the chief financial officer of Wilhelmsen, which carried about 5 million vehicles last year. “When investors look at shipping, they have a few favorites, and car carriers are among the top notch.”

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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