Shipping Industry Faces Smooth Sailing

THE shipping industry should be sailing into smoother waters during the 1990s. Industry experts note that both carrier companies and some shipbuilders were buffeted by a broad array of problems during the past two decades. There was the disruptive Arab oil embargo of the early 1970s. Also, the recessions of the '70s and '80s, which made it difficult for shipping companies to obtain needed bank financing, especially after industry losses on old loans.

Not surprisingly, new vessel orders disappeared in the early 1980s, some shipbuilding firms went bankrupt, and the shipbuilding industry sharply contracted.

Now there are grounds for optimism about the worldwide ocean shipping industry during the 1990s, notes Kathleen M. Elliott, a shipping analyst with David L. Babson & Company, Inc., in Cambridge, Mass., an investment counseling firm. Ocean shipping firms, including bulk carriers and oil haulers, are ``in the early stages of what could be a long favorable cycle,'' she says.

Among her reasons for optimism are the political and economic liberalization in Eastern Europe, European economic unification in 1992, continuing United States dependency on imported Middle East oil, and the growing demand for US farm exports abroad.

In the past few years the global shipping industry has begun to rebound, says Elliott. The ``increasing globalization of the world's economies'' will create ``many new opportunities'' for shipping companies, as well as some firms making and repairing vessels.

``We're now taking an optimistic, long-range view about the industry,'' says Elliott.

The biggest gains for shipping during the 1990s will presumably accrue to overseas, as opposed to domestic US, firms, says James Winchester, a shipping expert with Mabon, Nugent & Company, an investment house here. Still, he says, ``that will mean a better picture for some US shipbuilding companies,'' including such firms as American Shipbuilding, Tacoma Yards, and Avondale.

Winchester notes that overseas firms (Norwegian and Greek companies, as well as a number of independent firms registered in different countries) dominate ocean shipping. The global firms, he says, are poised for growth as the demand for world commerce increases during the 1990s. A number of overseas firms are listed on their respective stock markets, although many are also privately owned.

``The shipping industry is difficult to generalize about, since `shipping' comprises a lot of sectors, not just one or two components,'' notes Sally Smith, a shipping expert with Alex. Brown & Sons, in Baltimore, an investment banking house.

However, Smith says she is reasonably optimistic about several key components of global shipping, including tankers (such as crude oil or chemical tankers); dry bulk carriers (grain, ore, coal); and possibly, liners (container ships). The liner industry, she says, is a closer call, since while demand is expected to be up for liner use during the '90s, capacity remains high.

``The liner industry has suffered for many years from far too much capacity,'' she adds. Nonetheless, ``the changes now occurring in Eastern Europe could be very positive for the liner industry.''

Analysts stress that in terms of investment potential, it is the long-range, as opposed to short-term view, that is crucial. Moreover, the number of publicly traded companies is limited.

Ms. Elliott of Babson likes Overseas Shipping, International Shipholding, and American President Companies, all key US shipping firms. But in each case, she says, she likes them for their growth potential, rather than for any immediate investment purposes.

Elliott believes that US shipping firms can't help but benefit from the changes now occurring in Eastern Europe. She notes, for example, that General Motors Corporation is investigating the possibility of producing cars in Hungary. But to do so, she says, would probably require GM to bring in source materials from North America, either from the US or Mexico. And that, she notes, would be a plus for the shipping industry.

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