Dry silver lining?

International financial market may be taking a pounding leaving shipping markets, and dry-bulk owners in particular, looking vulnerable.

But that has not stopped one of the bulker industry’s biggest names sounding a positive note about expectations for the rest of the year and beyond.

Norden CEO Carsten Mortensen.

Norden may have been forced to slash its full-year net profit forecast earlier this month due to “plunging freight rates in the dry-bulk market” but the Dane is willing to spot opportunities amongst the wreckage of the credit crunch.

“When the going gets tough, the tough gets going,” chief executive Carsten Mortensen wrote in the company’s autumn newsletter published on Tuesday.

“We must continue to look for the opportunities,” he added. “An expected year-end equity of $1.8bn, expected net cash positions of $7-800m as well as substantial cash-flow from fixed coverage provide Norden with the financial strength to both resist fluctuations and take advantage of the opportunities that may arise.”

There was no indication of what “opportunities” Norden intends to exploit in the short-to-medium term but Mortensen tempered the positive note with some salient remarks on current market conditions.

“The heavy downturn in the financial markets and the related drop in freight rates in dry cargo illustrate that the shipping business is cyclical and is naturally influenced by the global economic development. Norden has also taken a hit.

“We are all looking for answers to today’s key questions: where is the financial crisis leading us and when does it stop hurting the global economy? But I am afraid that there are no precise answers to these questions.”

The Copenhagen-based owner may on 1 October have lowered its full-year profit forecast from the $950m-$1.03bn range to between $800m and $880m, but it believes this will still leave it on a sound footing.

“Still, we are well on track to post a full-year profit, which will exceed last year’s record result of $703m significantly,” Mortensen wrote. “A net profit of more than DKK 4bn must be perceived a solid performance in today’s world.”

Dry-bulk rates have been floored in the past month or two leaving Baltic indices well down on year-ago figures. Cargoes have dried up and China has cut back on South American iron ore imports.

But Mortensen tried to inject a bit of realism into the debate on rates commenting: “Even though rates in some segments have dropped 70% in just one month, the dry cargo rates still remain well above the historic average.”

Norden itself moved to narrow its exposure to the spot market in a bid to maintain profit growth, Mortensen claiming on Tuesday that “65% of the 32,000 known ship days [in Norden’s dry-bulk fleet] are fixed at rates considerably above the current spot rates”.

And while Western markets have been the hardest hit by the current financial malaise, Mortensen was quick to point out that the drivers of the shipping markets are elsewhere.

“It is also important to remember that the baton in the shipping market is not being [held] solely by the USA and Europe, but to a large extent also by the strong economies in Asia.

“China and India are crucial to the dry cargo market, and the growth rate in the world’s two most densely populated countries makes our confidence in the long term story in dry cargo remain undiminished, although the road may get very bumpy in the near future.”

Norden’s newsletter also said that, while 2007 saw India import 60-65 million tonnes of coal, this is set to increase to 130-135 million tonnes in 2012. Bauxite exports may also grow as manufacturing, particularly of cars, expands, Tuesday’s newsletter continued.

Norden shareholders could be seen to echo Mortensen’s largely positive notes as the Dane’s share price jumped 25.33% on Tuesday to put it third on the TradeWinds Shipping Index list of ‘Best Performers’ (click here for updated stock prices) .

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