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EGLE - bullish freight outlook for 2007

RTRS-INTERVIEW-Eagle Bulk sees bullish freight outlook for 2007

By Edgar Ang
NEW YORK, Oct 2 (Reuters) - The head of the largest U.S.-based Handymax dry bulk vessel owner, Eagle Bulk Shipping Inc. <EGLE.O>, predicts a multiyear uptrend for the small dry bulk vessel market, defying some bearish expectations by ship brokers.
In mid-September, ocean freight rate for dry commodities soared to a 17-month high on surging Chinese iron ore purchases, long-term charter deals, strong fundamentals and sentiment ahead of peak fourth-quarter demand for transport, but some ship brokers expect the bull run to fizzle out soon when more new vessels join the active fleet next year.
"We are at the beginning of a multiyear scenario" for the dry bulk freight market uptrend, Sophocles Zoullas, the company's chief executive, told Reuters in a recent interview.
"The supply side of the equation could sustain the uptrend next year."
The bullish market projection was supported by an expected incremental decline in the supply of Handymax vessels, which have a capacity of below 60,000 dwt, over the next four years.
Zoullas pointed out that about 32 percent of the aging Handymax fleet was more than 20 years old and was expected to be retired eventually due to safety concerns.
Eagle Bulk owns and operates 16 vessels, of which 12 are of 50,000-59,999-dwt Supramax size. The average age of the fleet is about 5.5 years.
Besides the expected shortfall in vessel supply, the demand fundamentals were also strong, helping to extend the recent bull run, Zoullas said.
In 2006, China's demand for iron ore, steel and cement were expected to jump by double digits.
About 60 percent of Chinese berths do not have the capability to handle larger Panamax and Capesize vessels.
Demand in the Persian Gulf and India was also climbing, he said.
"India buys about 6 million tonnes of grains a year, but we were told today that India will increase its grain demand to 8 million tonnes next year," Zoullas said.
Indian ports would require mostly Handymax vessels for their grain transportation due to the port infrastructure limitations, he said.
"It is also about the broadening of demand base, and not just about the demand growth," Zoullas said, explaining the sustainability of the demand growth.
Eagle Bulk vessels transport iron ore, coal, grains, cement, petroleum coke, steel, scrap iron and other commodities.

CAUTIOUS EXPANSION
Eagle Bulk remained in a cautious expansion mode, with the company's last ship acquisition seen in June, Zoullas said.
"Eagle Bulk is a growth company, and is always looking for opportunities (to grow)," he said.
However, he stressed that the future vessel acquisitions in the near term could be tricky, given the higher asset values versus the lower chartering rates.
"We identified a small window where there was an opportunity for us to acquire vessels because the asset prices had not moved and the demand had moved up," Zoullas said, referring to the purchase in June.
On ship security, Eagle Bulk will avoid sailing to war-torn countries even if it were offered attractive premiums over the regular shipping rates.
"We will not expose our assets and crew to that type of risk" in war-torn areas such as Iraq and Iran, Zoullas said.
((Editing by Matthew Lewis; Reuters Messaging: [e-mail]: <mailto:[e-mail]> ; Email: [e-mail]: <mailto:[e-mail]> ; [phone]))