Billionaire investor bets big on shipping

on Tuesday, August 16, 2011

Billionaire investor bets big on shipping  Companies that work within the international shipping industry have, like many other businesses, suffered over the past few years as volatile energy prices eroded profit margins. According to a published report, one billionaire investor is betting the industry will soon recover from its post-recessionary lull. 

Wilbur Ross, a billionaire who made his fortune by restructuring businesses across a wide array of industries, is a member of a group investing more than $900 million on 30 ships charged with transporting gasoline, diesel and a variety of other products, according to a report from Bloomberg.

According to analysts, the deal represents the first such instance of Ross investing in shipping companies. In interviews he gave last week, Ross affirmed that he is willing to put down even more money should the market heat up over the coming months. Deploying "another few hundred million" in shipping companies "is certainly easy to do," he said.

However, not every big-time investor agrees with Ross' outlook. According to reports, Frontline Ltd. founder John Fredriksen, who owns the biggest operator of crude carriers in the world, recently said it could take an additional two to three years before ship values fall, allowing him to purchase more vessels for his fleet.

"The history of the industry is one that goes from immense prosperity to immense poverty and back again, and we think that’s going to continue," Ross said during in an interview. "We're not necessarily at the exact bottom of the cycle, but we think we are relatively close to it."

The demand for such ships tends to ebb and flow with the global economic climate, experts say.

Ross is wagering a hefty bet that soon to be opened refineries in China and India, among other countries, will give a boost to the struggling industry. When refineries go online in the emerging economies over the coming year, demand will concurrently rise for large carriers to transport crude and other refined products.

Nonetheless, Ross has made billions taking over distressed companies and turning them around, according to The Street. His expertise varies across a swath of sectors, and he said he expects the economic expansion in China to continue at a fast clip, though he acknowledged it will likely slow from the blistering double-digit growth it has witnessed over the past decade.

"We do see growth in the emerging countries, but probably at a little lower rate than it had been," Ross added. "China maybe grows at 7 or 8 percent instead of nine plus."

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