Morgan Stanley expands dry freight charter business

By Edgar Ang

NEW YORK, Feb 5 (Reuters) - Morgan Stanley (MS.N) has added
long-term cargo shipping contracts to its dry bulk ship
chartering business portfolio to cut risks linked to long-term
vessel chartering, shipping sources said on Monday.

"Recently, Morgan Stanley has booked ships for single
voyages because it has picked up at least two or three
contracts of affreightment (COAs)," a ship broker said.

A COA is a long-term contract to ship a specific number of
cargoes such as grains or iron ore for a specific voyage.

The latest single-voyage charter was for the 74,500-dwt,
2001-built Marilena D Amato for loading in El Ferrol and
delivery to Europe. The hire rate was $31,000 a day.

"It (Morgan Stanley) has at least one COA for South America
to Europe," he said.

A Morgan Stanley spokesman declined to comment on the
long-term cargo shipping contracts.

Last August, the investment bank entered the physical dry
bulk freight chartering market after trading in the dry freight
derivatives market since 2002.

Morgan Stanley had only been involved in hiring dry bulk
ships on long-term basis and chartering out these vessels for
single voyages in the spot market.

The entry into the COA business was seen by shipping
sources as a move to offset risks linked to ship rehiring.

"It is very risky to be just chartering out the long-term
ships that you hired," a second broker said.

"Historically, not many people do it, but the market has
been volatile in the past year, which encouraged people to
enter in the vessel reletting business," he said.

Sources estimated in December that Morgan Stanley's total
long-term vessel charter numbered anywhere from four to eight.

In a COA contract, Morgan Stanley is seen making profits by
offering freight at a dollar-per-tonne basis to shippers, and
the bank would then take care of ship charters, sources said.

Morgan Stanley could also use their own vessels to move
these cargoes if their ships fail to find a suitable rate in
the spot market, they said.

"The rates have been on a slide in the past few weeks. The
COAs will make sure Morgan Stanley is not stuck with idling
vessels," the first broker said.

Panamax rates were weaker partly due to a demand lull from
Chinese shippers due to the upcoming Chinese New Year, but the
market outlook for the second quarter remained firm as
reflected in the long-term five-year charter rates.

The Baltic Exchange Panamax Index was pegged at 4,070
points, up 42 points from last Friday. The 2007 high so far was
at 4,558 points.