ShippingWatch

"The market is in a rather poor condition to put it mildly"

Right now, dry bulk rates are markedly lower than bulk carrier Golden Ocean's break-even for its fleet. The market is seeing uncertainty, and it is hard to tell when things will turn around, CFO tells ShippingWatch.

Per Heiberg is CFO at dry bulk company Golden Ocean. Photo: PR/Golden Ocean

It is still much too early for Golden Ocean to tell when the dry bulk market will turn around for the better, says the John Fredriksen-controlled shipping line's Chief Financial Officer Per Heiberg in an interview with ShippingWatch.

The start to 2020 has so far been especially tough for dry bulk companies, with rates and demand most recently being pulled down by the Coronavirus outbreak in China, which has prolonged the Chinese New Year and lowered demand.

It is too late to take any proactive measures

Per Heiberg, CFO, Golden Ocean

Current rates are significantly below the break-even levels Golden Ocean needs for its fleet. And it is hard to tell how long that will last, Heiberg says.

"The market is in a rather poor condition to put it mildly," the CFO says.

"Right now it is more about doing the best possible. It is too late to take any proactive measures."

For Golden Ocean's fleet, break-even levels are about USD 13,800 per day for capesize vessels and USD 9,600 for panamax vessels.

Before long the shipping line will present its annual financial report on 2019. As such, Heiberg declines to go into detail as to what the market developments have exactly entailed for the carrier's business.

Could postpone recovery

The CFO points out that the first quarter of the year is traditionally a weak period for the dry bulk sector, not least due to the Chinese New Year, which for a while lowers demand from the crucial Chinese market.

This year, however, the transition to the new sulfur regulation and the propagation of Coronavirus have also factored in, increasing uncertainty.

Steel and iron ore prices also continue to rise, implying demand could potentially pick up

Clarksons Platou in an update Wednesday

"It will maybe delay the recovery a bit so we would have a weak market for an extended time, and then of course the recovery will depend on how this development plays out," Heiberg says.

The uncertainty also influences Golden Ocean's process of installing scrubbers on its ships, which takes place in China. In total, 23 of the carrier's capesize vessels are to be equipped with the exhaust-cleaning technology.

As a consequence of the virus outbreak, several Chinese shipbuilders have declared force majeure, postponing ship orders and installations.

What this precisely entails for Golden Ocean, Heiberg does not wish to specify to ShippingWatch. Once the company presents its financials, it will provide an update on the process.

Golden Ocean's owned fleet currently consists of 79 ships, of which 67 are owned by the shipping line. The majority of the fleet, 46, are capesize vessels, while 30 are of the panamax type and three are ultramax ships.

Demand could rise

In its daily update, however, Clarksons Platou wrote on Wednesday that earnings levels for the large capesize vessels might have bottomed out.

"... as sentiment is improving in the futures market and the whole curve is trading further up this morning. Steel and iron ore prices also continue to rise, implying demand could potentially pick up," the brokerage writes in its update.

According to the broker firm's update on Wednesday, earnings levels for capesize ships without scrubbers equipped average at approximately USD 2,700 per day. For panamax vessels, average daily earnings are at USD 5,000.

For ships with scrubbers, still sailing on high-sulfur fuel, Clarksons says additional earnings come to USD 4,700 and USD 3,100 per day for these ship types, respectively.

Most recently, the Baltic Dry Index increased by 0.7 percent to 421 points on Wednesday. In the index, capesize ships are weighted 40 percent, panamax 30 percent and supramax 30 percent.

English Edit: Jonas Sahl Jørgensen

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