The last couple of years have been tough for dry bulk and gas shipping company J. Lauritzen, which has been struggling with weak markets and costly time-charter contracts.
But in addition to a full-year report for 2017 that shows improvements in the dry bulk market and expectations for better markets this year, the carrier also projects a return to profits in the near future, says CEO Mads. P. Zacho in an interview with ShippingWatch.
It's our clear ambition to be profitable in 2019"
"As for the future, we expect that 2018 will be better than 2017, but not satisfactory. We're not making it more concrete than that, other than it's our clear ambition to be profitable in 2019," says the CEO.
Improvements for dry bulk
The annual report released Friday morning shows that J. Lauritzen booked a net deficit of USD 45 million last year – a result more or less on par with 2016.
The carrier reported improvements in the dry bulk market, while the gas vessels were still struggling.
"We've strengthened our financial position and built new customer relations in 2017, so we think we're in a fairly strong position for a 2018 which will be better for both markets compared to 2017," Zacho tells ShippingWatch.
In the report, the carrier says that 2018 is expected to be another challenging year for both businesses on the way back to become profitable.
"2018 will represent another step toward a more normal and profitable sector overall. We see uncertainties due to the highly volatile rates for dry bulk in particular, as they fluctuate by thousands of dollars within weeks. We just have to accept this, so there's a lot of uncertainty when making projections about the market," he says.
He adds that fleet capacity utilization will increase this year and again next year, and this will, in his words, "only have a positive impact on the rates."
Equilibrium toward the end of the year
While the carrier's annual report states that it will take time to rebuild equilibrium in the dry bulk market, Zacho explains to ShippingWatch that the company expects to see a return to balance between supply and demand in the market toward the end of this year or during 2019.
This will come from "a gradual increase in demand and few newbuilds headed for dry bulk," he says.
"It's difficult to say exactly when the market will reach a balance. But we expect that this will improve, and we haven't gotten more cautious about 2018 or 2019," says Zacho.
However, a de facto market recovery could be short-lived and muted if orders for new tonnage surge, writes the carrier in the report.
But Zacho tells ShippingWatch that this worry applies to the time after 2020.
"If a wave of new orders hits now, the ships will be delivered from 2020 and on. Several newbuild orders have been placed in the last two to three months, but not a level that gives us cause to worry," says Zacho:
"Less than 300 ships were ordered, and we have to go back to 2001 to see a situation where fewer vessels were ordered. We still feel things are looking sound, but we worry that, if a flood of new orders is placed, we'll be struggling with overcapacity again three years from now."
English Edit: Daniel Logan Berg-Munch