Jinhui Cuts Loss as Dry Bulk Freight Rates Rise

Hong Kong-based dry bulk specialist Jinhui Shipping and Transportation Limited recorded a net loss of USD 7.97 million in the first quarter of 2017 as compared to a net loss of USD 18.5 million in the first quarter of 2016, as time charter equivalent rates more than doubled and the company’s shipping related expenses went down.

The company’s revenue for the first quarter of 2017 increased 54% to USD 15.3 million as compared to USD 9.96 million for the corresponding quarter in 2016.

The increase in revenue was mainly due to the recovering freight rates in the spot market, Jinhui said. The average daily time charter equivalent rates earned by the company’s fleet improved 102% to USD 5,925 for the first quarter of 2017 as compared to USD 2,934 for the corresponding quarter in 2016.

Dry bulk shipping market improved notably in the first quarter of 2017, Jinhui said. The market freight rates bounced back to encouraging levels since February and the uptick of rates was supported by the surge of seaborne trading activities in particular to China’s iron ore and coal imports.

With the reducing fleet growth due to continued demolitions of older tonnages and limited newbuilding entering the market, freight rates have improved year-over-year, and the average of Baltic Dry Index of the first quarter of 2017 was 945 points, which compares to 358 points in the same quarter in 2016.

”While we believe the overall recovery in dry bulk shipping market require a stronger demand and supply rebalance through slowing fleet growth, layups and scrapping of tonnages, we continue to see unpredictable and often high earnings volatility in dry bulk shipping market and we believe it will be prudent to periodically reduce indebtedness and enhance our liquidity when such opportunities arise,” Jinhui said.

The company’s shipping related expenses dropped from USD 16.2 million for the first quarter in 2016 to USD 10.7 million for the current quarter. The decrease was mainly attributable to the reduced number of owned vessels from thirty six in the first quarter of 2016 to twenty eight in the current quarter and the continued efforts in reducing vessels’ running costs under the group’s cost reduction strategy in order to remain competitive in the current tough market environment.

Looking ahead, Jinhui believes the factors that will continue to determine the pace of dry bulk market recovery are a continued positive demand growth in key dry bulk commodities importing activities from China; a continued recovery or stabilization of dry commodity prices; a reduction in shipbuilding capacity where irrational order, and hence oversupply will be discouraged; and geopolitical risks that affect the world trading pattern.

The difficulties faced by shipyards, buyers and financiers are all pointing towards a much reduced projected fleet growth, Jinhui said.

Delays, conversions of bulk newbuilding orders to other vessel types, cancellations, and shipyard defaults are currently leading to much fewer actual deliveries than previously scheduled. Asset based financing, in particular with respect to maritime assets continue to be hard and expensive to come by. A more stable operating environment will be reached if these continue, according to Jinhui.