Pacific Basin Staying Clear of Ordering as It Slashes Loss

Hong Kong-based dry bulk shipping company Pacific Basin will not be exercising its options for newbuilding tonnage as long as the current market conditions remain, the company said.

The dry bulker owner has options to purchase 11 Handysize, 3 Supramax and 1 Post-Panamax vessels at predetermined times and prices during the period of their leases.

On the other hand, the company is keeping a close eye on the second-hand assets which have very attractive prices at the moment to bolster its fleet.

“We continue to look for and assess attractive ship acquisition opportunities to grow and renew our fleet with modern, high-quality second-hand ships or resales that can generate a reasonable payback and cash flow even in today’s challenging market, and can reduce our average daily vessel costs,” the company’s CEO Mats Berglund said.

In its interim report for the first half of 2017, Pacific Basin said it cut its underlying loss to USD 6.7 million from last year’s USD 61.6 million loss amid improved dry bulk market freight rates in the first half of 2017. EBITDA improved to USD 56.6 million from a negative USD 5.0 million and positive USD 22.8 million for the entire 2016.

“With progressively fewer new ships delivering from shipyards and demand gradually recovering, the dry bulk freight market is returning to a healthier balance with demand in the first half outpacing supply,” Berglund added.

Still, despite improved market fundamentals prompted by lower ordering, scrapping is slowing down and the global fleet is still growing.

Namely, during the first half of 2017, a net growth of 2.0% and 1.5% in the global Handysize and Supramax fleets were recorded.

“Despite the market declines in January and May, Handysize and Supramax average freight market indices for the first half of 2017 were around 70% higher than for the same period in 2016. As significant as this improvement is, market freight earnings are still not at profitable levels for most dry bulk shipowners,” Berglund noted.

During the half year, Pacific Basin saw all of its seven newbuildings delivered, and purchased a secondhand Supramax and two secondhand Handysize vessels.

By 30 June, the company’s fleet expanded to 101 ships on the water out of about 250 ships operated overall.