The largest U.S.-listed dry bulk shipping companies are buying up ships in the secondhand market in anticipation of higher rates ahead.
During conference calls on Thursday, executives of both Golden Ocean (NASDAQ: GOGL) and Star Bulk (NYSE: SBLK) highlighted stronger fundamentals for 2021, with vaccine-fueled cargo demand growth expected to outpace vessel supply growth.
According to Star Bulk CEO Petros Pappas, “Clarksons expects the dry bulk trade to expand by 3.7% in terms of ton-miles. On the macro side, we expect a world economic rebound, a weak dollar, strong oil prices and low interest rates.
“On the micro side, we have a low orderbook, a future increase in Brazilian iron-ore exports and West African bauxite exports, more long-haul grain trade, more congestion, and a positive vessel-supply effect due to environmental regulations. We remain very positive about the short- and medium-term prospects for dry bulk shipping,” affirmed Pappas.
The big get bigger
On Wednesday, Golden Ocean announced the purchase of 18 dry bulk ships from Hemen Holding, the private arm of shipping magnate John Fredriksen and the largest shareholder in Golden Ocean.
The acquisitions, for a total consideration of $752 million, consist of 10 Newcastlemax-class vessels, each with capacity of 208,000 deadweight tons (DWT), and eight 81,600-DWT Kamsarmax-class bulkers. The deal brings Golden Ocean’s fleet to 96 ships with an aggregate capacity of 13.5 million DWT.
Golden Ocean CEO Ulrik Anderson said they were “the right vessels at the right time at the right price.”
Star Bulk has also been busy buying ships. In December, it purchased three 180,000-DWT Capesize-class vessels from E.R. Holdings for $39 million in cash and 2.1 million Star Bulk shares.
On Feb. 2, it announced the purchase of seven dry bulk vessels from Scorpio Bulkers, which has changed its name to Eneti (NYSE: NETI). The acquisitions consist of three 61,000- to 64,000-DWT Ultramax-class ships and four 81,300- to 82,000-DWT Kamsarmaxes. Star Bulk paid for the ships by taking over $102.3 million in lease obligations and issuing Eneti 3 million Star Bulk shares.
At current share pricing, the E.R. and Eneti deals add up to $207.3 million in combined consideration. Including ships from both deals, Star Bulk’s fleet size will increase to 126 vessels with a total capacity of 13.9 million DWT.
Star Bulk reported net income of $27.8 million for Q4 2020 compared to $23.5 million in Q4 2019. Adjusted earnings per share of 30 cents came in above the consensus forecast for 26 cents.
Pappas reported that the company has around 50% of its Capesize days booked for Q1 2021 at a little over $19,000 per day, 92% of its Panamax (bulkers in the size range of 65,000-90,000 DWT) days at $13,400 per day, and 87.5% of its Supramaxes [45,000-60,000 DWT] at around $14,500 per day.
Golden Ocean reported net income of $25.4 million for Q4 2020, compared to $41 million in the same period the year before.
It has 66% of its Capesize days for Q1 2021 booked at $18,200 per day and 86% of its Panamax days booked at $13,800 per day.