“We will continue to pursue our fleet growth and renewal strategy. Over the long term, we see upside in secondhand values and our buying focus remains on secondhand Japanese-built ships for their good quality and value,” the company said announcing its business performance results for 2019.
The shipowner said it would avoid contracting newbuildings due to their high price, low return, and because of the uncertainty over new environmental regulations and their impact on future vessel designs and technology.
“In the short term, what the industry can and should do to improve profitability and reduce emissions is to slow down existing ships and refrain from ordering new ships with old technology.”
The company posted a net profit of USD 25.1 million in 2019, an underlying profit of USD 20.5 million and EBITDA of USD 230.7 million. This is considerably lower from the corresponding figures in 2018, when the company’s net profit stood at USD 72.3 million with an underlying profit of USD 72 million.
“Our results benefited from our TCE earnings outperformance, enlarged owned fleet and competitive cost structure, but were adversely affected by weaker dry bulk market conditions and more off-hire than normal, especially in the second half of the year, due to scrubber installations and a record number of dry-dockings,” Mats Berglund, CEO of Pacific Basin, said.
During 2019, the company took delivery of eight secondhand vessels – six Supramax and two Handysize – and sold two older smaller Handysize vessels. By the end of April 2020, two further Supramaxes and one Handysize are scheduled to join the company’s fleet, pushing its owned fleet to 117 ships.
On the other hand, Pacific Basin is reducing the number of ships on long-term charter, from 61 at the end of 2012 to around 18 on average for 2020.
Commenting on its approach to meeting the IMO 2020 sulphur cap, the bulker owner said that about 85% of its overall fleet (including chartered ships) complies by using low-sulphur fuel.
“Our ships have made the switch without any major unplanned operational disruption, as we prepared thoroughly,” the dry bulk shipping major said.
“As Supramax vessels consume more bunkers than Handysize vessels, we chose a balanced approach to how we comply, took early actions to prepare for the expected volatility in fuel prices in early 2020 and installed exhaust gas scrubbers on a majority of our owned Supramax vessels allowing these ships to burn cheaper heavy fuel oil.”
The company completed its scrubber installation program in February, with scrubbers fitted and operational on 28 of its 35 owned Supramaxes.
“Having scrubbers on about 15% of our approximately 200 operated ships provides us some optionality in how we manage our fuel needs to comply with the new rules. Based on the fuel price spreads seen in early 2020, our scrubber-fitted ships are making a significant contribution to our earnings,” the company added.
Commenting on the market outlook, Pacific Basin sees positive developments including subsiding of tensions between the US and China as well as normalization of ore exports from Brazil and Australia following last year’s infrastructure and weather disruptions.
Clearly, there is a negative impact on the market from the coronavirus outbreak, however, the company expects to see a rebound and stronger rates driven by catch-up demand and stimulus activity once the outbreak is contained.
The market is also anticipated to benefit from further fleet inefficiencies amid planned scrubber retrofits, and speed reduction among the majority of the world’s dry bulk vessels due to the higher price of low sulphur fuel.
The company believes this will mitigate effective supply growth in 2020 and beyond, and uncertainty over new environmental regulations, adding that the gap between newbuilding and secondhand prices should discourage new ship ordering.
“Looking to 2020, the seasonal Chinese New Year dip was compounded and prolonged by reduced demand and disrupted logistics caused by actions to contain the coronavirus. Catch-up demand and stimulus should trigger a rebound once the virus is under control and Chinese activity returns. Hence, this year will likely be characterized by initial challenges and continued volatility,” Berglund added.
TURKISH MARITIME NEWS