Page 44: of Maritime Logistics Professional Magazine (Mar/Apr 2018)

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BULK CARRIER REPORT

Credit: Capital Link

With recent price increas-

Net freight rate sentiment Economics 101, demand es from yards, these will “ “ “ is positive in all main and supply. We either need not make fnancial sense tonnage categories … more tons to move or we to build … I am not sure it increased both in the need to shrink the barge that the VLOC [Very Large drybulk and container feet. Preferably both.

Ore Carrier] orders that – Peter H. Stephaich, ship trades.

we see now will eventually

Chairman and CEO of Camp- – Richard Greiner, be realized.

bell Transportation Company

Partner at Moore Stephens – Stamatis Tsantanis, CEO of

Seanergy Maritime Holdings now under court receivership. Importantly, and addressing bulk mover) with BRS noting that “Overall, Chinese iron ore concerns about a large group of newbuild orders tied to the imports grew by 6% to 1,075 million tons…” adding that the

Brazilian miner Vale (representing a potential overhang on the two major originators of iron ore exports both saw double digit market), Mr. Tsantanis said: “With recent price increases from gains from 2016. Australia, with overall iron ore shipments of yards, these will not make fnancial sense to build … I am not 839 million tons, was up to 25% from the prior year, and Bra- sure that the VLOC [Very Large Ore Carrier] orders that we zil- with 384 million tons overall, also up by a similar amount. see now will eventually be realized.”

Financials, ‘Black Swans’ & Logic

Stakeholders often look closely at ships on order as a percent of the existing feet size. Analyst Randy Giveans, who runs Eq- The fair winds pushed by market experts have also begun res- uity Research-Maritime at investment bank Jefferies & Com- onating through to the fnancial arena. In early April, Evercore pany, presented data (originating from Clarksons Research) at ISI analyst Jon Chappell wrote, “For the frst time in more than the Capital Link conference showing the orderbook/ feet ratio two years, we can begin to value dry bulk stocks on estimated hovering around 10% in early 2018, compared to 80% at the cash fows, rather than net asset value (NAV), as spot rate im- height of the market in 2008. His data also showed the spike provements drive meaningful cash fow acceleration.” As mar- in newbuild order activity during 2013-2014 was followed by kets improve, analysts look at company earnings, rather than a lull (corresponding to the market’s drop) in 2015 and 2016. simply the value of the steel (a downside protection if a com-

On the demand side, the researchers BRS said that “Chinese pany were to liquidate its assets). Chappell added, “We believe steel output grew by a strong 6% to 832 million tons.” This had ongoing rate improvements and sustained earnings growth will positive implications for iron ore movements (the leading dry- provide some confdence in the cycle, driving multiple expan- 44 Maritime Logistics Professional March/April 2018 | |