V for Volatility

Freight rates are on the rise and the darkest days of the downturn have passed but there’s a strong chance the bulker market will be more volatile than ever in 2014, Compagnie Maritime Belge (CMB) warned investors Thursday.
Horror show: some fear the period of prosperity will be short-lived due to the most recent avalanche of orders.

Horror show: some fear the period of prosperity will be short-lived due to the most recent avalanche of orders.

The NYSE Euronext-quoted parent of Belgian bulker operator Bocimar believes the capesize and panamax segments will be particularly susceptible to sudden shifts in freight rates caused by changing weather patterns, port congestion and erratic FFA markets over the next two years.

Promising trends

In CMB’s fourth-quarter earnings report it acknowledged the scene looks far less grim than in years past, however, due to emerging trends that will help the space achieve “a more sustainable balance” between supply and demand like the sharp reduction in newbuilding deliveries.

“On the demand side there are also numerous positive indicators, such as the renewed growth in global steel demand as well as an increase in demand for steaming coal,” the Brussels-based bulker owner continued in the market commentary section of the filing.

CMB stressed the importance of the increased availability of cargo, a trend it attributed to the activation of several iron ore projects that had been downsized or delayed but are now expected to contribute an additional 180 million tons of cargo to the market over the course of 2014.

Earnings

The commentary came as Bocimar’s fleet of capesize, panamax, handymax and handysize bulkers reported earnings averages of around $27,023, $18,031, $14,328 and $8,956 per day, respectively, in the fourth quarter of last year.

By comparison, these same sub-segments turned in daily averages of  $23,415, $10,001, $6,953 and $7,129, respectively, in the comparable period 12 months prior, according to documents filed with securities regulators.

CMB carded a gain of $12.7m fourth quarter while its consolidated full-year result fell to $49.4m from $134m year-on-year. The company said Bocimar’s annual contribution to the group’s bottom line dropped to $2.9m from $53.2m but did not explain why.

Sale-and-purchase

In the company’s earnings report it also shed light on a recent capesize order, the addition of two handysize newbuildings to its backlog and a new alliance with an affiliate of Cobelfret that marks its return to the chemical tanker segment.

CMB also confirmed that it offloaded the 20,500-dwt bulker 20,500-dwt Rio Negro (built 1999) in the fourth, which resulted in a capital loss of nearly $1m. The ship was one of four it acquired from managing director Marc Saverys in March 2012.

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