Weak rates dent GOGL

Golden Ocean has just managed to post a positive result for the second quarter of 2014 in the face of the weak freight rate environment.

The John Fredriksen-controlled bulker owner said net income for quarter was $1m versus the $10.1m achieved in the first quarter.

Total operating revenues for the second quarter were $72.8m, less than half the $147m achieved in the first three months of 2014.

Golden Ocean said the weaker performance was mainly related to lower earnings in the spot market during the second quarter of 2014, compared to the earnings in the first quarter.

“The second quarter took the dry bulk industry by surprise. It did not live up to expectations forecasted by most analysts following the sector,” Golden Ocean said.

Capesize vessels earned on average $11,900 per day compared to $16,300 per day the previous quarter. This was still almost twice as much as the same quarter in 2013.

Golden Ocean described the panamax segment as an even bigger disappointment with earnings averaging $6,300 per day, which was even lower than a year ago.

“Continued weak Chinese coal and bauxite import has meant a plentiful supply of panamaxes to put pressure on capesize through ratios in the coal trade,” it said.

“Coal demand from China has been considerably lower than anticipated due to more available hydro power and increased use of natural gas.

“Chinese imports and production of thermal coal each declined by one percent in the first half of 2014 compared to the first half of 2013.

“In addition, the ban on exports put in place by the Indonesian Government for nickel ore and bauxite, and a relatively moderate South American grain season did not support the smaller segments which again have a negative impact on capesizes.

“China has been drawing down on bauxite and nickel ore inventories for the last six months and unless the ban is lifted sourcing has to take place from longer distances.”

Looking ahead, Golden Ocean said that so far in the third quarter the earnings on the fleet are lower than in the second quarter.

It said the uptick seen lately will impact positively towards the end of the quarter; however the company still expects a small net loss for the third quarter of 2014.