Given the current market firming and the over 50% increase in handysize bulker rates on the Baltic Exchange between February and March, Edward Buttery, the chief executive of Taylor Maritime Investments and Grindrod Shipping, keeps a subdued bullish outlook on prices for these vessels, as reported by Splash 247.
Supporting rates and values
“I anticipate the market will hold steady for the remainder of this year, next year, and perhaps even longer. The fundamentals of the geared industry are strong, but there will undoubtedly be seasonal and technical ups and downs. Of course, we cannot forecast wildcard events.”
According to Buttery, this should produce a compelling supply-demand spread, which, when combined with the slowing fleet and ageing fleet, could further support rates and values. The combined minor bulk and grain demand is anticipated to increase in tonne-mile terms this and next year, while the handysize fleet increases marginally.
Increased shipments to China
The creator of the London-listed TMI anticipates growth in the industry this year, relying on higher grain exports and forecasted record-high soybean season in Brazil, which will underpin charter prices. According to sources in Brazil, he estimates that seaborne soybean exports are up more than 16% over the previous season. Shipments to China are also anticipated to rise, “locking up tonnage on long haul routes across the Pacific.”
Brazil’s grain exports will close the gap left by departures from the Ukrainian grain corridor, which reached a four-month low in January 2023, and the demand for shipments from farther away, he adds.
Dry bulk sector improves
He discovers that as China began to loosen its zero-covid rules and signalled its intention to stimulate the economy with measures aimed at the real estate and construction industries, both of which are the main drivers of geared bulk demand, confidence in the dry bulk sector improved.
He noticed rates last week at $12,500 a day, up more than 50% since mid-February, and that the asset value of a 10-year-old 37,000 dwt bulker had increased to $18.5 million from $16.5 million at the start of January 2023. “There is cause for cautious optimism as China returns to a pro-growth approach with the central government aiming for 5% GDP growth in 2023,” he writes, adding that UBS and Morgan Stanley believe this number could be higher.
Restricted renewal strategy
With the orderbook maintaining at close to record lows, shipyards full, and demand growth expected to pick up, Buttery tells Maritime CEO, “Overall, we maintain a bullish prognosis through the end of 2024 and maybe into 2025.”
Since that Japanese newbuild contracts are currently only deliverable in the second part of 2025 at the earliest, TMI contracted a 40,000 dwt handy newbuild in Japan for delivery in Q1 2024. The action was taken as a part of the company’s “restricted renewal strategy” to lower the fleet’s average age overall, improve its ESG credentials, and dispose of older boats.
Even though this was a fantastic chance for Buttery and the business, he emphasises that it “doesn’t herald the commencement of a newbuild project” and that the slot was only made available because of the company’s close ties to Japanese yards.
With a controlling interest in Grindrod and a fleet of more than 50 vessels, the majority of which are Japanese-built and have an average age of 9 years, TMI, in his opinion, is in a strong position.
Healthy balance sheet
We are making strong progress in finding synergies from the combined fleet across insurance, commercial management, technical management, and corporate activities, he says, adding that we are on a vital route to earnings and NAV accretion through our integrated approach.
Strong governance frameworks underpin Buttery’s position as CEO of both businesses, which he feels will allow him to carry out a well-defined integration strategy with both teams working towards value creation made possible by an increased fleet. He plans to keep TMI’s investment approach going forward, putting deleveraging first to preserve a healthy balance sheet.
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Source: Splash247
