Chinese demand for industrial commodities has reduced, and so shipping prices have crashed hitting the finances of ship operators. Two dry-bulk ship operators, Japan’s Daiichi Chuo Kisen Kaisha and Global Maritime Investments Cyprus Ltd., filed for bankruptcy protection in September.
China’s declining imports of coal and iron ore, major commodities for the bulk carriers, have cut deeply into shipping demand, sending freight prices plummeting. The Baltic Dry Index, a closely-watched measure of shipping rates for a batch of industrial commodities, fell last week to the lowest point in its 30-year history.
Pioneer Chief Executive Pankaj Khanna said that this is “the toughest year for the dry-bulk market in probably 35 years.” Fleet utilization, a key measure of supply-demand balance, fell from 99% in last year’s third quarter to 90.3% in the three months ending Sept. 30.
Pioneer Marine Inc. reported a $5.5 million loss in the third quarter and said it cancelled orders for three new ships as the bulk ship operator had to manage with the steep decline in China’s demand.
The carrier said China’s Yangzhou Guoyo Shipyard had cancelled the ship orders without penalties and had agreed to “substantial delivery delays” of other ships on order and cut $2 million from the total purchase price for the vessels.
“The macro slowdown in China and the collapse in commodity prices across the board are impacting demand, particularly for the major bulks,” Mr. Khanna said, “but, Pioneer is now well positioned with strong support from our sponsors and the banks.”
The third-quarter loss of 20 cents per basic and diluted share compared to a $5 billion loss in the same quarter a year ago. Pioneer Marine, which is listed in Oslo and has management based in Singapore, counted $9.9 million in net revenue in the third quarter, down 11.3% from the same quarter a year ago. Pioneer said revenue grew 14% from the second quarter to the third quarter, in part because the carrier added a vessel during the period.
Source: The Wall Street Journal