Pacific Basin, an owner and operator in the smaller-sized bulk carriers, said demand to transport dry bulk goods has remained strong, leading it to enjoy the best quarterly time charter equivalent rates in 10 years. Its handysize fleet earned $10,950 per day, while its supramax vessels generated $14,630 per day in the first quarter of this year, the Hong Kong-based company said in a trading update. That is a “significant improvement” over its 2020 levels.
So far in the second quarter, it has achieved an average of $16,100 per day for its handysizes and $18,000 per day for its supramaxes. Given breakeven levels of $8,720 and $10,120, respectively, including G&A overheads, its current core fleet of 91 handysizes and 41 supramaxes that are owned and long-term chartered-in are now “generating attractive returns”, it said.
Despite a slight recent softening in spot rates, the company expects a stronger market in the second half of the year as dry bulk freight continues to benefit from “a broad-based increase in demand for commodities”. Preliminary data shows that dry bulk volumes loaded in the first quarter grew 9% versus the same period last year, driven mainly by strong Chinese demand for imports and global grain trades, Pacific Basin highlighted. Global grain loadings in the first three months of this year rose 15% year on year, as record high US soyabean and corn exports in late 2020 continued into 2021. “As the US soyabean export season now winds down, it is encouraging to see larger corn volumes than in previous years, the South American grain export season starting to ramp up, and significant demand again coming from China,” it said.
Loadings of selected minor bulks in the first quarter also increased 11% year on year, with strong growth in construction materials such as logs, steel and other breakbulk cargoes, which found cover in bulkers as container rates surged, it added. Iron ore loadings gained 9% on year, due in part to a surge in Indian demand for coal in response to a particularly cold winter.
“Due to Covid-related national travel restrictions, industries in China did not fully shut down as they traditionally do for the lunar new year holidays, which also contributed to the unseasonably strong Chinese dry bulk demand in the first quarter,” the company said. The sharp increase in spot rates in January to March was indicative of a tightening supply-demand balance, it said.
Although uncertainties related to the pandemic, geopolitical and the supply-side remained, a “vaccine and stimulus-powered support of economic activity” combined with lower dry bulk fleet growth made it optimistic about the freight market this year and beyond.
The company has taken delivery of two of the five modern ultramax ships it committed to buy last November and in February. The remaining three are expected to join its owned fleet during this quarter, along with a modern handysize it agreed to purchase earlier this year. Following delivery, it will own 117 bulkers. Including chartered ships, it had an average of 259 vessels on the water in the first quarter of 2021.