Pacific Basin, an owner and operator of smaller-sized dry bulkers, expects continued strong market momentum in the sector, with spot rates pushed to new highs. Average daily earnings of its handysize and supramax vessels increased by about one third and a half, respectively, from the previous quarter to $24,350 and $36,270 in the three months ending September 30, according to a trading update. The Hong Kong-listed company said levels “improved with each month” to $26,950 and $39,310 last month, while most of October was covered at $29,070 and $40,200. “With over 30% of our core vessel days still uncovered in the fourth quarter overall, we have significant opportunity to add cargo fixtures to our book at what we expect will be strong market spot rates,” it said.

Given breakeven levels for handysizes and supramaxes of $8,630 and $10,170, respectively, including general and administrative overheads, its current core fleet — including 91 handysizes and 44 supramaxes that are owned and long-term chartered-in — is now generating decent returns. Third-quarter operating margin stood at $5,430 net per day over 4,680 operating days, almost double the tally in the second quarter.

The results come as Baltic Exchange’s freight rate index for handysizes and supramaxes in September hit 13-year highs, driven by a mix of factors, including demand for construction materials, port congestion and the spillover effect from the container shipping sector. Despite some corrections, “market rates have continued to rise in October,” the company said, adding that the pick-up of US grain exports and extra coal demand spurred by power shortage in key economies could support rates in the fourth quarter. It shrugged off concerns that the recent economic setbacks in China, including the property market slowdown, might weigh on dry bulker demand. “Recent uncertainty over China’s real estate market, steel production curbs and energy curbs has caused jitters in the financial markets, but we have not yet observed any connected impact on dry bulk demand (other than reduced iron ore prices).”

Meanwhile, the tight supply of vessels was expected to further bolster the market. The global fleet of handysize and supramax ships grew by only 2.2% in the year to date, while the orderbook stands only at 5.1% of the existing fleet, said Pacific Basin. “Despite the strong freight market and a slight recent uptick in newbuilding ordering, we expect that new ship ordering will remain restrained, discouraged by uncertainty about the future fuels and vessel designs and technology that will be required to meet coming decarbonization regulations.”

As part of its green shipping commitment, the company said it would only place orders when “zero-emission-ready vessels” become available and commercially viable in its sector, with appropriate global refueling infrastructure in place.