Bulker owner-operator Pacific Basin Shipping still sees plenty of reasons to be optimistic about freight markets going forward, despite the barrage of macroeconomic bad news. Freight markets for handysize and supramax bulk carriers, the sectors in which the Hong Kong-listed company specializes, saw a slowdown during the third quarter. Demand for minor-bulk transportation by sea suffered knocks from increasing inflation and interest rates, slowing economic growth both globally and in China, where the construction sector has weakened and zero-Covid policies have impacted economic activity.

Pacific Basin’s bulker fleet outperformed average spot market earnings by a strong margin during the third quarter and CEO Martin Fruergaard said things aren’t all that bad, especially for minor-bulk cargoes. “We’re a little bit positively surprised about how strong the market still is, considering all the things that are happening in the world now. I’m a bit surprised at how good our markets continue to be,” said Fruergaard during the company’s third-quarter conference call with investors. “I think that comes a little bit because, of course, China is a big player in dry cargo but for us it’s only about 10% of our loading and discharge. We still see the ASEAN countries in southeast Asia being very active; we see a lot of cement clinkers going into the US and bauxite and now we see the grain out of South America, and we see coal distribution in Europe, so our markets are holding up quite well.”

There are reasons to be optimistic about the last three months of this year, Fruergaard said. “Going into the fourth quarter, we do see some grain being postponed and now it’s coming into the market, that might be positive and that’s actually why we see the Atlantic market coming up somewhat.” The company expects a seasonally weaker market during the first quarter next year but remains optimistic about the balance of 2023. Pacific Basin’s handysize bulkers earned a net time-charter equivalent (TCE) rate of $23,620 per day on average during the third quarter. Its supramaxes earned $26,640 daily. In comparison, the Baltic Handysize Index averaged $16,010 per day and the Baltic Supramax Index averaged $18,740 per day during the third quarter. Pacific Basin’s bulker operating business generated a margin of $3,860 net per day over 4,780 operating days in the third quarter, the company said.

Fuel price dynamics during the period mean that the company’s $62m investment in fitting scrubbers on 28 vessels has already paid for itself “considerably faster than expected”. Scrubbers contributed a daily $2,810 to Pacific Basin’s TCE earnings across its core supramax fleet, which the firm said is equivalent to an annualized run rate of around $49m. Pacific Basin today owns and/or operates 36 vessels that are fitted with the exhaust gas cleaning systems. The shipowner acquired an unidentified supramax fitted with scrubbers in September, which is its first vessel purchase since December 2021. Fruergaard said the company had taken advantage of falling vessel values, which have softened in line with the freight market. Meanwhile, Pacific Basin has sold 14 handysize vessels since the beginning of 2020, one of which was sold in the third quarter this year. “Going forward, we will continue our organic fleet growth and renewal, and will invest in zero-emission-ready ships when they become commercially viable for minor bulk trades and the requisite global bunkering infrastructure is being built out,” Fruergaard said during the call. Looking ahead, Pacific Basin has covered 74% of its available handysize days during the fourth quarter at $18,760 per day on average. Forward bookings for its supramax fleet are even higher at 89% of available days, booked at an average of $20,480 net per day.