UK shipowner Taylor Maritime Investments (TMI) believes handysize bulk carrier values will continue to rise as fleet growth turns negative. The London-listed company said in an update on Thursday that demand for minor bulk cargoes at 2.2% is expected to continue to outpace fleet supply growth of 1.7% this year. And the size of the handysize fleet will reduce next year. “Further asset value upside is possible given inflation in newbuild prices, with secondhand ships valued below depreciated replacement cost,” TMI said.

The handysize orderbook continues to be at a historical low of 4.8%, the smallest of all bulker segments. TMI puts this down to newbuilding price inflation, orders in other segments filling yards and ongoing uncertainty around future ship technologies.

“Beyond 2023, effective supply is expected to decrease due to lower operating speeds required to meet IMO emissions reduction targets,” the company added. With 8.3% of the fleet over 25 years old and a further 1.7% turning 25 in 2022, analysts expect older, less efficient tonnage to be removed in 2023. The number of handy sizes could shrink by 2.3%, they believe. “Given the underlying fundamentals of the handysize segment, particularly tight fleet supply, the company believes the 2022 outlook is positive,” TMI said.

The owner also argues a post-lockdown rebound in China’s trading activity would lead to upward pressure on rates in the current “congested and inelastic” market environment. And the war in Ukraine is adding tonne miles as steel, grain and coal volumes from Ukraine and Russia bound for European and Mediterranean markets are being replaced by sources from further afield.

Additional support for handysize freight rates continues from cargoes usually transported by container ships now being carried on dry bulk vessels and port congestion, both of which may recede in the medium-term, TMI said.

The company added that its net asset value at the end of March was $1.74 per share, an increase of 22% since 31 December and 78% since its initial public offering in May 2021. An interim dividend of 1.75 cents will be paid for the first quarter. And TMI said that, following strong trading conditions, the board will consider an extraordinary dividend in early May.

Current average net charter rates for the 31 bulkers have increased to $19,200 per day versus $18,600 at the end of March 2022. Chief executive Ed Buttery said: “We have created a differentiated shipping investment opportunity offering growth and attractive shareholder returns as well as effective recycling of capital.” He added: “This is in the context of our continued anticipation of two to three years of further strength in the market.”

Buttery said two ships have recently been fixed on one and two-year charters, while a significant portion of the fleet has remained on short-term deals where yields are higher.