Major Frontline investor UBS Group has offloaded some of its shares after a big jump in the price this year. The Zurich-based investment bank said in a filing to the Oslo Stock Exchange that its holding has fallen below the 5% reporting threshold. UBS sold 810,000 shares on 8 November. At Wednesday’s price of $13.98, these shares are worth $11.32m. The Swiss bank now has 10.41m shares, or a slice of 4.63%.

The UBS shareholding does not appear to have been previously reported. It is not clear who has acquired the shares. The Frontline share price has risen 85% so far in 2022 in recovering tanker markets. The stock has been a big draw for major investors in recent weeks.

US investment giant BlackRock announced a big holding earlier this month. The move followed a similar investment in Fredriksen’s bulker giant Golden Ocean Group in September. BlackRock said it had amassed a stake of 5.13% — a slice worth $153m. But the fund later issued a correction, saying that “following identification of correct issued shares, holding remains below 5% in aggregate”. The exact ownership is therefore unknown.

Frontline chief executive Lars Barstad welcomed BlackRock as a significant shareholder at a time when the “fundamentals of our market are starting to shine through in earnings”.

Frontline, which is listed in both New York and Oslo, is currently trying to tie up a big combination with Belgian partner Euronav.

Last month, US investment bank Goldman Sachs revealed it was holding a 5.26% stake in Frontline, but this could be on behalf of a client. The stake has since been adjusted to 5.02%.

Fredriksen himself controls about 36% of Frontline.

Rhode Island-based Pangaea Logistics Solutions is rewarding shareholders after turning yet another profit in a weakening third quarter and significantly outperforming market indices. New York-listed Pangaea jumped its dividend to $0.10 per share from $0.075 after it produced an adjusted net income of $23.3m or $0.52 per share. Revenue was $184.5m.

The profit topped an adjusted figure of $21.65m or $0.49 per share in the third quarter of 2021 despite a decline in time charter equivalent (TCE) rates. Revenue fell from the year-ago figure of $213m. The adjusted EPS fell just short of the $0.55 per share figure estimated by Alliance Global Partners analyst Poe Fratt, one of the few analysts following Pangaea.

“Our diverse portfolio of stable, long-term transportation contracts, leading positions in higher-margin ice-class trade routes and improved fleet utilization culminated in a strong third quarter performance, one highlighted by significant year-over-year growth in operating cash flow and adjusted Ebitda,” said Pangaea chief executive Mark Filanowski.

“During the third quarter, all ten of our modern, ice class 1A vessels were active within premium-rate ice trades, contributing to a reported TCE rate that was 41% above the broader market benchmark. While most dry-bulk trades experienced typical levels of seasonal softness during the summer months, demand within our core ice class routes was solid, positioning us to deliver another consecutive quarter of profitability.”

Pangaea’s owned fleet, which now numbers 25 with the August acquisition of the 55,618-dwt Bulk Sachuest (built 2010), earned a TCE average of $24,107, down 16% from the year-ago figure of $28,770 per day. Total shipping days declined 14.2% as the company released chartered-in tonnage in recognition of the declining market. “In a declining market, Pangaea’s flexible business plan turns defensive, with high-cost chartered-in ships redelivered to be later replaced by lower market-cost tonnage to be utilized in the company’s cargo trades,” Pangaea noted.

The enhanced dividend also appeared to reflect confidence in the strength of the company’s balance sheet despite the softer market. “With more than 90% of our long-term debt sitting at a blended fixed rate of less than 5.1%, we are well insulated from a rising interest rate environment,” Filanowski said. “We ended the third quarter with cash and equivalents of $118 million, an increase of nearly $62 million from the beginning of the year.”

Pangaea is a player in niche-market trades with significant barriers to entry and prioritizes cargoes ahead of vessel acquisitions. It has also placed increasing emphasis on its ports and logistics business.

New York-listed Genco Shipping & Trading rolled to another profit in a softer third quarter and continued to build on its new high-payout dividend model. The John Wobensmith-led company is handing out a dividend of $0.78 per share, 56% higher than the $0.50 per share it managed in the second quarter and equivalent to a yield of 21%. Genco has now paid dividends of $2.74 per share over the last four quarters since implementing the model. The payout came as Genco reported adjusted net income of $42.7m, or $1 per share. This was down from $57.1m, or $1.36 per share, in the third quarter of 2021. Revenue declined to $136m from $155m in the third quarter of 2021, which Genco laid primarily to lower rates earned by its capesizes.

While solidly profitable, the result fell short of the Wall Street analyst consensus of $1.07 per share, with higher-than-expected operating expenses the main suspect. Genco was able to push those expenses down to $5,457 per day, lower than the prior quarter but higher than the $4,950 guidance it had provided to analysts. “During the third quarter, we generated strong earnings driven by our sixth consecutive quarter of TCE [time-charter equivalent rates] exceeding $20,000 per day together with lower expense levels,” Wobensmith said in the earnings statement. “Prudent cargo coverage taken during the second quarter resulted in significant benchmark freight outperformance during Q3 2022.”

The shipowner reported TCE rates of $23,624 fleet-wide, which was down from $28,800 in the second quarter. However, the previous quarter had been the second-highest rate for the company since 2010. Overall TCE was $29,287 in the third quarter of 2021.

Genco’s fleet wide TCE declined further to $20,451 with 77% of days fixed in the current quarter. But the figure is well above the roughly $13,500 current spot rate for both supramaxes and capesizes, Wobensmith said.

Genco’s ultramaxes and supramaxes were able to beat the Baltic Supramax Index by $7,000 a day in the third quarter. Its numbers were $19,762 for spot cargoes and $24,690 for period cover. This was even though Genco doesn’t have exhaust-gas scrubbers on ships of that size. “Prudent cargo coverage taken during the second quarter resulted in significant benchmark freight outperformance during Q3 2022,” Wobensmith said.

Genco has invested heavily in dry dockings and installation of energy-saving devices on its fleet within 2022 in preparation for the upcoming International Maritime Organization carbon-reduction rules. The figure was $41.1m for the year. But that has left it with little such work to do as the calendar flips to 2023, with only $5.7m budgeted for such work.

1,346 new daily coronavirus cases were reported in China today, which marks the largest amount seen since April 30th.  Cases have still not peaked and have now gone into the 1,000+ daily count, which is a level not seen since March – April’s dramatic surge (new daily cases during that period peaked at 5,659 on April 29th). 

We continue to urge caution if anticipating any near-term reopening in China.  We remain of our view that near-term sentiment has been too bullish regarding any potential reopening in China.

Canadian grain exports pick up in October, following successful wheat harvest

According to AXS vessel tracking, Canada exported 4.7 MMT of Agri bulk on bulk carriers in October, an increase of 27.8% YoY. Canada’s 2022/23 wheat harvest, which ran from August-October, is projected by the USDA’s WASDE at 35 MMT, 14.2% above the 5-year average. This is a 57% increase from last season’s crop, when widespread drought caused a 31.4% YoY drop in yields.

Last marketing year (August-July), Canada’s seaborne grain exports totaled 26.4 MMT, down 42.4% YoY. The USDA expects Canada to export 74% of this season’s wheat crop, at 26 MMT. Around 75% of Canadian grain is exported from the country’s North Pacific coast, mostly to markets in Asia. China was the largest importer in October, at 1.7 MMT, followed by Japan, which imported 580k tonnes.

Of Canada’s grain exports, Panamax liftings increased by 35.6% YoY to 2.4 MMT, compared to a 28.6% YoY increase to 850k for Handies, and an increase of 21.4% YoY to 1.4 MMT for Supras.

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Turkish coal imports rise sharply in October

Turkey imported 3.9 MMT of coal in October, an increase of 95% YoY as low natural gas supply and high prices have driven Turkish utilities to burn more coal. According to data from Energy Exchange Istanbul, Turkey’s coal power generation in October was 54.2% higher YoY, accounting for 44.9% of total electricity generated. Electricity generated from natural gas was down 55.3% YoY in October, with its share of total power generation falling from 42.4% in October 2021 to 20.1% last month. Dry weather has also led to a fall in hydropower generation, with electricity generated in October 62% lower than the peak in May.

Much of this coal has come from Russia, which is being offered at a steep discount to those still able to buy it. The share of Turkish coal imports originating from Russia has increased from 35% in October 2021 to 67% last month. More expensive imports from Colombia, Turkey’s other main source of coal, decreased 0.7% YoY to 700k tonnes in October. Most of this new Russian trade has been shipped on Panamaxes. In total, Panamaxes discharged 1.5 MMT of coal in Turkey in October, a more than sixfold YoY increase. Capes saw a smaller increase in volumes of 30.7% YoY to 1.6 MMT.

Trading in capesize bulkers remains active, but recent deals and market price indices suggest values are continuing to slide for the biggest dry bulk vessels. At least three sale-and-purchase transactions for capesizes show continued erosion since an upturn in prices peaked in May and June, which was followed by a slump over the summer that has market watchers wondering whether prices will decline further. Among the latest deals, US bank JP Morgan has sold the 175,000-dwt Aquafortune (built 2011) for $26.5m to $27m, multiple brokers reported.

JP Morgan Asset Management Global Transportation Group chief executive Andrian “Andy” Dacy confirmed the sale, describing it as a part of a “fleet mix rebalancing strategy”. The ship, which has no scrubber, was constructed at Japan’s Namura Shipbuilding. VesselsValue data shows that the vessel saw its value reach as high as $32.8m in May, before it reached the valuation platform’s current estimate of $27.4m.

Similarly, multiple shipbroking houses said Hamburg-based Neu Seeschiffahrt, controlled by California shipowner Richard Neu, has sold the 176,000-dwt Edward N (built 2011) for nearly $25.3m. The ship was built at China’s Shanghai Waigaoqiao Shipbuilding (SWS) and was worth $29.8m in May before sliding to $24.9m today, VesselsValue estimates show. Conflicting reports identify the buyer of the Edward N as either German or Taiwanese. The shipowner did not immediately respond to requests for comment.

It is common for Japanese-built bulkers to command a higher secondhand price than those built in China. But the deals represent a drop since Seanergy Maritime Holdings picked up the Japanese-constructed, 180,000-dwt Mineral Haiku (built 2010) in June for a reported $32.8m, before renaming it Honorship. Meanwhile, brokers in the US and Greece reported that JP Morgan also sold the 181,000-dwt True Patriot (built 2016) for $39.8m to $40m. Equasis lists the Imabari Shipbuilding-constructed ship as controlled by Bermuda-registered Dakota Holding, which the International Consortium of Investigative Journalists’ Offshore Leaks database lists as an affiliate of the bank. Dacy did not comment on the reports, and some brokers said the vessel has not been sold. But if it does go through, the undisclosed buyer would benefit from a slump in prices that saw the Imabari sibling Thalassini Njord (ex-Mineral Yarden, built 2016) change hands for a reported $50.5m in May. The reported price for the True Patriot suggests the vessel’s value has slumped more than 20%.

The deals emerged as Clarksons Research said in its weekly market report that more capesize transactions are expected to change hands in a “very active” market, but that has not lifted values. The latest end-of-week report by the analysis arm of shipbroking giant Clarksons showed the $45m price for a five-year-old capesize bulker represented a drop of $2m from the prior Friday and an 11% fall over the last three months. Ten-year-old vessels of the same size were steady at $30m compared to the prior week, but that was 13% weaker when compared to three months earlier. The latest reading of the Baltic Exchange’s S&P index for the sector is its lowest level since September 2021, but that was the highest in about a decade, meaning today’s prices still represent a historically high level.

890 new daily coronavirus cases were reported in China today, which marks the largest amount seen since May 1.  Cases have not peaked, and we continue to urge caution if anticipating any near-term reopening in China.  We remain of our view that near-term sentiment has been too bullish regarding any potential reopening in China.

Norden made more money out of dry cargo than tankers during the third quarter but will begin to adapt its plans as the tanker sector strengthens and macroeconomic conditions remain volatile. Chief executive Jan Rindbo told TradeWinds the success is a testament to the Danish firm’s trading-focused strategy. “Given that we have a lot of profitable dry-cargo cover, and we had this short position where we had more cargo than ships, we’ve earned more money on dry cargo than tankers in the third quarter. But clearly, tanker markets are very strong,” he said. Norden has just declared another quarterly dividend of DKK 30 ($4.03) per share and has launched a new plan to buy back up to $50m of its securities by February. “We already have this dividend policy of paying out a minimum 50% of our profit and, rather than waiting until our AGM in next year, we thought we might as well pay out a dividend now, as we did in August,” Rindbo explained.

Norden owns only about 5% of its fleet, which comprises handysize and MR product tankers and bulkers up to panamax in size. This means less capital expenditure and more available cash to return to investors. “Just this year, including this dividend that we will pay out later in November, we’ve paid out $300m in dividends. And then we have the share buybacks that come on top of that, where we have paid out, including the one that we are initiating now, $135m,” Rindbo said.

2022 has been volatile. The key thing to watch going forward will be oil, according to the Norden CEO. “One of the things that is certainly on our radar is that we are looking into a weaker global economy, this is also one of the drivers behind a lower dry cargo market. And that will also hit oil demand,” he said. “Another concern in the oil markets could be the oil production, Opec has cut production. There’s also, I guess, a risk that once Europe stops importing oil from Russia, then Russian oil production will not find a market and therefore they will have to also reduce their exports. But I think the market, and Norden, believes that the fact that Europe will have to buy oil now from further away. That sort of overwrites the downside scenarios that we look at for oil demand and oil production.”

Nevertheless, this scenario is something that the firm is factoring into Norden’s trading strategy, especially as tanker spot rates and asset values have risen higher this year. “It’s also why we gradually will start to take some cover, not that our base case is less optimistic, but just the fact that that with strong increases in asset prices have gone up by 20%, in the third quarter, and MR tanker time-charter period rates were also up a lot over the period,” Rindbo said. “It has become more attractive, I think, for us to start maybe gradually reducing some risk or looking for some cover also on tankers, because you can lock in now high rates, not just for 2023 but actually out to 2025.”

As for bulkers, freight rates may have disappointed this year, but Rindbo said that demand has been slightly stronger than anticipated. The growth in tonnage supply caused by the easing of port congestion is what has applied the most pressure to dry-cargo markets, he said. The weaker outlook for the global economy is also weighing heavily on commodity demand growth. “I still think that spot rates are not at a great level, but at a decent level. Of course, we’ve seen the forward curves coming down a bit so I daresay that there’s probably a bit more downside to come still, we believe, in this market in the months to come.”

Norden’s sale-and-purchase activities will begin to pivot too. Norden has been active as a seller of bulkers this year, selling six dry-cargo vessels as well as four MR tankers. “I think it’s fair to say that there’ll probably be fewer sales, fewer opportunities to sell ships at attractive prices. On the other hand, of course, with large [price] increases on tankers, it has become more attractive to sell tankers,” Rindbo said. “We are opportunistic, and we look at opportunities, but as we may gradually reduce exposure, we may sell a few vessels as well on the tanker side.”

China holds the key to dry bulk shipping’s fortunes, according to the head of Thai owner Precious Shipping. Although China’s Purchasing Managers Index was at 49.5 during the third quarter, indicating a slowing economy due to its zero-Covid policy, GDP grew by 3.9%, said Khalid Hashim. “China with its interest rate cuts and stimulus will grow its GDP at less than its targeted rate, but grow it will, and dry bulk owners will cheer,” the chief executive said in a newsletter, adding China will be “the wild card for dry bulk” once it gets the current coronavirus outbreak under control.

China spent $586bn in 2009 on steel-intensive infrastructure, which boosted the Baltic Dry Index to a high of 4,221 points from a low of 665 points at the end of 2008.

Fast-forward to 2020, and China allocated $667bn to assist with Covid-19 hits to its economy. That pushed the BDI to 5,650 points, a 13-year high, in October 2021.

“The real question therefore should be, what happens when China’s massive $2.3trn stimulus, a third devoted to steel intensive infrastructure development, comes into play, in such a finely supply-demand balanced dry bulk freight market, in 2023?” said Mr Hashim.

Despite four revisions downwards by the International Monetary Fund for world growth, GDP is still at “a reasonable” 3.2% for 2022 and 2.7% for 2023, he said.

Dry bulk demand has decoupled from world GDP growth rates and is now more dependent on government stimulus or lack of it, impact from weather patterns such as La Niña, climate change, geopolitics, inefficiency, lockdowns, and congestion.

Meanwhile, vessel supply has been shrinking, with growth at 3.6% last year, which was able to absorb the marginal increases in tonne-mile demand of 3.8%, he said.

“If you see the low growth in expected tonne-mile demand for 2022, the slowdown in imports/exports in China, and the expected supply side growth, we should not have had as strong a nine-months as we have had in 2022,” he said, adding that time-charter earnings have been strong in the third quarter, which “cannot be justified” if just the tonne-mile demand growth is considered.

“It is the inefficiency in the dry bulk fleet, the very high price of bunkers slowing ships down significantly, that has been reducing the effective supply of ships and hence, despite all the existing obstacles of an end to central bank stimulus, QE tapering, strong dollar, rising interest rates, threat of global stagflation, China slowdown, lingering Covid-19, and the Russia-Ukraine war, dry bulk shipping is still doing very well,” he said.

“That may, however, be coming to a temporary end as demand continues to weaken in the rest of the world, while de-congestion increases fleet efficiency and releases more supply into a demand-constricted market.”

Diana Shipping has signed a trio of time-charter deals amid continued signs that period rates are eroding. The New York-listed company said it signed charter deals that lock in about $15.5m in gross revenue, or more if the charterers hold onto the ships for longer than the minimum periods. The Greek company said that it signed a deal with Hong Kong’s ASL Bulk Marine that will employ its 60,500-dwt DSI Phoenix (built 2017) for between 16 and 18 months at a rate of $13,250 per day, minus a 5% commission. The ultramax began the charter on Friday. The rate is significantly below recent period charters in the ultramax sector, although the deal is longer than the 12-month charters that were fetching $17,000 per day in October, according to data from the Baltic Exchange. But assessments by shipbroking giant Clarksons have shown ultramax bulkers in decline, falling to just under $14,800 per day on Friday from nearly $15,500 a week earlier, after a recent peak of nearly $17,400 per day on 21 October.

Diana’s charter deals for two larger vessels reflected similar trends. The Semiramis Paliou-led company struck a deal with Luxembourg operator Cobelfret for the 98,700-dwt post-panamax bulker Amphitrite (built 2012) at $14,250 per day, minus the 5% commission. That charter, which is to commence on Thursday, will see the bulker employed by Cobelfret until 1 December 2023 at the earliest, with the latest redelivery on 15 February 2024.

And Diana said it struck an agreement with Singapore’s Reachy Shipping that will see its 77,500-dwt Crystalia (built 2014) earn $12,500 per day, with the commission taking a 5% bite out of that rate. The ice-class panamax will start the charter on Tuesday and will be locked up between 1 September and 15 October 2023.

There are scant publicly available charters of post-panamaxes and classic panamaxes of similar length for comparison. But Clarksons data points to declining period rates in the panamax segment.

The shipbroker said on Friday that a 75,000-dwt bulker could earn nearly $14,600 per day on a one-year charter, down from just under $14,900 per day a week earlier and $16,500 per day on 21 October.

The dipping market for midsize bulker term charters mirrors a slumping spot market. The Baltic Exchange’s P5TC average of panamax spot rates, which tracks larger 82,000-dwt vessels, fell to $15,300 per day on Monday, down from nearly $19,500 per day on 19 October.

The S10TC index of supramax spot rates fell to $13,800 per day, down from a peak of nearly $18,900 on 11 October. The route basket tracks 58,000-dwt vessels, which are slightly smaller than ultramaxes.