Norway’s Belships has secured a new $116m loan from DNB Bank and Sparebank 1 SR-Bank that will be used to repay off its existing credit facility. Two vessels will be left unencumbered once the process is complete. The loan has a margin of 225 basis points and a loan-to-value ratio of 55%, the Oslo-listed company said. The first instalment of repayments is due in 2023 and maturity is set for 2027. Belships expects to conclude the loan agreement this quarter once certain contractual conditions have been met.

The company had mortgage debt of $135.2m at the end of the third quarter of 2021, plus cash and cash equivalents of $106.5m, according to its most recent financial report. The last time Belships entered a new loan was in April 2019, when it put in place a $140m facility at a margin of 275 basis points over Libor. That loan had been due to mature in the second quarter of 2024 and was used to expand Belships’ bulker fleet through acquisitions in the second-hand market.

Belships’ contract coverage for 2022 stands at about 65% at an average net rate of $23,000 per day per vessel. The daily cash breakeven this year is about $10,000 per vessel. CEO Lars Christian Skarsgard told TradeWinds in January that fixing more of the fleet on period employment is of strategic value to Belships. “During the past few months, we have actively sought to secure contract coverage. We think our stock is heavily undervalued and these cash flows efficiently de-risk our earnings proposition and secures our ability to pay out dividends,” he said. The company today has a fleet of 27 supramaxes and ultramaxes with an average age of 3.7 years.

Yesterday, Vale reported Q4 iron production of 82.47 MMT, which is down 7.8% QOQ and up 2.4% YOY. Vale’s iron ore production totaled 315.6 MMT in 2021, up 5.1% YOY and in the lower end of its 315-335 MMT guidance. In percent of production, Vale’s Q4 iron ore sales amounted to 101%, well above Q3 2021 and Q4 2020 of 76% and 98%, respectively. Total sales for 2021 came in at 277.5 MMT, up 8.9% from 254.9 MMT in 2020. Vale still expects to reach 370 MMTPA of production capacity by the end of 2022, which compares with 315 MMT in 2021 and suggests a continued recovery from current levels.
 
On a positive note, Minas Gerais has already resumed full operations following the heavy rains of early 2022. According to Vale, the stoppages saw only an impact of 2 MMT on Vale’s overall operations and will therefore not impact its iron ore production guidance for 2022 of 320-335 MMT. Furthermore, the guidance would suggest a quarterly production of c82 MMT, compared to average quarterly production of 79 and 64 MMT for 2021 and 2020, respectively.

Pan Ocean and Cofco were among bulker charterers locking in tonnage on period deals on Friday as dry bulk ended a week that saw the spot market roar back to life after the Lunar New Year. Positive sentiment ushered in plenty of deals over the week, including six period charters and 11 spot fixtures signed on Friday. Four of the period charters were for a year or more. The dealmaking saw South Korean ship operator Pan Ocean swoop on the 81,800-dwt Taho America (built 2019) for 23 to 25 months. Taiwan’s Ta Ho Maritime, which owns the ship, will rake in $25,000 per day for the charter. That’s the same rate that Chinese agricultural giant Cofco is paying to lock in another kamsarmax bulker for a year. The 82,640-dwt Bettys Dream (built 2008) is owned by Turkey’s Zihni Group.

The rates are slightly higher than Clarksons’ latest assessment of $24,375 per day for a one-year charter of a kamsarmax bulker and represent a premium over average panamax bulker earnings in the spot market. Meanwhile, Hong Kong bulker operator Sino East Transportation, meanwhile, will pay $22,000 per day to spend 12 to 14 months with the 76,596-dwt Sea Gemini (built 2006), which is controlled by Zhangjiagang Oceanic of China. Finally, Danish handysize operator Integrity Bulk has signed an index-linked deal to take the 37,059-dwt open hatch carrier Corewise OL (built 2013) for 12 months. Taiwan’s Shih Wei Navigation will earn $27,000 per day for the first 45 days followed by 105% of the Baltic Handysize Index for the rest of the charter.

In the spot market, dry bulk rates posted a large seven-day gain on Friday as workers in Asia and elsewhere began returning to work after celebrating the Lunar New Year. China’s most popular holiday takes place over 15 days, but most businesses close for only the first week of festivities. The capesize 5TC, which is a spot-rate average for capesizes across five key routes, leapt 50% during the week to reach $15,397 per day on Friday, according to the Baltic Exchange. Smaller ships also saw much higher averages over the same period. The panamax 5TC rose 34% to $21,623 per day, while the supramax 5TC improved 35% over the week to hit $23,743 per day on Friday. “There was positive sentiment throughout the dry freight sector this past week, including capesizes, as traders returned from Lunar New Year holidays,” exchange analysts wrote on Friday.

The exchange reported rumor of Rio Tinto taking at least four capesizes for their standard 170,000-tonne shipment of iron ore from Dampier, Australia to Qingdao, China at rates of $8.45 and $8.55, starting on 26 and 27 February. The Australian mining giant reportedly fixed a capesize a week earlier to move the same cargo of ore on the same route at $7.10 per tonne. Loading is set to happen from 21 to 23 February. It also hired two ships on 3 February for the same task at $7.60 per tonne each. They are expected to take on ore from 16 to 19 February.

Greek shipowner Aristides Pittas expressed confidence in the prospects of the dry bulk market as his US-listed company EuroDry reported a robust set of earnings. Despite their steep drop since October, spot earnings are still high compared with long-term averages, Pittas said in a results release late on Wednesday. A recovery in one-year charter rates since December suggests that declining spot earnings are “only temporary”, in line with “a cyclically common effect during the first couple of months every year”, he added.

Pledging to put his money where his mouth is, the owner said he is “committed to continue growing EuroDry” with mid-sized bulkers “to take advantage of expected market increases”. EuroDry unveiled the latest such acquisition last month with the $21.2m purchase of the 57,900-dwt Molyvos Luck (built 2014), a supramax previously in the stable of Eurobulk, the private company of the Pittas family. Eurobulk clients had purchased that vessel in August 2020 for $14m. The Molyvos Luck was EuroDry’s third buy in less than a year, bringing its fleet to 10 ships between supramax and kamsarmax size. EuroDry was established in May 2018 as a dry bulk spin-off from Euroseas, which continued as a pure-play container ship company.

EuroDry’s net income of $15.2m in the fourth quarter of 2021 was its highest since inception and compares with a net loss of $715,307 in the corresponding period of 2020. Net income attributable to common shareholders soared to $29.4m for the entire 2021, from a $7.45m loss in the previous year. EuroDry’s profitability and expansionary drive represent a considerable turnaround. In 2020, the company deferred loan repayments and paid dividends in kind instead of cash as it took measures to safeguard its dwindling cash. As its results soared amid an improving bulker market, it bought back preferred shares to reduce funding costs and simplify its capital structure. “Our increased liquidity and low leverage ratio provide us with significant firepower to pursue our strategy,” said Pittas, who has always presented the company as a “consolidation vehicle” for eventual combination with other fleets.

The average spot rate for capesize bulkers took a giant leap on Thursday, leading a dry bulk sector that has been on the rise since Monday. The capesize 5TC, a spot-rate average across five key routes, jumped 26% to $15,789 per day, according to the Baltic Exchange. That figure has gone up 66% since Monday, while the panamax 5TC has improved 24% and the supramax 7TC rose 26% over the same period. “It was an active day in both [Atlantic and Pacific] basins,” exchange analysts wrote in their daily take on the dry bulk market. “Plenty transatlantic enquiry circulated in the market today.”

The exchange reported 22 spot fixtures on Thursday, including Singapore operator Pacbulk Shipping’s hire of compatriot Berge Bulk’s 175,900-dwt Berge Rinjani (built 2010) to move 170,000 tons of ore from West Australia to Qingdao, China. Berge Bulk is getting paid $8.60 per tonne to ship the commodity after it is loaded from 26 to 28 February. Fortescue Metals Group fixed an unnamed capesize to carry 160,000 tons of iron ore from Port Hedland, Australia, to Qingdao at $7 per tonne, with loading set for 21 to 23 February.

It was a busier day for small and mid-size ships, such as Tsakos Shipping and Trading’s 81,800-dwt Psarros D (built 2019). Umang Shipping Services hired the kamsarmax to make a voyage from China to India at $18,500 per day after loading it on Thursday and Friday.

Greece’s Star Bulk Carriers has some growing to do. Now that may sound strange given that the New York-listed shipowner is already dry bulk’s greatest consolidator, already operating 128 vessels and already boasting a market capitalization of $2.6bn. That sounds pretty good until one considers a point raised this week by Star Bulk president Hamish Norton, who had a long career as an investment banker before assuming his current role. Norton told a webinar sponsored jointly by the Greek and Norwegian chambers of commerce in New York that the average size of a company within the Russell 2000 – the benchmark index of US-listed “small cap” stocks – is $3.8bn. “There aren’t too many shipping companies that are worth $3.8bn,” Norton said. “There aren’t too many shipping companies that are at $3.8bn at the top of the cycle, let alone at the bottom. That’s our ambition when we grow up. We want to be solidly mid-cap at the bottom of the cycle.”

It would be smart not to write Star Bulk off. The Petros Pappas-led bulker owner has amassed about half of its current vessel count over the past three years by acquiring a series of company fleets. Since 2018, Star has struck successive deals with Songa Bulk, Augustea Atlantica, ER Capital, Delphin Shipping and Scorpio Bulkers, each time acquiring either a full fleet or, in Scorpio’s case, a seven-vessel chunk. Each time Star has used a blend of its own shares alongside cash as payment, with Songa Bulk’s Arne Blystad and Augustea’s Italian Raffaele Zagari joining the Star board.

“The sellers wanted to take our shares,” Norton said. “In order to do a deal like that, you need to have a share that people want.” With Star shares trading near a 52-week high, Star’s market cap is the largest it has ever been. And still there are miles to go to reach Norton’s standard of a $3.8bn value in a low market. A look at the roster of US-listed shipowners shows that most have even further to travel. Star Bulk ranks fourth of the 29 New York-listed shipowners covered by investment bank Jefferies. The list is led by rampaging Israeli liner operator Zim at $8.7bn, followed by container ship-heavy lessor Atco at $4.2bn and US-flag owner Kirby at $3.9bn. Another surging container ship lessor, Danaos, rounds out the top five at $2bn. The largest tanker company is Euronav at $1.9bn. Still, only nine of the 29 in the Jefferies group top the $1bn mark, and the valuations get as small as LPG operator StealthGas at $78m. A few others outside Jefferies coverage – Flex LNG, Matson, Costamare and Golden Ocean Group– also top $1bn.

So why does any of this matter? “With the majority of the public shipping companies trading at sub-$1bn market caps, the investor audience is greatly narrowed, with a heavy bent toward retail,” said veteran Evercore ISI analyst Jonathan Chappell. “It’s all about marketing to a bigger audience, getting more widespread institutional interest, and enabling investors to take, and exit, large positions. And a vast majority of the market caps today do not check those boxes.”

Still, Clarksons Platou Securities analyst Omar Nokta sees some progress toward what he recalled as the vision laid out by former Euronav chief executive Paddy Rodgers: that public tanker companies reach $5bn in good times and stay above $1bn in bad ones. “We appear to be there now, which is nice,” Nokta said. “A couple of tanker companies have over $1bn market caps and we’re experiencing the toughest market for the sector in decades.” The crown jewel in Star Bulk’s quest, Chappell reasoned, would be to reach the point where it’s included in the Russell 2000. “It would open up the interest and liquidity substantially,” he said. “We’ve said many times that nobody needs to own a shipping stock because it’s not in anyone’s benchmark or index in a meaningful way.”

AP Moller-Maersk chief executive Soren Skou says 2022 is to be another bumper year, but the “new normal” means nothing is certain. “The reality is we don’t have any experience coming out of a pandemic,” Skou told an earnings call on Wednesday. He expects Maersk to turn in $24bn in Ebitda this year — the same figure as in 2021 — based largely on an increase in long-term contracted business. That would lift its earnings to an astonishing $48bn in earnings over two years.

But the Maersk boss warns there are plenty of caveats that may derail its expectations for container shipping markets. Skou assumes a strong first half of the year for the container market and expects a normalization of that same market in the second half of the year. “Everything we see right now looks very strong,” Skou said. “But we also have to assume that at some point people come back to work, that bottlenecks (will unwind), and things come back to normal.”

Those factors would release container ship capacity back into the market. That would include 88 ships waiting at the Port of Los Angeles as well as additional capacity to be delivered into the market this year, he said. Skou also expects the company’s performance in the first quarter of 2022 to be on a par with the extraordinarily strong fourth quarter of 2021. After that, some form of “normalization” might start to take effect in the second half of the year as port congestion is freed up. That remains anything but certain as supply chain problems continue to plague the industry.

On schedule reliability alone, it will take at least eight or nine months for the industry to recover, Danish analyst Sea-Intelligence said on Wednesday. “That said, the market is showing no indication that we have started on the path to resolution,” the analyst added. “The system is so far out of balance that there is no historical precedent fully describing this situation.” Maersk’s bullish projection reflects strong demand, and the company expects to grow in line with global container demand of 2% to 4% in 2022. But uncertainties due to congestion, network disruption and demand could stifle those ambitions, Skou conceded.

Maersk is also projecting that the proportion of long-term business will continue to increase. Long-term contracts rose by 15% in 2021 to 65% of its long-haul business. The figure is expected to increase to 70% this year, or more than 7m feu. Average long-term freight rates increased by around $1,000 per 40-foot equivalent unit (feu) in 2021 to around $3,000 per feu. These too are expected to rise by $800 per feu in 2022, compared with 2021, enough to add around $6bn to earnings this year.

Should normalization pan out as Skou expects, Maersk will match Ebitda of $24bn it racked up in 2021. “If it plays out that way, then it will still be a year of exceptional high earnings and free cash-flow, also in 2022,” Skou said. That will benefit shareholders to whom Maersk plans to return $9.6bn in 2022. But Skou added that some of the “normal” contractual practices in container shipping have been shunted aside in the past 18 months. “The normal seasonality of contract rates is out the window. We used to have some fixed dates around the calendar year and around 1 May for the Pacific season,” he said. But many of those had been renegotiated early and contracts enlarged, he added. “Customers are coming saying, ‘we need more capacity’, so we end up doing a new contract out of the normal cycle at more volumes,” he said.

Skou said it would be difficult to gauge the speed at which the container market might revert to normal. “Whether it’s a gradual normalization or sharp normalization, we don’t know. Obviously how capacity gets freed up will probably determine that,” he said. “The issue we have in the US in particular is pretty set, and it seems unlikely that this is something to be resolved overnight. That’s why we’re guiding for a strong first quarter and first half, and then we’ll see what happens.”

Dry bulk shipping saw higher spot rates across the board on Wednesday as China goes back to work following the Lunar New Year holidays. Larger vessels saw the biggest jump in the day. The Baltic Exchange’s capesize 5TC, a spot-rate average across five key routes, rose 25% in one day to $12,468 per day. But all major dry bulk segments saw gains as well, with the average supramax rates surging 10.2% and panamaxes gaining 9.2% on Wednesday.

“This is mainly attributed to the Chinese coming back to ‘business as usual’ following the inactivity that the Chinese New Year Holidays entailed, which created a backlog of orders,” EastGate Shipbrokers founder and head Sevi Katemoglou told TradeWinds. The Baltic Exchange reported just nine spot fixtures being signed on Wednesday for all vessel classes except handysizes at above-average rates.

Refined Success chartered Transmed Shipping’s 203,149-dwt Pigi (built 2014) at $18,000 per day plus a $1m ballast bonus for a voyage from Guinea to China. Loading is set to start 22 February. Glencore subsidiary ST Shipping & Transport hired STC Shipping’s 81,756-dwt panamax Plainpalais (built 2015) at $21,000 per day plus $1.1m ballast bonus for a trip from East Coast South America to the Far East.

The freight forward agreement (FFA) market is also showing charterers’ eagerness to hire ships across all size classes, said Sevi Katemoglou, founder and head of EastGate Shipbrokers in Athens. “The green FFA marks across all vessel sizes and calendar quarters are also reflecting the renewed enthusiasm for an overall good performance of the dry bulk sector this year,” she told TradeWinds.

Capesizes were the biggest winners, especially after the physical index made such a huge leap on Wednesday. Positive sentiment pushed the March contract up 13% over the course of the day to settle at $21,214 per day. The April capsize contract closed $2,193 higher on Wednesday at $25,829 per day, equivalent to a gain of just over 9%.

The capesize plunge came to a halt on the Baltic Exchange yesterday, with spot rates on the 5TC rising $448 to $9,969 per day. There is, however, clearly a bullish expectation that the sector is poised for a big rally. The FFA market is pricing in some serious expectations of about $25,500 a day in Q2 and $30,000 a day in Q3. “That optimism will probably be built on expectations of Chinese authorities aiding the property sector and channeling funds into new infrastructure projects that will boost iron ore import requirements,” analysts at Lorentzen & Stemoco suggested today.

A new report from Breakwave Advisors also looks at growing expectations for Chinese iron ore demand this year. Iron ore prices have reached their highest level since early September last year. “Renewed optimism that the Chinese authorities will introduce new fiscal stimulus measures to support flagging growth rates after the Lunar New Year and the Winter Olympics have pushed iron ore prices beyond 140 dollars per tonne,” Breakwave Advisors pointed out.

It is not only prices for iron ore that had a solid start to the year. Global seaborne export volumes of the commodity also rose during January to a new record for the month with Breakwave Advisors predicting February could be in line for yet another Chinese monthly import record.

In recent weeks, iron ore inventories have been declining in many Chinese ports despite the robust import volumes. “The growing expectation of Chinese authorities returning to a pro-cyclical stance has fueled restocking activities among the Chinese steel mills. The shrinking portside stocks should also signal rising iron ore imports in the coming weeks and months,” Breakwave Advisors suggested.

So, you thought shipowner consolidation was on hiatus for a while after an unusually busy spell in 2021? Maybe think again. Jefferies shipping investment banker Doug Mavrinac told a financial panel on Tuesday that he is working on three prospective merger-and-acquisition deals after being in the middle of two of the biggest combinations of 2021. Mavrinac was a panelist at the 28th annual shipping commerce by the Hellenic American and Norwegian American chambers of commerce, held virtually this year because of Covid-19 protocols. “Last year we were involved in three different M&A transactions. Two were completed and one did not reach the finish line,” Mavrinac told his audience.

He said there’s another three that the bank is actively engaged in. “And there is some diversification quality in those assignments,” Mavrinac said, referring to the idea of creating a shipowner with vessels in multiple operating sectors. The Jefferies veteran did not identify any of the companies in his current mandates, but details of the two completed 2021 deals are well known. Jefferies had a hand in International Seaways’s all-shares $416m acquisition of Diamond S Shipping in the tanker sector, and also worked on Navios Maritime Partners’ takeover of tanker subsidiary Navios Maritime Acquisition later in the year.

While he did not identify those involved in the deal that got away, Mavrinac said it fell victim to one of the many things that can go wrong with a consolidation attempt: a lack of trust. There was little chance for a trust breakdown in the Navios combination given that founder Evangeliki Frangou was the principal on both sides of the transaction. Jefferies represented Navios Partners in the deal. “Even if you overcome social issues, if there’s a trust breakdown between parties, there’s nothing that can be done to salvage that transaction. We literally saw a deal fall apart in the second half of last year because trust was broken,” Mavrinac said.

Navios Partners chief financial officer George Achniotis spoke on what his company views as the virtues of the deal, particularly the points of scale and fleet diversity. Combined with an earlier acquisition of another subsidiary, Navios Maritime Containers, Navios Partners now has a presence in bulkers, boxships and tankers. “For us, the rationale was compelling,” Achniotis said. “Over the past few years, we have seen extreme volatility in all sectors. We have seen the sectors act counter-cyclically. By diversifying, you create a way to smooth out that volatility. It can give you better capital allocation and more predictable returns to shareholders. It’s a larger diversified platform.”

Another panelist who knows quite a bit about consolidation was Star Bulk Carriers president Hamish Norton, who once held Mavrinac’s current job as Jefferies’ shipping banker. Star has acquired about half of its industry-largest fleet within the past three years through company acquisitions, he noted, all using company stock. “The sellers wanted to take our shares,” Norton said. “In order to do a deal like that, you need to have a share that people want.” Star has also benefitted by being willing to place the principals of acquired companies on its board, with Norwegian shipowner Arne Blystad and Italian Raffaele Zagari both currently holding seats, he said.