Pacific Basin past the worst 3Q update suggests

Pacific Basin Tiawai Point
Dirty tankers and dry bulk vessels to benefit most from reductions in Excess of Loss rates

In its quarterly update Hong Kong-based minor bulk specialist, Pacific Basin said that improvement in market conditions in the third quarter leads it to believe the company is past the worst in the current dry bulk cycle.

But Pacific Basin will not benefit from the better conditions immediately as the lag between securing cargoes and performing voyages, and with fourth quarter revenue days already covered the stronger rates will have only a marginal effect on 2017 results.

For the handysize and supramax sectors daily TCE earnings of $8,130 and $9,350 per day net in the third quarter showed an increase of 15% and 27% respectively compared to the same period in 2016.

The year to date average handysize and supramax daily net TCE earnings improved 25% and 41% year-on-year to $8,010 and $9,060, outperforming the BHSI and BSI spot market indices by 19% and 8% respectively.

“The traditionally slower summer period benefitted from strong American grains exports, including record high third-quarter volumes from Brazil,” the company said.

While lower than Atlantic freight earnings, Pacific earnings improved to third-quarter levels last seen in 2011. This Pacific buoyancy was supported by solid growth in the Bauxite trade and Chinese imports of especially minor bulks which in January to August increased 18% year on year to their highest level since 2013. Fewer newbuilding deliveries resulted in a lower concentration of new tonnage supply in the Pacific.

Pacific Basin’s belief in a brighter 2017 comes with a caveat however.

“If demand growth can be maintained, we expect the gradual market recovery to continue albeit with some volatility along the way. But the global fleet is still growing and the risk of new ordering and the potential for increased ship operating speeds remain negative factors. More time, scrapping and limited ordering are required for a better market balance to be sustained,” the company concluded.

 

 

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