Dry Cargo Market Collapse Affects Norden’s Earnings in Q1

Danish shipping company Norden closed the first quarter of this year with a net loss, impacted by a “surprisingly steep decline in the dry cargo market.”

The company suffered a net loss of USD 5.3 million in Q1 2019, compared to a net income of USD 18 million posted in the same period last year.

Adjusted result for Q1 2019 was USD 7 million, compared to USD 9 million seen in Q1 2018.

Norden’s Dry Operator business unit reported a loss of USD 3 million in the first quarter of 2019, compared to a profit of USD 3 million delivered in the corresponding period a year earlier.

Dry Owner’s Q1 2019 adjusted result stood at USD 0 million, compared to USD 5 million in Q1 2018.

The company’s third business unit, Tanker, was the only profitable one as it delivered a profit of USD 10 million during the three-month period ended March 31, 2019, against USD 0 million seen in the same period last year.

“Norden generated a positive result in a quarter characterised by a strong winter market in tankers and a dry cargo market on the brink of collapse,” Jan Rindbo, CEO of Norden, commented.

“Norden had anticipated a weak dry cargo market, but not even swift and agile response in Dry Operator could offset rates being halved within a three-week period,” he added.

“Dry Owner, however, was well protected against the weak market due to high coverage and generated a break-even result, while the Tanker business was well positioned towards a very strong winter market and delivered a good result.”

Specifically, the Dry Operator unit navigated a dry cargo market in which the weak rates seen in Q4 2018 deteriorated further with an accelerating pace in the first quarter. On the back of slowing Chinese imports, trade tensions and a tragic dam incident in Brazil, the dry cargo market more or less collapsed, as explained by Rindbo.

As asset prices in dry cargo did not suffer to the same extent as the spot market, Norden’s Dry Owner unit used this to sell four older vessels in the first quarter.

“We are aiming for a fleet size that is tradable and at the end of the quarter Norden owned 14.5 dry cargo vessels,” the company’s CEO said.

Since the first quarter, the dry cargo market has improved but the company does not expect the market in 2019 to be better than in 2018.

On the other hand, the tanker market saw a significant improvement in rates. With daily earnings of around USD 17,000 for Handysize vessels and USD 16,000 for MRs, Norden outperformed the benchmark in the form of the average 1-year T/C rate during the last twelve months with 6%.

“Even though the market has softened in Q2, we expect tanker rates to once again pick up in the second half of the year as the industry prepares for the IMO 2020 sulphur regulation,” Rindbo concluded.