Favourable Dry Bulk Market Leads Pacific Basin to Profit

An improvement in dry bulk market conditions pushed Hong Kong-based dry bulk shipping company Pacific Basin into the black during 2017.

The company witnessed a USD 90 million improvement in its earnings year-on-year, as it recorded a net profit of USD 3.6 million for the year ended December 31, 2017, against a net loss of USD 86.5 million seen in the previous year.

Revenue for the period reached USD 1.48 billion, up from USD 1.08 billion reported in 2016, while EBITDA stood at USD 133.8 million at the end of 2017, compared to USD 22.8 million seen a year earlier.

Pacific Basin said that its Handysize daily time-charter equivalent (TCE) earnings increased 25% year-on-year and outperformed the market index by 15%.

“Dry bulk freight market conditions improved significantly in 2017 from a historically low base in 2016 which, combined with our high laden utilisation and competitive cost structure, enabled us to record a much improved and positive net profit,” Mats Berglund, CEO of Pacific Basin, said.

The company took delivery of its final newbuildings and recommenced secondhand acquisitions, growing its owned fleet to 106 vessels. Pacific Basin purchased eight ships at historically low asset values, five of which where funded mainly by a combination of a share issue and private placement.

“With supply and demand fundamentals now more positive, we are cautiously optimistic for a continued market recovery, albeit with some volatility along the way,” Berglund said.

The company added that it will continue to look at secondhand ship acquisition opportunities as prices are still historically low, while it does not plan to order newbuildings in the medium term.

The outlook for favourable global GDP growth bodes well for dry bulk demand, and supply is expected to be kept in check by the continued gap between newbuilding and secondhand prices and the uncertain impact of new regulations on ship designs, both of which cause many shipowners to refrain from ordering new ships.