Analysts: Handysizes Best Investment in Bulkers (15 Mar 2019)

Handysize bulkerScorpio Bulkers [SALT] sold seven ships to China Merchant Bank Financial Leasing in a sale-and-lease­back deal wherein the owner will lease the ships back from the partially state-owned bank. Scorpio says it will add US$ 60m in liquidity from the deal.

The New York-listed dry bulk company, Eagle Bulk [EGLE], was pleased to announce in its new annual report to having secured a profit in 2018, offsetting a deficit in the year before. Last year saw revenue rise by 31% thanks to gains in the dry bulk market as a whole and a rise in available ship days for its vessels (the company purchased 12 Ultramax carriers in the last two years). Company CEO Gary Vogel says Eagle Bulk plans to continue executing its fleet renewal plan. A refinancing plan in 2018 also gave the com­pany some US$ 65m in new liquidity, which helped it lower debt costs and extended maturation dates for existing loans. Revenue grew US$ 73.3m to US$ 310.1m in 2018, contributing to a new profit of US$ 12.6m in the year versus a deficit of US$ 43.8m the year before. For the first quarter of 2019, the com­pany has already secured 90% of its ship days for its fleet at an average TCE of US$ 9,124 daily. Ahead of the 2020 sulphur regulations, Eagle Bulk says it will already have 37 of its ships fitted with scrubbers. The company fleet currently consists of 47 dry bulk carriers made up of Supramax and Ultramax ships.

Investment opportunities have thinned out for the bulk carriers in the year so far with freight rates un­der pressure, but near term prospects are still well-balanced between cargo and tonnage, according to Court Smith of VesselsValue at the recent German Ship Finance Forum in Hamburg. There is, however, a negative mismatch between expected tonne-mile growth and tonnage growth for nearly every bulker size, with the exception of one, Smith said. In terms of tonne-mile growth vs. supply growth in 2019, Smith expected to see -0.9% for Capesizes, -0.7% for Panamaxes, -0.9% for Supramaxes but + 0.4% for Handysize vessels. Given the overall “positive bal­ance” in the Handysize sector, Smith recommends the smallest bulker size class as the best “top level” investment perspective for the current market.

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