Golden Ocean Posts $135 Millon Loss as Ship Scrapping Accelerates

golden shadow bulk carrier
Image: Golden Ocean Group

During the first six weeks of this year 19 Capesize bulk carriers were committed to scrap buyers, according to data obtained by Golden Ocean Group, the dry bulk arm of Norwegian billionaire John Fredriksen’s shipping empire.  The company notes this is almost half of what was scrapped in total last year in their Q4 earnings report released today.  This year, 27 new Capes are scheduled for delivery and 29 in 2016.

With the dry bulk shipping market is sitting at its lowest point in recorded history and numerous companies sitting on the end of bankruptcy, aggressive fleet reduction is the only option for many.

Golden Ocean Group attributes today’s down market to “the lack of coal demand from China, the relief of the
grain port congestion in South America compared to the previous year and the after effect of the stock piling
ahead of the Indonesian ban on raw ore (nickel ore and bauxite) exports.”

Looking ahead into 2015 and beyond, research by Pareto Securities is showing a 100 million ton decrease in China’s domestic iron ore production over the next two years which will be backfilled by iron ore from Brazil and Australia, a situation that will help to support dry bulk ton-mile demand.  The dry bulk sector will also be supported by an anticipated 2 percent growth in Chinese steel production over that period while orders for new bulk carriers appears to be at a near standstill.

Other positive drivers for growth lie in the currency markets, says Golden Ocean.  A weakening Russian Ruble and Australian dollar supports exports from both countries and a strengthening Rupee supports coal imports into India.

Golden Ocean Group, says the reduction in China’s domestic ore production will likely help to keep ships employed, however due to the amount of shipping capacity currently available, it will not be enough to push charter rates up significantly.

Golden Ocean Group reported a net loss of $135.1 million for the quarter on revenues of $53.0 million compared to a profit of $18.2 million a year ago.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to $69.7 million, outperforming expectations for $13.4 million, according to Reuters.