In Dry Bulk Market,International Shipping News 28/05/2015
A prolonged period of paltry returns and overcapacity in the dry bulk freight market has resulted in the creation of new shipping pools by shipowners to help stay afloat.
With rates at rock bottom and historically low earnings for shipowners, at least two shipping pools in the dry bulk segment have been launched since the beginning of the year.
The first pool venture of the year — The Sapphire Pool — consisting of Supramax vessels was set up by shipowner Clipper and was followed by the Capesize Chartering Ltd pool, launched by Bocimar International, C Transport Maritime, Golden Union Shipping Co, and Star Bulk Carrier Corp.
The latest to jump on the pool bandwagon is tanker operator Heidmar through an alliance with TBS Ocean Logistics that will mainly trade geared Supramaxes.
A shipping pool is a collection of similar types of vessels from various owners placed under the control of a commercial entity.
The entity trades the vessels as a single, cohesive fleet and collects or “pools” the earnings, which are then distributed to owners.
Although vessels trading in dry bulk shipping pools make up less than 10% of the total tonnage, the teaming up of dry bulk shipowners to form a new shipping pools has met with a mixed reaction from market participants.
While many see the move benefiting the dry bulk freight market, they add that the move may not ultimately have a big impact in pushing up rates in a chronically oversupplied market consisting of Capesize, Panamax, Supramax, Ultramax, Handysize and Handymax vessels.
“I absolutely agree that consolidation in the dry bulk market, in the form of pools, would better allocate ships to cargoes, on similar lines to the tanker, and [container] liner industry,” TBS Ocean Logistics’ India Pacific vice-president for commercial Rishi Nyati said.
Shipping pools have their strengths as well as weaknesses, market participants said. Some of the benefits are in the form of having the wherewithal to take on large contract of affreightment programs by having a sizable fleet.
POOLING RESOURCES
Pools are able to help with triangulation strategies such as higher load factors, reduced ballast legs and idle time.
On the downside, the head-owner losses the control over the tonnage once it has entered a pool.
Also, at times, owners could become embroiled in accounting differences based on technical specifications and other commercial aspects.
“You can’t stop people from finding other ways of making money when the market is so bad and forming a pool is one of them.
There is potential for the Capesize market [in the creation of pools] but its limited for smaller sizes due to the extremely fragmented ownership,” a Supramax shipowning source said.
“It may work for tankers, where the [number of] owners are still somewhat limited. But in the dry bulk, I find that very challenging. I have my skepticism of people wanting to form pools.”
Many market sources said the creation of pools helps shipowners who have a small fleet, tight cash flow and lack the commercial expertise to trade vessels on their own.
“Forming pools is better. Bigger companies can better bear the brunt of a low market. It is also good for head-owners since the vessel is kept running and has access to cargoes as well as getting paid in accordance with the market,” a chartering source with a coal trading house said, adding that logically pools were a good way to do business for the owner.
“The market is very fragmented in the dry bulk segment. To some extent will be good for owners if larger pools are formed.”
Some said they believe the fact that the dry bulk market is much larger than the tanker market and at the same time being highly fragmented, the pools for bulkers may have a limited impact.
“The larger capital costs place a natural barrier on small entrants [in the Capesize segment],” said a dry bulk shipping market researcher, adding that there were fewer owners in the Capesize market than in the Handysize segment.
“So from that point of view, there would probably be more benefit for the smaller players to gang up together. But it is difficult for owners, who by nature think they know better than the next guy, to let their assets be managed by a third party.”
Another market watcher said pools didn’t necessarily have the best interests of the shipowner at heart.
“Pool always works best for the pool company. They always earn [irrespective of the market being weak or strong]. The banks force shipowners to enter pools. It does not make sense for shipowners. You don’t buy a car and give it to someone asking them to drive it around and pay for that,” the source said.
