John Fredriksen-backed shipowner Golden Ocean Group expects bulker demand will be lower in 2022 but will still outstrip vessel supply growth, aiding freight markets, according to its chief executive.

But strong freight rates have not always been reflected in Golden Ocean's share price this year, as has been the case for most public bulker owners — even though the company has paid out more than $300m in dividends in 2021.

Norway's DNB Bank and Clarksons Platou Securities have estimated that the Oslo and Nasdaq-listed stock is trading at 0.7 times its net asset value.

Ulrik Andersen, Golden Ocean's chief executive, is unfazed.

"We have been surprised to see the share trade where it does, but as a famous trader once wisely said: 'The market is always right'. Therefore, we focus on delivering the best possible results, and then we trust that the pricing of our share will eventually find its correct level," he told TradeWinds.

Andersen thinks the combination of Golden Ocean's reinstated quarterly dividends and the positive forecasts for bulker markets over the next two years should aid its share price.

"Your pricing will suffer if you pay out too much and the outlooks are poor, but your pricing will also suffer if you pay out too little and the outlooks are good," he explained.

"Right now, the outlooks are good, and in Golden Ocean the board operates with the simple policy of paying out a significant portion of our net profit. With the [third-quarter] dividend, we have paid $321m back to our shareholders this year. We believe that will give us the best pricing in the long run."

Famed investor Michael Burry's company Scion Capital took a stake in the shipowner earlier this year, and at the end of the second quarter owned 700,000 shares.

Regulatory filings show that Scion had sold all its Golden Ocean stock by the end of September.

Spot exposure

Golden Ocean entered the fourth quarter with perhaps the highest exposure to the capesize spot market, compared with many of its peers. Fifty-six of its 99 bulkers are capesizes, including 10 newcastlemaxes.

"As the market peaked in October, we felt the value for the first quarter [2022] was becoming attractive, so we converted a significant portion of our cape fleet from floating to fixed rates," Andersen said of his company's chartering strategy.

"We think we found a reasonable balance between maximising income in the fourth quarter and hedging the first quarter [2022] but time, of course, will tell.

"As of today, our fixed-paying vessels guarantee a first-quarter [time-charter equivalent] income of $73m on 32% of our fleet."

He said this will increase visibility, mitigate risk and secure the company's dividend capacity.

Happy New Year?

Golden Ocean believes 2022 will hold some level of "normality" for bulker markets, in that the usual seasonal cycle will return, but demand for dry-cargo transportation will be lower than this year.

"We believe the development in freight levels will mirror previous years. It means that the first quarter will be the weakest," Andersen explained.

"That is not the same as saying the market will collapse in the first quarter, but just that it will average lower than the other quarters."

Roughly half of the shipowner's forward coverage for the final quarter of 2021 extends into 2022.

"2021 was an exceptional year in terms of demand growth. We do not expect those levels to continue in 2022," Andersen said.

"However, with the continued congestion and low fleet growth, that means that even at 'normalised growth levels', demand looks set to grow faster than supply."

Golden Ocean left the Capesize Chartering Ltd (CCL) pool in August, saying it wanted to regain control of its commercial strategy and get closer to its customers.

"At the moment, we have control of 25 of the 33 vessels we had in the CCL pool. We expect to have commercial control of our entire cape fleet before the turn of the year," Andersen said.

"Our newfound independence has allowed us to enter into contract of affreightment deals and also opened up new client relations. However, we will only see the full effect from next year when we have all vessels back under our control."

Golden Ocean is also involved with "several" decarbonisation projects with its charterers and other stakeholders, but he said it is too early to disclose details.