Eagle Bulk is wary of the ongoing tariff spat between the US and China but it does not see an impact on overall global dry bulk demand.
The current scenario may even be beneficial for dry bulk shipping due to inefficiencies that overcome congestion and delays in new trade routes, company officials said.
A full-scale trade war is unlikely but we need to be prepared for it, chief executive Gary Vogel said on a conference call.
“We believe the impact will be negligible on tonne miles,” said CFO Frank De Costanzo. “Overall impact on trade demand may actually be positive as changes in trades can create inefficiencies, such as congestion and delays.”
Vogel concurred, adding that there will be no disruption in actual trade flow, but where it comes from.
He gave the example of US soybeans being redirected to Europe, and Brazil filling some of the gap for Chinese soybean demand.
The real concern is the “potential impact on global GDP growth,” Vogel said.
Profit growing
The comments came after Eagle posted a second quarter profit of $3.5m. It followed a $100,000 profit in the first quarter of this year.
Analyst Amit Mehrotra says second quarter core operating profit was up by 100% year on year thanks to a fleet growth and a tightening dry bulk market.
The Nasdaq listed company has added 13 modern vessels since late 2015 and divested 10 of the “smallest, oldest, and least efficient vessels” in its fleet.
Expansion has included both the en bloc purchase of nine vessels from Greenship Bulk and single-ship deals. As Vogel has previously started, both remain on the table.
“We intend to continue on our fleet growth and renewal strategy, selling off older and less efficient ships, and purchasing newer and more efficient ones,” said Vogel when quizzed about Eagle’s future S&P plans during its second quarter conference call.
Apart from growing the fleet one vessel at a time, Eagle is also not averse to large-scale purchases, Vogel said.
“Definitely, there are advantages in larger scale acquisitions, and we have identified a number of groups of ships and are in discussions,” Vogel said.
Mehrotra said in a post-earnings report: "With a very healthy balance sheet and zero newbuild obligations, we also expect EGLE to be an active player in the S&P markets over coming quarters."
Connecticut-based Eagle now has 47 ships averaging about 8.5 years of age in its fleet.
Its last buy came this summer with the 63,300-dwt Bao Tong (built 2014) bought for $21.2m. It will be renamed Hamburg Eagle following delivery in the fourth quarter.
Eagle Bulk also recently offloaded the 53,000-dwt Thrush (built 2011) in a deal expected to bring in $10.9m. The ship will be delivered to the new owners by September.
