Have bulker owners been wishing they were tanker owners in the first half of 2020, as they watched that market surge?
If there was any doubt, the confirmation came in the last five minutes of Star Bulk Carriers’ first-quarter earnings call on Wednesday.
Was it more bizarre that Deutsche Bank analyst Amit Mehrotra asked Star Bulk – the world’s largest bulker owner – whether it was considering converting bulkers to tankers? Or rather, was it stranger that Star Bulk management confirmed that it actually had studied the possibility?
The exchange between Mehrotra and Star Bulk president Hamish Norton came at the end of a call that was typical for public bulker owners at the moment: will they have liquidity to survive a dire 2020 market damaged by coronavirus demand hits?
The next question made it different from all the other bulker owner calls.
Allowing that his question was “kind of out of left field” and perhaps “totally off base”, Mehrotra went forward.
“Is there any technical possibility of converting a ... a bulker into a tanker? I know it's a crazy question,” Mehrotra said.
“Hamish, you're a physicist and into stuff like this. I was wondering if you've ever thought about that, what would be involved in it? How much would it cost? How long would it take? If that's even a possibility at all?”
Apparently not so crazy.
“Yeah, so we looked into this possibility in terms of using a bulker or two for a storage charter, and we concluded that it would cost a lot, that it would take a long time,” Norton said.
“And I think that was really the killer that it would take long enough, that by the time it was done, the storage charter business would be gone.”
As Norton quickly noted, the storage business is already just about done.
“It would have taken a lot longer than [we] would have needed to take to get that storage charter business,” Norton said.
“And in terms of modifying a bulker to be a tanker to be used for transportation and not storage, I think you'd have to consider that to be essentially impossible.”
The New York-listed company has plenty of bulkers to spare, with a total of 116. It looks as though they will all remain bulkers for the foreseeable future.
Star Bulk reported an earnings miss for the first quarter with an adjusted loss of $0.23 per share, deeper than the Wall Street consensus of $0.06 per share.
