Pacific Carriers Ltd (PCL) has been approaching Japanese shipping companies for charter rate reductions.
The exercise, aimed at addressing a slump in market rates that has slammed PCL’s mainly chartered-in fleet, will be the Singapore bulker operator’s second hire rate renegotiation in four years.
“We are in the midst of discussions with the Japanese dry bulk owners and these discussions are ongoing," a PCL spokeswoman said. “However, we are unable to comment on details of the commercial discussions between ourselves and our long-standing tonnage providers as they are confidential.”
The spokeswoman said PCL has continued to honour charter commitments “without exception” and business continues as usual.
“Despite what have been very challenging times, exacerbated by the Covid-19 situation, we are starting to see early signs of improving conditions in the dry bulk sector,” she said.
PCL controls a fleet of about 48 bulkers that range from handysize to capesize. Over 90% of the ships are owned by Japanese interests.
“Around 20 Japanese companies and banks are linked to PCL’s rate renegotiations,” a Tokyo-based shipping source said. “PCL is reaching out to the individual company through local trading houses, since they are involved in the vessels' fixtures.”
The Japanese trading houses are said to include Itochu, Mitsui & Co, Mitsubishi Corp and Sumitomo.
Two options
PCL is said to have proposed two options to the Japanese shipowners. It is asking for a cut that brings charter rates in line with current dry bulk spot market levels, or it wants termination of the charter contract altogether, returning the ships to the owners.
TradeWinds is told that a few companies are considering the contract-termination option. However, they would like the Singaporean company to pay up on a pledge made four years ago to reimburse them for a shortfall at the time of previous rate-reduction negotiations. The shortfalls took place between March 2016 and April 2019, sources said.
In March 2016, PCL was reported to have sought a 40% reduction in charter rates for about 60 vessels, with half the shortfall in rates paid back to owners once the market recovers. PCL is said to have declared “market normalisation” in April last year.
Industry observers think PCL’s latest proposals will not go down well with the Japanese shipowners, since the company has done similar before.
“If they [Japanese owners] are to accede to PCL’s requests, they are afraid that other shipping operators would follow suit,” an industry observer said. “PCL is backed by billionaire business magnate Robert Kuok. The Kuok family should bail out the dry bulk operator.”
PCL is not the only shipping company seeking to restructure charter contracts amid the market slump. Norway’s specialist open-hatch bulker operator Gearbulk revealed it had approached its tonnage suppliers to open negotiations on rates.
Singapore liner company Pacific International Lines has also notified Japanese shipowners that it will pay a reduced rate from June.
