Shipowner 2020 Bulkers has faith that strong bauxite volumes will continue to cushion the capesize and newcastlemax market from extremely low rates early next year.
Chief executive Magnus Halvorsen told analysts and investors that his company does not feel the need to take on any additional forward contract cover for the first quarter of 2025, seasonally the weakest period of the year for capesizes and newcastlemaxes.
All six of 2020 Bulkers’ newcastlemaxes are employed on index-linked contracts until the second quarter of 2025 at the earliest for two vessels.
Bauxite volumes are a big part of the reason why 2020 Bulkers does not see much reason to derisk the quarter further.
“We always monitor this quite closely, but I think the dynamic in the market has probably changed a bit, given the now very solid trade flows we’re seeing in bauxite in Q4 and Q1,” Halvorsen said.
“If you look at Q1 this year, we averaged $24,000 [per day]. That was in part due to the bauxite volumes and also, of course, a little bit drier [weather] in Brazil.”
The forward curve for capesize freight derivatives currently indicates rates of $17,000 per day.
Halvorsen said these are not bad levels, “but they’re not necessarily levels where we don’t think there could be significantly more upside”.
“It’s not really tempting to give away that optionality, given the volumes we’re expecting to see on the bauxite front in Q1 for the time being,” he said during the call.
“Of course, if the curve moves to a different level, we may change our mind, but that’s the view today.”
Bauxite tonne-miles for capesize and newcastlemax bulkers this year to date have been 13.9% above the same period in 2023.
Volumes have mostly been above those last year.
The Oslo-listed newcastlemax owner has just announced $31.1m net profit for the second quarter, in which $20.4m was generated by a vessel sale.
