Finland's ESL Shipping is busy laying up vessels and handing back chartered ships as it comes to terms with a big slump in bulker cargo demand.
Volumes decreased "exceptionally steeply" to 3m tonnes in the second quarter, from 4.1m tonnes a year ago, it said.
Operating profit was cut to €0.6m ($0.71m) from €2.6m a year ago, as revenue plunged to €32.9m versus €42.6m.
"Due to lower demand for transportation and the prevailing low cargo price level, determined adaptation measures were launched to reduce fixed costs by €0.9m," the company said.
One larger vessel and two pusher-tug units that supply the steel industry were in lay-up for most of the second quarter.
"The vessel units currently in lay-up will be returned to operations as quickly as possible, depending on the development of the market situation," it said.
Redeliveries made
The company has also returned three smaller time-chartered vessels to their owners at the end of their contracts.
The size and content of the time-chartered portfolio will be reviewed, if necessary, in accordance with any changes in the development and focus areas of customer demand, ESL added.
Price levels for charter renewals is expected to be lower than before, it said.
"Cost adaptations" were also directed both at the shipping company’s onshore and offshore personnel.
Significant impact
"During the review period, the coronavirus pandemic had a very significant impact on the global demand for sea transportation and on price levels," the company said.
"The market situation was particularly difficult in ESL Shipping’s main markets in Northern Europe, where restrictions on societal activities and general uncertainties led to a significant decrease in demand, especially in the steel industry."
Due to transportation volumes being significantly lower than estimated, some of the bulkers of more than 10,000 dwt were forced to operate in very weak spot markets," it added.
One of the two supramaxes was docked during the quarter. Furthermore, one larger vessel was docked after the second quarter.
Worse to come
Looking ahead, it said: "The impact of the coronavirus pandemic on the shipping company’s main customers is expected to be the highest during the third quarter, when some of the main customers will significantly cut their production and carry out maintenance stoppages."
Production by its main customers in the steel industry is expected to return towards a normal level during the final quarter of the year after transportation volumes start to increase in September.
One silver lining
The market for large vessels recovered during the summer, with lower demand for iron ore in Northern Europe increasing exports to China and elsewhere.
This change enabled ESL Shipping to close a significant new contract for the loading and unloading of larger vessels at sea for the rest of the year.
"ESL Shipping will continue to adapt its operations in response to transportation demand," it said
The third quarter result is expected to be weak, however, it warned.
The shipowner also said it is investigating different opportunities to have a bigger presence in markets in the Russian Arctic.
ESL has 48 vessels with a total capacity of 454,000 dwt.
Of these, 24 were wholly owned, two were minority owned and the remaining 22 vessels were time chartered.
