C Transport Maritime (CTM) has been buying and selling bulk carriers this year in plays that show the changing nature of opportunities in the sale-and-purchase market.
CEO John Michael Radziwill told TradeWinds that CTM has acquired four bulkers as resales directly from Japanese owners.
“Actually all of our fleet rejuvenation programme is from existing relationships in Japan. We’ve done a number of long-term deals,” he explained.
The buys comprise two 82,000-dwt scrubber-fitted kamsarmaxes built to fuel-efficient designs, plus a 64,000-dwt ultramax built at Imabari Shipbuilding, which also comes with scrubbers. A capesize has also been acquired. The specific vessels were not identified.
The quartet are all between one and three years old and will be split between two of CTM’s portfolio companies, likely CBC Holding and Carras Ltd.
“We’re happy with the price that we achieved and we’ll probably look to add on if things get a little bit worse in the market,” he said.
An interesting price spread is opening up between older ships and newer, eco-vessels.
Based on Clarksons data, in 2019 the difference between a 10-year-old, 180,000-dwt capesize and a resale was around $30m. Today, the difference is $24m — so increasingly it makes sense to pick up resales, according to Radziwill.
“You’ll see us getting out of the older ships in a GoodBulk-type portfolio and going into the newer ships in another portfolio that is more long-term rather than total return, so to speak,” Radziwill explained.
Within the group, capesize owner GoodBulk, CBC Holding and Carras Ltd focus on shipowning. On the asset-light side, CTM focuses on commercial management and Stone Shipping makes gains from arbitrage trades in chartering and derivatives.
Oslo-quoted GoodBulk has this year sold eight capesizes and a panamax in what it said was the strongest S&P environment in eight years for capesizes and in 11 years for panamaxes.
The sales have helped the owner to pay the largest quarterly distribution to shareholders in its history, $2.25 per share for the third quarter.
Radziwill describes GoodBulk as a “total return vehicle” and the formula has proven successful. The first round of investors have made 31% over their initial investment since the company’s inception in 2017.
But while freight rates remain subdued and the first quarter will be seasonally weak, what can GoodBulk do to keep sharing the wealth with its shareholders?
“Really tight risk management. We might sell ships. Again, we might buy ships, if things get better,” Radziwill said.
“But let’s say that the best way to deal with a bad market is not to be around — and the GoodBulk shareholders have that luxury because it could be one ship or 25 ships and they’ll still have the same scale, that same information, the same operational efficiency because they’re trading with the bigger CTM fleet.
“We use all the tools for risk management that are available for us: selling, chartering out, derivatives. Keeping your costs down — that’s a big one.”
Supramaxes have been the highlight for CTM in its commercial management activities this year, Radziwill said.
“We’re pretty proud of the outperformance this year, especially in the first half of the year when we had a rising market, which is harder to outperform on,” he said.
“The Capesize Chartering [Limited] pool, which we’re co-manager of, we’re unbelievably pleased with the performance there and the cooperation we have with our partners. And that’s been a real success story.”
Alongside hints that GoodBulk will keep selling, its 14-vessel fleet is just over 12 years old on average and mostly not fitted with scrubbers. With weeks to go before new environmental regulations enter into force, clearly GoodBulk has work to do.
“The jury’s still out if we’re going to put scrubbers on them or not. We made a decision a while ago not to put scrubbers — and, by the way, for most of their trading life with us it’s made sense not to have the scrubbers,” Radziwill said.
“Having said that, the past year or so it’s been a different story. We’re always rethinking views and plans, but at the moment we would probably just make them comply with the new regulations and carry on trading them with our usual commercial strategy.”
GoodBulk’s capesizes will remain focused on the spot market until time-charter rates move up.
“China is really the ball and chain of this market right now. It’s one that is slowly and surely unravelling and I’m fairly certain it will be fairly, substantially unravelled by the end of Q3 next year, if not sooner,” Radziwill said.
The gradual relaxation of zero-Covid policies in China will boost consumer spending, economic growth and industrial demand for commodities, enhanced by the fiscal stimuli to which China has already committed, he said.
“And then, with the low [fleet] supply, some kind of inefficiency — I don’t know what it would be — can also come and change the picture pretty quickly. I don’t think we can go much farther down from here.”
Investment vehicle Stone Shipping is gearing up to raise its fifth joint-venture fund, which will focus again on supramax and ultramax vessels.
Returns are generated for investors through arbitrage trades in the chartering or derivatives market over a roughly 12-month period. The tenor is deliberately a short one — Radziwill said he knows how frustrating it can be for investors to be unable to access or adjust their investments when money is tied up over longer timelines.
Fundraising will begin early next year and this time the fund will be the biggest yet. The $20m target is twice as big as the previous round.
To date, investors in Stone have mainly been the Radziwill family and their friends in order to perfect the right formula for the vehicle.
“We’ve tested the machine and we continue to test the machine, so to speak, and we’re confident that it will work,” Radziwill said.
“We’re confident to grow the pot bigger and bigger, but we don’t want to get ahead of ourselves, right. And we want to be as certain as we possibly can that we can deliver the returns that we say we can.”