Pan Ocean has increased its exposure to the dry cargo spot market after chartering an additional 45 bulkers during the first quarter.
South Korea’s largest shipowner chartered in an extra 27 handymaxes, nine handysize bulkers and nine capesize bulkers, according to its latest investor relations presentation.
Pan Ocean, the fifth-largest bulker owner in the world, now has a dry bulk fleet of 240 vessels — 76 owned and 164 chartered in.
Unfortunately, the increased exposure to the dry bulk market came too late to boost its first-quarter results, down 47% year on year to KRW 60.1bn ($44.4m).
Management was conservative on chartering vessels and enlarging the exposure on spot when the market was temporarily down in January, said Nomura’s Korea industrials analysts, Eon Hwang and Chulwoo Park.
“Also, the improvement in the Baltic Dry Index [BDI] in the first quarter was driven by capesize vessels, to which Pan Ocean has relatively less exposure.”
Pan Ocean’s bulk division posted an operating profit of KRW 54bn, down 18.3% year on year, compared with an 80% increase in the BDI over the same period.
The operating profit for its container ship segment turned negative in the first quarter due to a lag between the Shanghai Containerized Freight Index and the inter-Asia freight rate, which Pan Ocean focuses on.
Its tanker arm, made up of two VLCCs, 14 MR tankers and seven chemical tankers, was positively affected by the Red Sea disruptions, with operating profit up 27.1% to KRW 38bn.
“Following the BDI’s rebound, we expect Pan Ocean’s operating profit to increase 23.2% year on year to KRW 475bn for the whole of 2024,” said Hwang and Park.
“The bulker segment operating profit in the first half of 2024 may disappoint when compared to the BDI level but will likely improve faster compared to the BDI from the second quarter as Pan Ocean is increasing its spot exposure.”
However, the analysts said investors should be cautious about increased iron ore inventory levels in Chinese ports and receding Panama Canal disruptions, which could exert downward pressure on the BDI.
Pan Ocean recently confirmed that its board of directors had approved an order for two more MR tankers at $49m each, with deliveries scheduled for 2027.
The shipowner now has six confirmed MR tankers on order. Deliveries for the other four ships are in January, April, June and August 2026.
Pan Ocean add a handymax bulker from the secondhand market in the first quarter. Delivery is due next month. Further details such as financial terms were not disclosed.
