Borealis Finance is searching for a silver lining after detailing the uniquely rapid and far-reaching effects of the Covid-19 outbreak on boxship markets.
The Oslo-listed owner of 25 containerships and three bulkers said the second quarter triggered a temporary suspension of many liner services, resulting in a wave of ship re-deliveries by operators to independent owners throughout April and May.
This turned out to be unprecedented in both speed and scale, leading to the highest recorded fleet idle ratio in history, Borealis added.
Fleet use was also hit by the temporary closure of shiprecycling facilities on the Indian sub-continent.
"This can act as a valve to support a swifter supply-demand rebalancing in times of heightened industry stress," the company said.
Rates dropped dramatically
The Borealis fleet was not spared, and idle days hit 316 days — 12.4% of the available total and the second highest level since the company was formed.
Rates plunged $3,000 per day in the classic feeder class, and by as much as $7,000 per day in the more volatile classic panamax class.
However, they remained above operating cost levels, in stark contrast to the last significant containership downturn in 2016, Borealis said.
"Lower day-rate levels are likely to persist for the remainder of the year," the company said.
But it added that the market looks to have bottomed out in the third quarter, with utilisation, charter rates and secondhand market activity starting to pick up towards the end of June as Western economies began to open up.
This was led by the larger post-panamax segment, which the company said is anticipated to drag along the smaller ships "eventually".
Green shoots of recovery
Borealis said considerable uncertainty remains, but its management is still cautiously optimistic about the incrementally improving trends experienced into the third quarter.
"If one looks for the silver lining, a combination of some remaining scrubber retrofits, rescheduled and delayed newbuilding deliveries, increased scrapping, and limited incremental newbuilding orders might all lend mitigating support to container supply fundamentals in the short to medium term," the shipowner said.
The company has reported a net loss of $3.97m in the second quarter, deeper than the loss of $2.86m in the same period of 2019.
The six-month deficit now stands at $4.93m.
Second-quarter revenue was down at $20.5m, against $22.1m from the year before.
During the summer, the company sealed a refinancing agreement with bondholders, which waived covenants and gave Borealis Finance more financial flexibility.
Total assets amounted to $328m by 30 June, with equity at $116m and interest-bearing debt of $197m.
