Edward Buttery, the chief executive of Taylor Maritime Investments and Grindrod Shipping, maintains a quietly bullish sentiment on handysize bulker rates, encouraged by recent market firming, with rates on the Baltic Exchange up by over 50% between February and March.
“I expect the market to remain fairly firm for this year, next year and possibly beyond. There will of course be seasonal and technical ups and downs, and of course we cannot predict wildcard events, but the fundamentals of the geared sector are strong,” he says.
With combined minor bulk and grain demand expected to increase in tonne-mile terms this and next year, while the handysize fleet increases marginally, Buttery reckons this should result in a compelling supply-demand spread, which, combined with the slowing fleet and aging fleet, could lend further support to rates and values.
The founder of London-listed TMI expects the sector to pick up pace this year, banking on increased grain exports with Brazil’s soybean season forecast at a record high all set to support charter rates. Citing Brazilian sources, he sees seaborne exports of soybeans up over 16% against the previous season, with shipments to China also expected to increase, “tying up tonnage on long haul routes across the Pacific”.
“Brazil’s grain exports will fill the gap arising from Ukrainian grain corridor departures which fell to a four-month low in January 2023 and the need for shipments from further afield,” he notes.
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He finds that sentiment in the dry bulk sector improved as China started to relax its zero-covid policies and signalled its intention to stimulate the economy with measures targeting the property and construction sectors, both drivers of geared bulk demand.
Last week, he observed rates at $12,500 per day, an increase of over 50% since mid February and the asset value for a 10-year-old 37,000 dwt bulker going to $18.5m from $16.5m at the beginning of January 2023. “There is reason for cautious optimism as China reverts to a pro-growth strategy with the central government aiming for 5% GDP growth in 2023,” he says, adding that this could go even higher according to UBS and Morgan Stanley.
“Overall, we maintain a positive outlook through to the end of 2024 and possibly into 2025, driven primarily by attractive supply side dynamics, with the orderbook remaining at near historical lows, shipyards full and demand growth set to improve,” Buttery tells Maritime CEO.
TMI contracted a 40,000 dwt handy newbuild in Japan for delivery in Q1 2024, described as a rare early delivery window given Japanese newbuild contracts are now only deliverable in the second half of 2025 at the earliest. The move was part of the company’s “limited renewal strategy” in conjunction with disposals of older vessels and to lower the fleet’s overall average age and enhance its ESG credentials.
Although this was an excellent opportunity for Buttery and the company, he notes that it “doesn’t herald the start of a newbuild programme,” adding that the slot was secured thanks to strong relationships with Japanese yards.
He reckons TMI is well positioned with a controlling stake in Grindrod and has become a significant owner in the geared dry bulk market with a fleet of over 50 vessels, the majority of which are Japanese-built and have an average age of 9 years.
“We are on a critical path to earnings and NAV accretion through our integration strategy and are making good progress in identifying synergies… from the combined fleet across insurance, commercial management, technical management and corporate activities, he says.
Buttery’s role as CEO of both companies is supported by strong governance frameworks, through which he believes he will be able to execute a clear integration strategy, with both teams working toward value creation enabled by an expanded fleet. Going forward, he intends to continue TMI’s investment strategy with deleveraging at the forefront to ensure a strong balance sheet.