Baltic Trading Ltd said it may spend up to $120 million to buy vessels as the dry bulk shipping market recovers from a four-year slump. The dry bulk market slipped into a downturn after dozens of vessels ordered before the global recession hit the seas just as demand cratered. Rates to charter vessels are only now picking up, buoyed by demand from China.
"We're looking at opportunities and we still are at cyclical lows as far as vessel values are concerned and, assuming 50 percent leverage, we probably have $120 million of buying power right now," Chief Financial Officer John Wobensmith told Reuters. Baltic Trading plans to buy second-hand vessels on the cheap, rather than placing orders for new vessels that are unlikely to be delivered before 2015, Wobensmith said. The Baltic Exchange's main sea freight index, which gauges the cost of shipping commodities such as iron ore, cement, grain, coal and fertilisers, has been on a tear.
It added nearly 1,000 points in the last month alone, mainly due to expectations of higher demand for iron ore in China. "I think for the first time in a while you're going to start to see demand outstripping supply which is obviously positive," said Wobensmith, who is also the president of the company. Baltic Trading shares have risen nearly 60 percent this year. Its fleet of nine vessels is contracted on the spot market rather than being tied up in long-term contracts.
Supply is expected to grow by 4 percent in 2014, and 2-3 percent in 2015, according to Baltic Trading's estimates. Demand, on the other hand, is expected to grow 5-7 percent annually. Slots at shipyards are filled with orders for high-margin product tankers, containers and liquefied natural gas vessels, leaving little room for dry bulk vessels and this has helped keep a lid on vessel supply, Wobensmith said.