Drop in freight rates in 2015 for all classes of bulkers have forced owners to resort to demolition of older tonnage and layup as excess supply overwhelmed anaemic demand growth, particularly in the fourth quarter.
This year doesn’t seem that promising either, as freight rates in January and February have set record lows every day.
As a result, 4.5 million tonnes were scrapped in January alone, dry bulk owner Pioneer Marine says.
“We are also seeing inquiry for layup with 600 applications reported in Greece alone but we haven’t yet seen mass layup. We currently count around 25 ships laid up in Greece,” Pankaj Khanna, Pioneer Marine’s Chief Executive Officer, says.
The dry bulk owner reported a net loss of USD 80.6 million for the fourth quarter of 2015 and a net loss of USD 96.9 million for the year ended December 31, 2015, which includes a USD 74.4 million non-cash impairment loss.
“We expect these challenging conditions to continue in the first half of 2016 and then a gradual improvement as the supply side measures kick in. In this environment Pioneer has positioned itself with a strong balance sheet as a result of the equity raise in August last year and the cancellation of 3 newbuilding announced in November 2015,” Khanna added.
The company said it was also working with the yard to rationalize the program further in light of the current market conditions. In addition, Pioneer Marine said it had reached out to all its suppliers and vendors to help reduce costs along with its banks to obtain covenant waivers and cures for covenant breaches.
Pioneer Marine currently owns fourteen Handysize and one Handymax drybulk carriers with an additional 7 Handysize newbuildings on order for delivery through 2017.