Golden Ocean Says 20% of World Capesize Fleet Idle, Shares Fall

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Tuesday, 02 December 2008

Golden Ocean Group Ltd., the shipping line chaired by Norwegian billionaire John Fredriksen, said more than a fifth of the world’s fleet of capesize vessels for hauling coal and iron ore has been idled after fees collapsed. Shipping rates slumped after a 20-30 percent cut in global steel output cut demand for deliveries of iron ore, and a freeze on credit made it harder to fund cargoes, Oslo-based Golden Ocean said today in a statement distributed by Hugin. The company fell to the lowest in more than two years in Oslo trading.
Rates for renting out capesize vessels have collapsed by 99 percent from a record in June to $2,425 a day, compared with daily running costs of about $6,000, according to Henrik With, an analyst in Oslo at DnB NOR Markets ASA. Normally about 250 capesizes compete for spot bookings, Lorentzen & Stemoco A/S shipbroker Kjetil Sjuve said on Nov. 7.
Golden Ocean fell as much as 11 percent to 4.35 kroner, the lowest since August 2006 and traded at 4.47 kroner by 11:16 a.m. in Oslo, valuing it at 1.2 billion kroner ($170 million).
“Utilization of the total dry bulk fleet is estimated to be around 80-85 percent and it is believed that more than 20 percent of the capesize fleet is idle and waiting for employment.” Golden Ocean said. There’s concern overcapacity “in the dry bulk market today, combined with the weak global economic condition will continue to put pressure on the market.”
The order book for new dry-bulk ships at the end of September will swell the global fleet by 70 percent if completed, it said. “Tight” financing will lead to canceled orders, while there has already been an increase in ships scrapped, it said.
Vessels on Order
There were 6,998 dry bulk vessels totaling 412,741 deadweight tons operating in September, according to data from London-based Drewry Shipping Consultants Ltd.
Golden Ocean has 30 vessels on order worth $1.6 billion, with about 55 percent already financed. It is in talks to cut, delay or seek funds for the remainder, it said.
The company’s third-quarter profit more than doubled after a $54.4 million gain on the sale of two ships. Net income advanced to $118.7 million, or 43 cents a share, from $52.9 million, or 19 cents, a year earlier.
As adapted from Bloomberg