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Wednesday, April 08, 2009

Norden in a move to cancel orders

Norden is ready to cancel, delay or convert some of its newbuilding orders as the dry-bulk market remains depressed.

The Danish owner vowed, however, that it will not simply walk away from orders and has the company cash to finance its large orderbook.

Norden chopped a pair of 50%-owned handysizes at an unidentified Chinese yard earlier this year and a note from the company on Tuesday did not rule out further orders being binned.

"We are in constructive dialogue with other shipyards where we discuss e.g. later deliveries or conversion to other vessel types," chief executive Carsten Mortensen said in Norden's spring newsletter.

"We will inform about progress in this area in e.g. interim reports to the possible extent. But it is important to me to say that Norden lives up to its contracts, and amendments will only take place when we and the ship yards agree," Mortensen said under the headline ‘Quicker balance in the market'.

Although the Danish boss does not explicitly mention the possibility of cancelling further orders it is also not ruled out.

While on the one hand saying he "will not be surprised if 40-50% of the [global dry-bulk] orderbook will never be realised", Mortensen was quick to point out that Norden itself will not be going anywhere near these figures in terms of cancellations.

CEO Carsten Mortensen. Finance chief Martin Badsted confirmed during a teleconference revealing the owner's annual result last month that it had axed a half-owned handysize pair which was due for delivery this year.

Badsted also admitted at the time that the benefit of hindsight has shown that the company's orderbook was too large.

"With the knowledge we have today we have probably bought five vessels too much and sold five vessels too little."

Mortensen pointed in Tuesday's note to increased scrapping and newbuilding cancellations as reasons for an element of cheer in a dreary dry-bulk market professing, "I am sure that we will appreciate that the crisis came so quickly and so roughly".

He quoted statistics from Clarkson showing that 167 bulkers of 8.3 million dwt were scrapped between October and February, or about 2% of the world fleet.

"I will chance my luck and predict that the scrapping will continue because the low rates have taken away the incentive to keep old and outmoded vessels sailing.

"Other - and we talk about lots of - orders are not financed, and the ship yards and the shipping companies do not stand a chance of getting finance."