Lauritzen Bulkers
President Jens Ditlev Lauritzen
In 2005 EBITDA was USD 130.8m compared to USD 193.0m in 2004. Earnings were influenced by a reduction in vessel days due to scheduled redelivery of time chartered tonnage as well as declining freight rates. However, results were better than expected and very satisfactory.
Ordinary result before tax was USD 165.9m in 2005 compared to USD 214.5m in 2004; this included gains of USD 23.6m from the sale of vessels, up from USD 17.2m in 2004. It also included income of USD 9.6m from associated companies compared to USD 7.8m in 2004.
Main events
During the year, two 32,000 dwt Handysize bulk carriers were ordered at the Hakodate Shipyard in Japan for delivery in 2008-09, bringing the total number of newbuildings on order for delivery from 2006 onwards to Lauritzen Bulkers’ fleet to 12 vessels. Four of these vessels will be fully owned, and another four long-term time chartered by Lauritzen Bulkers. The remaining four vessels will be owned by Lauritzen Bulkers’ partner in the Handysize segment, Island View Shipping (IVS).
In January 2005, Lauritzen Bulkers took delivery of the Handysize newbuilding Durban Bulker, jointly owned with IVS. A second Handysize newbuilding on long-term time charter was delivered in June.
Two Handysize, one Handymax and one Panamax se-cond-hand vessel were also acquired during the year and three Handysize vessels were sold.
Lauritzen Bulkers entered the Capesize segment by taking one 176,000 dwt vessel on long-term time charter.
During the summer of 2005, Lauritzen Bulkers’ Pacific Rim operations relocated from Melbourne, Australia to JL’s new offices in Singapore.
Lauritzen Bulkers acquired a minority shareholding in Good Hope Overseas Management Inc., Panama, which fully owns New Century Overseas Management Inc., Manila (NCO). NCO provides ship management services for all vessels owned by Lauritzen Bulkers.
In May 2005, the Panamax bulk carrier Lucia Bulker grounded off the coast of Indonesia, which caused major damage to the hull. The incident caused no personnel injuries or environmental damage.
Off-hire of the owned fleet, including scheduled dry docking, was 4.3% compared to expected 1.1%.
Market trends
Freight rates for bulk carriers went through a turbulent 2005 with sufficient differences between the high and the low market to create a sense of unease during the summer period. However, charter rates recovered partially during Q3 and the beginning of Q4 before sliding again towards the end of the year, cf. Figure 8, page 14.
Demand for bulk carriers
Global seaborne shipments of bulk cargoes increased by about 4% in 2005, down from about 6% growth in 2004. Although iron ore shipments continued to grow strongly in 2005, other commodities, particularly grains and minor bulks, experienced low growth.
A number of factors contributed to reduce port congestion during the year, which tended to dampen demand for bulk carriers.
Demand for bulk carriers was on a rising trend in 2005, supported by rising economic activity, although it was unevenly spread over the year. A number of commodities, including metals saw rising prices and this underpinned demand for transportation.
Tonnage supply
The global bulk carrier fleet grew by an estimated 7% in 2005 to almost 350m dwt. Strongest growth was seen in the Capesize, Panamax, and Handymax segments, which all grew by 7-9% from year-end 2004 to year-end 2005, whereas the Handysize segment only increased by about 2%.
Deliveries amounted to around 300 bulk carriers, equivalent to approximately 23m dwt during 2005, cf. Table 1.
Table 1: Number of vessels delivered in 2005
Source: Clarkson Research Services Ltd
In 2005, orders amounted to almost 17m dwt compared to 33m dwt in 2004. In terms of numbers of vessels, the first half year saw 152 units ordered, falling to 76 units during the second half of the year, cf. Table 2. In dwt terms and as a percentage of the existing fleet, the order book stood at approximately 19% at year-end 2005 compared with 20.7% at year-end 2004.
During 2005, the most remarkable characteristic of fleet development was the near absence of scrapping. Demolition was only reported for 37 vessels. Despite a pick-up in scrapping during the fourth quarter, total demolitions were estimated at only about 1.4m dwt, or 0.4% of the global bulk fleet.
Fleet
In 2005, Lauritzen Bulkers’ total number of ship days reached 22,023 (60.3 vessels on average), down 4.7% on the 23,107 days (63.3 vessels on average) reported in 2004.
Table 2: Number of vessels ordered in 2005
*) Order book as % of existing fleet (end 2005)
Source: Clarkson Research Services Ltd
The fully-owned fleet comprised six vessels at the beginning of 2006, with five further vessels owned in partnerships.
Fleet management for the owned bulk carriers is performed by NCO. These vessels are registered in various flag states.
Lauritzen Bulkers’ fleet of Handysize bulk carriers, which is commercially managed in collaboration with IVS, totalled an average of 45 vessels over the year (48 vessels in 2004).
Lauritzen Bulkers’ Handymax fleet comprised 11 vessels (12 vessels in 2004), and the Panamax fleet comprised four to five vessels (six vessels in 2004).
Figure 8: Charter rates for Handysize bulk carriers 2004-05
USD/day
Source: Clarkson Research Services Ltd
The Capesize fleet comprised one vessel, which was delivered in September 2005, marking Lauritzen Bulkers’ entry into this segment.
At the end of 2005, Lauritzen Bulkers had 36 vessels on time charter, some of which with purchase options.
Events after year-end
In January 2006, Lauritzen Bulkers acquired a 39,000 dwt second-hand Handysize bulk carrier with prompt delivery.
In February 2006, Lauritzen Bulkers sold a 52,500 dwt Handymax bulk carrier with prompt delivery.
Outlook for 2006
Demand for bulk carriers is expected to continue at a somewhat lower pace than during the past couple of years benefiting from a fairly healthy global economy and the continuing growth expected in China.
Supply growth is forecast to outpace demand growth in 2006. Deliveries amounting to about 7% of the existing fleet are projected, based on the current order book. Although the age profile of the fleet in general indicates a strong basis for scrapping, owners’ present financial strength combined with expected rate levels suggest another year of modest demolitions.
JL is anticipating the slowest growth in tonnage supply for the Handysize segment because of modest deliveries. This segment is also more likely to see demolitions due to the age profile of the fleet.
The past couple of years have seen high volatility in both freight rates, cf. figure 8, and prices on tonnage. Many factors indicate that this development may continue in 2006, offering risks and opportunities.
In 2006, Lauritzen Bulkers will take delivery of two additional second-hand Handysize vessels which were acquired late 2005. One time chartered second-hand Handysize and one time chartered Panamax newbuilding will also be added to the fleet.
Results for 2006 are expected to be satisfactory, although not as strong as in 2005. Ordinary result before tax is expected to be about USD 50-55m including gains from sale of vessels of about USD 8m (USD 24m included in the 2005 result).
