Dry bulk, while still treading water, has also seen S&P activity, has well-resourced owners set up to play the inevitable market cycle.
A recent report from VesselsValue, originally formed by a UK-based S&P broker, and now part of data provider and analytics powerhouse Veson Nautical, noted that: “the top 10 tanker owners have doubled that, spending a total of $3.66 billion on 90 second hand vessels.” In their mid-August release, they point they contrast the tanker outlays with their dry bulk brethren, where “the top 10 biggest spenders on second hand bulkers have spent a collective $1.58 billion on 51 vessels.”
Geopolitics form an important backdrop to the tanker side of the business. While the top spender was Scorpio Tankers (NYSE- STNG), buying 17 vessels with a total value of $829.3 million, the runner-up in the league tables, according to VesselsValue, was Gatik Ship Management – linked by a number of commenters to “The Dark Fleet”.
In the case of STNG, its financial strategy involved exercising purchase options under long-term leases, thus lowering the fleet’s daily breakeven levels. In an August 2023 presentation of its Q2 financial results, STNG management explained that, since August 2022, it had given notice to repurchase 49 vessels under lease financing and one under a credit facility, and had repaid the outstanding debt on 46 of those vessels. Its management also noted that “the company expects to repurchase three vessels under lease financing in the third quarter of 2023”.
At end the end of 2022, STNG’s lease financing liability stood at $1.66 billion; at end Q2 2023 (six month later), lease debt was pegged at $1.117 billion, dropping to just over $1.0 billion at end July, 202). STNG did enter a new bank facility totaling $1 billion and drew down $446 million “to finance 21 of the Company’s unencumbered vessels – 17 MRs and four LR2s).” The bank debt is priced at SOFR + 1.95%.
Gatik had been an active purchaser of vessels in the past few years, with VesselsValue writing that: “Newcomer Gatik Ship Management purchased an impressive 19 vessels this year to date, bringing the total number of vessels bought since the company emerged in December 2021 to a total of 63.”
However, with attention focused on it following the imposition of sanctions on Russian crude, followed up by price caps on crude and refined products coming from Russia, Gatik has lately reshuffled its fleet into the hands of smaller, albeit related companies. This is alluded to as VesselsValue writes that: “Some of these vessels have already been sold on as Gatik takes advantage of the continued high values for older Tankers.”
On the drybulk side, the VesselsValue analysts note that “Golden Ocean (NASDAQ – GOGL)… ranked first in terms of total spend, splurging $291 million” so far in 2023. Their list shows Hong Kong-listed Pacific Basin in the runner up slot, having spent just under $190 million, closely followed by Chinese lessor BOCOM, with $188.7 million.
The drybulk market, which soared in 2021 before pulling back; in spite of brief rallies, it has failed to find a renewed footing. Pac Basin’s Q2 2023 report hints at the rationale for vessel purchases, describing a strategy of being: “Committed to our growth and renewal strategy as asset prices allow further strategic investment.” GOGL, in its Q1 report, had explained, similarly: “We took advantage of a temporary softening in asset prices in the first quarter to acquire six modern and high-efficient vessels.”
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