Friday, December 3, 2010

Danish Bulk Shipping Group Plan For The Future

New Builds on the Blocks and Already Chartered Out
Shipping News Feature

DENMARK – SOUTH AMERICA – CANADA – ASIA - International bulk freight and tanker operator Norden A/S has contracted two Handysize new build vessels which, following delivery from the shipyard, will be chartered out to Rio Tinto, one of the biggest dry bulk charterers in the world. The agreement is long term and is expected to result in accumulated earnings before interest, taxes, depreciation, and amortization of approximately $60-70 million for the entire contract period.

The two dry cargo vessels in question have been contracted to the Japanese shipyard Onomichi Dockyard. The vessels are 37,000 dwt, ice class vessels designed especially to meet the requirements of Rio Tinto for transportation of alumina from Latin America to eastern Canada. The first vessel will be delivered from the shipyard in the second half of 2012 and the next in the first half of 2013.

The agreement is part of the Dry Cargo Department’s strategy to expand business with well established, global cargo owners by entering into long-term charter operating agreements (COA’s) to employ vessels. In May 2010, Norden entered into a similar agreement with Rio Tinto on chartering out two Panamax class vessels, and also has a number of COA’s with Rio Tinto.

In addition to the 2 vessels from Onomichi Dockyard, Norden has contracted 2 other Handysize new build ships at Hyundai-Mipo (Vietnam). The company’s order book in Handysize now counts 16 owned new builds and 5 long-term chartered vessels with purchase option. These vessels will bedelivered in the period 2011-2013 and will contribute to Norden’s objective of obtaining critical mass in this vessel type.

Norden’s investments in Handysize are made in expectation of an attractive long-term demand development in combination with a large part of the global fleet being outdated and the order book being of a manageable size. According to Clarkson Research, the global fleet in Handysize counts 2,995 vessels (from 10,000-39,999 dwt.). 50% of the vessels are more than 20 years old, meaning that the scrapping potential is significant. The official order book in Handysize corresponds to 28% of the global fleet, while the average for the global dry cargo fleet is approximately 52%.

As we have indicated recently, second guessing the future bulk (or container) freight market can be a risky business, but Norden believe they have come up with a secure strategy to take them into the next decade.