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Review on the freight market in the 3rd Quarter 02-11-2015

In this new topic we give you some more insight on the chartering results of our fleet. Despite the ongoing crisis we could welcome the first signs of recovery in the past year. In this topic we look back on the past quarter on the basis of three regular subjects: development freight revenues, input from the commercial manager and figures & facts.   

Development freight revenues
In the third quarter of last year we could observe that the recovery had a 'permanent' character. Now a year later, we can say that since then a slight improvement/stabilization has occurred in the core segment (multi-purpose vessels up to 10,000 tonnes) within which we operate. We look at the results from three types of vessels: 5400 dwt, 7800 dwt & 7800 dwt (geared). Compared to the first nine months of 2013 all three types of vessels realized a growth of the daily revenue. 
 
In the traditional weaker summer period only the 5400 tonnes vessels have noted a decrease in freight revenue compared to the first six months, which is very common in the relevant period. The 7800 tonnes vessels managed to stabilize their income level in the summer. A remarkable fact is that the geared vessels generate less revenue than the vessels which are not equipped with cranes. This stems from the persistent surplus of geared vessels. All in all it can be said that the recovery - although gradually – starts to get a more structural character. In addition, the comment must be placed that the income is still far from the level that was achieved before the crisis. In our view, however, there cannot permanently be referred to rates of the past as currently, there is a new reality. The focus lies on finding a healthy balance. Fortunately, the signs that are pointing towards a development in the desired direction (redundant older tonnage and decrease of newbuilding ambitions) are significantly increasing.
 
Input from our commercial manager
For years we have been using the services of our charterer MTL from Duisburg. Because of their long-
standing relationships with reputable cargo parties we have, relatively speaking, been able to limit 
the damage in the crisis period. Through weekly updates MTL informs us about the ups and downs in
the freight market. Some salient passages from the mentioned updates can be found below:
 
‘It is still a very tough market situation for geared tonnage, too many vessels and limited spot cargoes’ (week 31)
 
‘Done fixtures this week mirror the current climate within our market environment quite well. We are happy tom perform for our several contract partners as that freight level is much above the spot market level’ (week 32)
  
‘All vessels employed without any idle days in the month of August. Results for August are steady and not effected by any seasonal up and downs’ (week 35)
 
‘We noticed several new spot cargoes, traders are ready to cover deals for the 2nd half of the month as they inspect increasing freight levels’ (week 36)
 
‘Although we covered all B-dieps, market is still affected by an oversupply of prompt tonnage’ 
(week 38)    
 
Facts & Figures
To conclude this retrospective we show some numbers below. The figures show the change (in %) compared to the first half of 2015 as well as compared to the same period last year.
 
If we compare the cumulative daily revenue at the end of September '15 to the figures of a year earlier (daily revenue at the end of September '14) then the 5400 tonnes vessels show an increase of 2.7%. The daily revenue of 7800 tonnes without cranes has increased by 1.8%, the 7800 tonnes with cranes recorded a rise of 9.5%.
 
Compared to the first half of this year the 5400 tonnes vessels are confronted with a decrease of the 12.75% in the third quarter due to overcapacity in the summer. The 7800 tonnes vessels without cranes managed to limit the damage to a decrease of 1.7%. The 7800 tonners with cranes were able to achieve an increase of 5.4% compared to the first half of 2015. Overall, it can be seen that the fluctuations were smaller in the summer than we previously assumed. The fact that quite a substantial decrease occurs within the 5400 tonnes vessels is explained by the fact that this type of vessels is largely dependent on occasional cargo from the spot market. This part of the market is more sensitive to the negative influence of the summer period. 
 
All vessels in the above mentioned classes are operating on voyage chartering and are therefore not chartered for a longer period at a fixed income (time charter). Through a combination of contracts of affreightment and cargo on the spot market we aim for an optimal occupancy and thus a continuous revenue stream. The 5400 tonnes vessels are for 15% active on cargo contracts (contracts of affreightment), the remaining 85% of the time the vessels are operating in the spot market. For the 7800 tonnes vessels 60% of the time is filled with cargo contracts and thereby there is a limited dependency (40%) of the spot market.