Falling demand from China for industrial commodities is sending shipping prices down and hitting the finances of ship operators

Pioneer Marine Inc. reported a $5.5 million loss in the third quarter and said it canceled orders for three new ships as the bulk-ship operator coped with a steep decline in demand for commodities in China.

The carrier said China’s Yangzhou Guoyu Shipyard had canceled the ship orders without penalties and had agreed to “substantial delivery delays” of other ships on order and cut $2 million from the total purchase price for the vessels.

Bulk Carrier Pioneer Marine Expands Losses, Cancels Ship Orders

Image: Bulk-carrier ships at the Posco steel mill in Gwangyang, South Korea / Bloomberg News

The actions came at the end of “the toughest year for the dry-bulk market in probably 35 years,” Pioneer Chief Executive Pankaj Khanna said in a statement.

China’s declining imports of coal and iron ore, major commodities for the bulk carriers, have cut deeply into shipping demand, sending freight prices plummeting. The Baltic Dry Index, a closely-watched measure of shipping rates for a batch of industrial commodities, fell last week to the lowest point in its 30-year history.

Two dry-bulk ship operators, Japan’s Daiichi Chuo Kisen Kaisha and Global Maritime Investments Cyprus Ltd., filed for bankruptcy protection in September.

“The macro slowdown in China and the collapse in commodity prices across the board is impacting demand, particularly for the major bulks,” Mr. Khanna said, adding that Pioneer had “strengthened our balance sheet to withstand the current low freight rates. Having built this long runway we are now well positioned in comparison to many of our peers and enjoy strong support from our sponsors and the banks.”

The third-quarter loss of 20 cents per basic and diluted share compared to a $5 billion loss in the same quarter a year ago. Fleet utilization, a key measure of supply-demand balance, fell from 99% in last year’s third quarter to 90.3% in the three months ending Sept. 30.

Pioneer Marine, which is listed in Oslo and has management based in Singapore, counted $9.9 million in net revenue in the third quarter, down 11.3% from the same quarter a year ago. Pioneer said revenue grew 14% from the second quarter to the third quarter, in part because the carrier added a vessel during the period.

Source: wsj.com