NORDEN plans to grow itself out of the crisis in the dry cargo market. This is to be achieved through significant growth in the Company’s operator activities by which cargoes are combined with available vessels in the market for one or a couple of trips. This extra focus on operator activities will take place while NORDEN head on continues its regular business on the spot market (day-to-day market) with the core fleet of owned and longterm chartered vessels. At the same time, NORDEN is executing its long-term contracts.
Always money to be made
The activities as operator involve global transportation at sea where profit is made as the difference between what the customer pays for transportation and what NORDEN pays for chartering a vessel for a shorter period of time or for just a single voyage to perform the transportation task at hand. As a rule in terms of earnings, operator activities are usually less dependent on market rates than dry cargo business in general. If freight rates are low, the price for chartering unemployed vessels will also be low. Conversely – if prices on unemployed vessels go up, it reflects that freight rates have also increased. Therefore, as a rule money can be made on operator activities during both up- and downturns.
“Activity as an operator is not something new to NORDEN, but it is our ambition to increase this business segment significantly in the coming years. The rates in the dry cargo market are historically low, but operator activities have the advantage of being less dependent on market trends, and we can therefore make earnings within these activities also during hard times. There are plenty of cargoes in the market and there are plenty of available vessels which can be chartered at reasonable prices – for a couple of trips or just one. Our task is to ensure the best combination of cargoes and vessels, so we can make money on it,” says CEO Jan Rindbo.
Panamax bulk carrier Nord Neptune at sea - Image courtesy of Norden
At the end of the third quarter, there were 180 vessels in NORDEN’s dry cargo fleet – 80 in the core fleet (20 owned and 60 on long-term charter) and 100 vessels on short-term charter.
“NORDEN is not idly standing by waiting for rates in the dry cargo market to improve. We act and we have big ambitions for our operator activities. With our skilled organisation, our brand, our strong customer relationships, our global presence and our financial position, we have a very good starting point to carry out these ambitions,” says Jan Rindbo.
Next step in strategy
The extra focus on operator activities is a further step in the realisation of NORDEN’s strategy for the coming years. The strategy is called Focus & Simplicity with “focus” referring to the relationship with customers, fleet composition, market exposure, etc. and “simplicity” referring to the way work is done at NORDEN. The strategy will ensure greatest possible value creation – both in these years
of historically low dry cargo rates and declining product tanker rates, but also when market conditions improve. The strategy about the significantly increased operator activities is developed in cooperation with the 3 leaders in the Dry Cargo Department Vice President Michael Boetius, Vice President Thomas Kobbel and Vice President Thomas Jarde. The strategy involves the vessel types Panamax, Supramax and Handysize.
Making use of core competencies
CEO Jan Rindbo expects a lot from the increased operator activities.
“These activities will provide us with new business opportunities and economies of scale, they will increase our turnover and earnings and they will add more energy to the organisation – we will get a more dynamic working environment. And all this is possible, whether the dry cargo market goes up or down. This is about seizing opportunities which we have not made fully use of so far. But this will be done now. The same goes for this initiative as for all other initiatives taken in NORDEN. We must make use of our core competencies best possibly – no matter whether it is steel or people. It is very much a matter of making even better use of the human potential and great knowledge that lie in NORDEN,” says Jan Rindbo.