Bleak Outlook for Dry bulk as GOGL Posts $135M Loss, Moves Forward with Knightsbridge Merger

Companies push ahead with merger amid weak market conditions

Dry bulk carrier Knightsbridge Shipping Limited (Knightsbridge) Friday said the outlook for the sector in 2015 was looking weak, but it is pushing on in its merger with rival Golden Ocean Group Limited (GOGL).

"During a period with a weak market we expect to see increased scrapping, postponed orders, cancellations and conversions," said Knightsbridge.

Knightsbridge and GOGL agreed to merge in October, but have now set a date to consult shareholders at special general meetings to be held on March 26.

The merged group will operate 72 vessels, including 34 newbuilds currently under construction.

It is understood that following the merger, Knightsbridge will be the surviving legal entity but the combined company will be renamed to Golden Ocean Group Limited.

GOGL's current Singapore listing will be cancelled in favour of dual listing of the merged company on the Nasdaq Global Select Market and the Oslo Stock Exchange.

The comments came in Knightsbridge's Annual Report for 2014, in which the company announced a net profit for the year of $5.3 million.

2015 Outlook Bleak, Opportunities For Those with Stamina

But the company added that a poor start to 2015 would likely weigh on first quarter results.

Separately, GOGL was reported to have posted a $135 million loss for the fourth quarter of 2014 following a heavy $183 million impairment to the value of its dry bulk vessels.

GOGL pointed to low coal demand in China, easing grain port congestion in South America, and the halt to stockpiling of Indonesian raw ore exports.

"Should the weak market continue this will force changes on the industry, some participants will disappear and it will open for consolidation, and for those that have stamina to stand through this period there will be opportunities," it said.

On Thursday, Pacific Bulk announced it had swung to a $285 million net loss in 2014 in a "very difficult market," adding that it expected the weak market to continue in 2015 and was taking a cautious view on the freight earnings outlook.