J. Lauritzen: Dry Bulk Has Hit Rock Bottom, Operators Are "Burning Through Cash"

Sato says J. Lauritzen will not be scrapping any vessels.

J. Lauritzen says dry bulk has hit bottom, with operators "burning through cash" as rates hit historical lows and many players struggle to cover their costs, ShippingWatch reports.

"Everyone is hurting. Only very few players are currently making money right now - on the contrary, most players are burning through cash in the current market, where you can barely cover operating costs," says Martin Sato, J. Lauritzen's managing director in Singapore.

"The rates are historically low, about USD 5,000 per day in the Handysize segment. And so I think that things can only go one direction from here - the market has reached rock bottom!"

Sato cited significant declines in coal exports to China, Russia's intervention in the Ukraine, and Indonesia's mineral export halt, as factors that, along with the massive growth in the aggregate dry bulk fleet, have contributed to overcapacity.

So far in 2015 the sector has seen a record amount of vessel scrapping, and Sato believes that in order for the market to "become interesting again", seven to eight percent of the total dry bulk fleet needs to be removed – although J. Lauritzen, which is mainly positioned in Handysize says it is less affected by overcapacity and will not be scrapping anything.

"We can see that a lot of scrapping is taking place, and if this continues, then it could help push the market in the right direction," says Sato.

"It is a cyclical market so it will turn at some point."

J. Lauritzen published a deficit of $29 million for the first three months of 2015, and CEO Jan Kastrup-Nielsen told media that the fundamental dynamics of the bulk market will not change noticeably before early 2017