J. Lauritzen: Weakest Dry Bulk Market for the Last 30 Years

J. Lauritzen says the dry cargo market has been at its weakest in 30 years

The weakest dry cargo market in 30 years resulted in J. Lauritzen posting a first half 2015 EBITDA of negative $17.9 million, down by $45.6 million on H1 2014.

Impairment on dry bulk vessels amounted to $173.4 million, of which $79.1 million was related to small bulk.

Gas carrier operation met expectations, the firm said, but described its H1 EBITDA for Lauritzen Bulkers as "unsatisfactory" at negative $24.9 million, down $42.2 million from the period in 2014 "primarily due to the remarkably weak dry cargo markets."

J. Lauritzen's outlook for the remainder of 2015 is equally dismal: its interim financial report released on August 13 states that "We still see significant uncertainties associated with the dry-market during 2015; our expectations on gas carrier activities are unchanged."

The full year net result has now been revised down to be in the range of negative $200 million to $170 million, from the earlier reported $135 million o $80 million "mainly due to additional impairments and write downs."

"The dry cargo markets encountered during the first half of 2015 turned out to be weakest for the last 30 years," Jan Kastrup-Nielsen, president and CEO of J. Lauritzen, remarked.

"Changing Chinese import patterns of permanent nature combined with the large number of newbuildings scheduled for delivery until the end of 2017 have in our opinion put dry cargo vessel values under pressure, resulting in impairments influencing our bottom-line result."

In a separate report, Kastrup-Nielsen was quoted as saying that his company had planned 2015 with too many "open shipping days", and subsequently, exposure to the open spot market's low rates impacted the first half of the year.

"Some things have happened in the first half of the year which have turned out different than we expected, and now we are feeling the consequences," he said.

"If the dry bulk market is low for a sufficiently long period of time, then there will be no dry bulk carriers left: it's as simple as that."

In July, Martin Sato, J. Lauritzen's managing director in Singapore, said that dry bulk has hit rock bottom and "most players are burning through cash in the current market, where you can barely cover operating costs."