Record Scrapping of Less Fuel Efficient Vessels Points to Market Improvement

CEO Angeliki N. Frangou said the company is positioning itself for market improvements

Record scrapping levels of 33 million tonnes in 2012, and the promise of more scrapping in 2013 will help bring the shipping market into balance, officials of Greek dry bulk shipper Navios Maritime Partners L.P. [NYSE:NMM] (Navios) told analysts on their Q1 2013 earnings call.

"Scrapping rates for older, less fuel efficient vessels have continued at very high rates this year," said George Achniotis, executive vice president of business development.

"Through April 18, about 8.7 million deadweight tons was scrapped.

"If this trend continues, scrapping could once again exceed 30 million deadweight tons in 2013."

Achniotis said steel prices, as well as the excess supply of tonnage, make it logical to scrap older, less efficient vessels.

In the first quarter of 2013, the company reported that its time charter revenues grew to $50.3 million from $48 million in the same quarter last year, while profits dropped to $16.2 million from $16.9 million.

Navios said it had 21 vessels operating at the end of the quarter, compared with 18 one year previous, and its fleet's available days rose to 1,890 from 1,576 in the first quarter of 2012, but the time charter equivalent dropped to $26,244 from $29,978.

Still, between scrapping, decelerating newbuilding deliveries and increasing dry bulk demand, Achniotis said the market is improving.

"For the first time in four years these are expectation that net demand will exceed supply, consequently rate levels could pick up during the course of 2013," he said.

The company said it recently acquired four vessels with an average age of 3.75 years from Japanese shipyards for a total price of $108 million, taking advantage of the devaluation of the Japanese yen.

CEO Angeliki N. Frangou said the company also raised $73.2 million of gross profit from an equity offering in February, which she said helps it be prepared for future opportunities.

"With the shipping recovery on the horizon, Navios Partners is along with some of its peers uniquely positioned to take advantage of this market recovery," she said.