Slightly OT: Busy reporting week (shipping)

A number of shipping companies reporting this week
11/16 Container shipping co (ZIM), Dry bulk shipper Star Bulk (SBLK), Dry bulk shipper Golden Ocean (GOGL)
11/14 SFL Corp (SFL) - mixed fleet of Container vessels, Dry bulk vessels, Tankers Car carriers, and a pair of drilling asset
11/15 LNG tanker operator Flex LNG (FLNG)
The only one I don’t own is SFL, so this was a busy week for me. In order of priority, ZIM was the result I was interested in. For two main reasons

  1. The collapse of the container shipping market in Q3 2022
  2. The impact if a shipper has more spot exposure (true of ZIM)

So how bad/good are things with ZIM?
ZIM revised their targets for 2022.
Adjusted EBITDA $7.4B - $7.7B (From $7.8B - $8.2B)
Adjusted EBIT $6.0B - $6.3B (From $6.3B - $6.7B)
Given that container spot rates plunged more than 70%, I would have expected ZIM to lower their adjusted numbers more than 5 -10%. So, for me, the news was less negative than what I was expecting (less negative is a positive, right?)

The other interesting item was the company plans to expand in the car carrier segment. If world economies are expecting a recession, surely the car sector would also be impacted, right? Already hearing stories of US consumers delaying high dollar purchase items - homes, cars. Don’t see why this would not also apply to other countries.


I sold GOGL when the share price drifted down 10%. That being said, I’m impressed with the dividend payment of 35 cents. Thats solid…doc

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@physician - will be commenting on GOGL soon. But, to your point on the dividend, given the market conditions in Q3 2022, that was a good payout. FWIW, entering 2022 and knowing the GOGL has a variable payout, my target div for GOGL is/was $1.65 (some combination of 30c, 30c, 75c, 30c during the year). GOGL was at $2 in three payouts

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I liked GOGL, but I didn’t want to ride the share price down from the seventeens down to the $8 range it is now. Thats why I sold when it dropped to 15…doc

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Yup, took some gains when GOGL was at different times in the teens too. Still have a GOGL stake with shares acquired at various price points: $6.20 - $10.60 (not adjusted for any dividends paid) *

    • Somewhere there’s a post that I commented (with the benefit of looking back) that the dry bulk shipping peak was on/around D-Day (June 6th) for several shipping ideas.
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I think GOGL is positioned well for when the recession is over. I’m on the sidelines until then…doc

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Ok, into the dry bulk shipping sector.
Last year, the Sept - Oct 2021 timeframe represented a huge moment for the Baltic Dry Index (BDI/BDIY). That’s when the index had the best readings in years and years. Actually, to be more precise, the highest levels since the GFC (Great Financial Crisis) in 2008. I recall Cape rates reaching $85K daily last year. But, the BDI could not maintain that level, and things cooled off.

Q1 and Q2 of 2022 were actually holding up quite well for all dry bulk categories. Then in Q3, rates inverted by vessel size, and smaller vessel classes (Handys & Supras) earning more than the larger categories (Cape & Panamax). That represented a challenge if a dry bulk shipper was weighted towards the larger vessel categories. Seanergy (SHIP) is a Cape pureplay. Star Bulk Carriers (SBLK) and Golden Ocean (GOGL) are slightly more nuanced
SHIP - 14 Cape vessels
SBLK - 41 Cape category vessels out of fleet of 128 vessels
GOGL - 48 owned Cape category vessel out of fleet of 79 owned vessels

For a variety of reasons - reduced Chinese construction, reduced Chinese iron ore demand, Covid lockdown, Ukraine-Russian war, etc. it was going to be an uphill battle for dry bulk shipowners to match the second half of 2021. While most of the owners couldn’t match the second half of 2021, the market was still healthy enough for the owners to have good cash flows, and if their fleet’s were run properly, to pay a (nice) dividend
SBLK: Q1, Q2 div - $1.65/sh, Q3 div - $1.20/sh
GOGL: Q1 div - 50c/sh, Q2 div - 60c/sh, Q3 div - 35c/sh

IMO regulations go into effect across the entire shipping sector on 1/1/2023. If operated under usual conditions, many/most vessels will fail the IMO standard. Slower sailing will allow some/many vessels to stay under the emissions threshold. If not, other options include painting the vessel, or installing Becker Mews ducts. That said, there is still an element of the unknown. And the owners treat the unknown as an aspect of the sector.

Prior to announcing their Q3 2022 results, GOGL mgmt instituted a $100M share buyback program. No guarantee GOGL will utilize the feature. But my guess is, if the shares trade between $7 - $7.75, the company will buy some shares back.

Still have a GOGL stake - but about 1/2 of the share-count held during Q1 2022.


@HohumYNWA thanks for this summary of what is going on with these shipping companies. I think the economy is close to trending up again and am following this sector too…doc


11/17 Another dry bulk shipper, Diana Shipping (DSX) announced Q3 2022 results. Don’t follow DSX as closely. But I do know the company shuffled things in Aug 2022 with an acquisition of 9 Ultramax vessels. DSX do have a subsidiary, OceanPal (OP), that the company seems to be using to “drop-down” older vessels. No DSX position

Last segment - LNG shipping.
Few publicly traded entities left in this space. A couple of big names, Teekay’s gas tanker subsidiary (TGP) and Gaslog (GLOG) were taken private the last couple of years, and Golar (GLNG) sold its fleet to a third party. On the publicly traded side, there’s Gaslog Partners (GLOP), Dynagas (DLNG) and Flex LNG (FLNG) as LNG tanker pure-plays, and Capital Product Partners (CPLP) as a hybrid.

Three-to-Four years ago, one could order a new LNG tanker for around $200M-a-pop. Costs have gone up, so prices are now $247M - $275M per vessel (South Korean shipyard). Relevant because a majority of FLNG’s fleet of13 vessels were acquired from a third party while the respective LNG tanker was still being constructed. That said, a similar situation is less likely to play out today.
Why? Qatar.
For their future LNG projects, Qatar took up lots and lots of South Korean shipbuilding slots. Then shortly thereafter, picked up a bunch of Chinese shipyard slots. If a third party LNG tanker owner runs into financing issues today, they could likely get Qatar assistance in exchange for allowing Qatar to use vessel.

How is this related to FLNG? Well, the company announced their Q3 2022 results, and shortly afterwards, a second Press release regarding a $100M at-the-market (ATM) offering. Slightly puzzled. But leaning towards the idea that FLNG is looking to expand its fleet. Let’s see what develops.

In the interim, HohumYNWA is sitting back and harvesting dividends.

Any thoughts on DLNG?


@DrBob2 - to my knowledge, the risk to DLNG was - what if the 5 (of 6) LNG tankers leased by Russian companies had their contracts terminated? Well, three of the tankers were charted by Gazprom (which became SEFE & under German control). Two other DLNG tankers were trading on Russian routes before Ukraine-Russian war started. Those vessels have supposedly transitioned to SEFE too. The last tanker is chartered to Equinor thru 2023

While not completely “risk off”, I think the risk concern with DLNG has been greatly reduced for remainder of 2022 & for 2023. DLNG has an annual debt payment of $48M due in 2023. Then a balloon payment in 2024.