Back to the newbuilding market! Ship owner: Now is a good time to expand the fleet

Bullish on the dry bulk shipping market, Hong Kong-listed shipowner Golden Ocean Group continues to expand its fleet, returning to the newbuilding market after many years to sign its first order.

On June 28, Golden Ocean Group announced that its wholly-owned subsidiaries Jinhan Marine Inc. and Jinming Marine Inc., as the first and second buyers respectively, signed shipbuilding contracts with Jiangsu Hantong Ship Heavy Industry Co., Ltd., to order two 63,500-dwt bulk carriers.

Each new vessel will cost approximately US\$34 million, with a total value of approximately US\$68 million (approximately RMB 494 million). The first vessel is expected to be delivered in December 2026, and the second in November 2027.

For reference, Clarksons data shows that the price of a 61,000-64,500 dwt Ultramax bulk carrier is currently around US\$34 million, a 3% increase compared to US\$33 million in the same period last year.

It is understood that the two newly ordered vessels of Golden Ocean Group will be built by Hantong Yingji Heavy Industry. In recent years, Hantong Yingji Heavy Industry has developed into an important base for building Ultramax bulk carriers under Hantong Ship Heavy Industry. Clarksons' data shows that Hantong Ship Heavy Industry currently has a total backlog of 82 vessels, including 70 bulk carriers, 9 crude oil tankers, and 3 product tankers, of which 29 63,500-ton bulk carriers are all built by Hantong Yingji Heavy Industry.

Golden Ocean Group stated that the Group's main business is international ship leasing and ownership. Ordering these two new vessels is in line with the Group's continuous strategy of renewing its fleet with modern, larger, and higher-quality vessels, gradually phasing out older vessels and replacing them with newer and younger ones. The directors believe that by improving the fleet, the Group can enhance its competitiveness in the maritime shipping industry and meet the market's demands for its shipping services. After delivery, these two vessels will be chartered to third-party companies to transport dry bulk commodities, generating charter hire and providing the Group with recurring freight and rental income.

Golden Ocean Group believes that this is the optimal time to further expand its fleet size to increase the Group's operating revenue. The Group currently operates 33 vessels, including 23 owned vessels and 10 chartered-in vessels, with a total capacity of approximately 2.024 million dwt. Compared to other bulk carriers currently operated by the Group, the newly built vessels have higher fuel efficiency and operational efficiency, complying with the latest environmental regulations and current standards in the shipping industry.

It is understood that Golden Ocean Group is an investment holding company that operates global shipping business through its subsidiary Golden Ocean Shipping, in which it holds a 55.69% stake. The Group's shipping business started in the 1980s, and it currently operates a modern fleet of bulk carriers ranging from Handysize to Capesize. In 1991, Golden Ocean Group was listed on the Hong Kong Stock Exchange as the holding company of several ship owning and leasing subsidiaries. In 1994, Golden Ocean Shipping was listed on the Oslo Stock Exchange in Norway.

In recent years, Golden Ocean Shipping has been expanding its fleet through chartering and acquiring second-hand vessels, but has never ordered any new vessels. It is understood that the last time Golden Ocean Shipping appeared in the newbuilding market was in 2014, when the company placed an order for a 60,000-dwt bulk carrier at Oshima Shipbuilding in Japan through intermediary Sumitomo Corporation. The vessel was originally scheduled for delivery in March 2016, but in 2015, due to market downturn, Golden Ocean Shipping decided to cancel the order to reduce future capital expenditure.

Since the beginning of this year, due to an optimistic outlook for the long-term dry bulk market, Golden Ocean Shipping has begun to significantly expand its fleet capacity, acquiring and long-term chartering multiple second-hand vessels. In just six months, the size of Golden Ocean Shipping's fleet has increased from 24 vessels with 1.416 million dwt at the end of last year to the current 33 vessels with 2.024 million dwt, an increase of 42.9%.

At the same time, Golden Ocean Shipping has also begun to shift towards the medium and large bulk carrier market. In February this year, the company purchased the 180,000-dwt Capesize bulk carrier "New Delight" from Dyna Shipping for US\$30.95 million. In April, it chartered in for the first time a 207,672-dwt Newcastlemax bulk carrier "TRUE NEPTUNE" (built in 2017), which is the largest vessel in its existing fleet.

In the first quarter of this year, Golden Ocean Shipping achieved significant improvement in its performance. During the reporting period, Golden Ocean's operating revenue reached US\$27.894 million, a year-on-year increase of 93%; the net comprehensive profit turned profitable from a loss of US\$12.752 million in the same period last year to a profit of US\$2.405 million; the basic earnings per share were US\$0.022, while the basic loss per share in the same period last year was US\$0.117.

Golden Ocean Shipping stated in its first-quarter financial report that 2024 has had a relatively good start, with stable demand for dry bulk seaborne trade. The company expects the freight market to remain strong due to the positive ton-mile effect from disruptions to trade routes caused by geopolitical tensions and conflicts.

Golden Ocean Shipping pointed out that commodity transportation continues to be affected by complex variables driven by industry characteristics, economic to geopolitical factors. Supply and demand remain balanced, while newbuilding supply remains low and waiting times are long. This situation provides very solid support for the value of second-hand vessels. Looking ahead, the pace of global economic recovery is faster than market expectations, and the company's fleet will be in a favorable position, and the company will continue to seek opportunities to renew its fleet to meet market and customer needs.