Star Bulk defies weak markets to fix capes at $20,000 per day

Petros Pappas-led already reaping the benefits of major scrubber installation program, say analysts

Star Bulk has defied dry bulk market weakness to book over 65% of its capesize and newcastlemax days in the first quarter at close to $20,000 per day.

It said it has fixed employment for about 72.3% of the days in the first quarter at average time charter equivalent (TCE) rates of $12,580 per day.

“This is exceedingly strong in the context of near record-low spot rates and underlines the benefits of Star Bulk’s scrubber investments,” said Deutsche Bank shipping analyst Amit Mehrotra.

“Some of this outperformance could reflect hedging of the spread that Star Bulk entered into in December...though we suspect the largest driver is the underlying scrubber economics.”

Mehrotra said the strong charter rates had “validated” Star Bulk’s scrubber program and “sets the company up for significant fundamental inflection once China gets back to business”.

Star Bulk said it has fitted scrubbers to 90 of its fleet out of the planned installations aboard 114 of its 116-vessel fleet.

“Since the beginning of the year, we are seeing commercial and operational benefits on our scrubber investment, having 90 vessels with scrubbers certified today,” said Star Bulk chief executive Petros Pappas.

He added that the company expected to complete the scrubber installation program by the end of March in view of delays experienced in Chinese yards on a number of its vessels due to the coronavirus outbreak.

News of the strong rates emerged as the company reported a fourth-quarter net profit of $23.5m versus the $11.75m seen a year ago.

Adjusted earnings per share came in at $0.36, missing analyst consensus by $0.07 but $0.03 better than a year earlier.

Average rates in the fourth quarter were $15,535 per day, which is reportedly about 40% above all-in cash break-even levels of the company.

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