Mats Berglund is content with how he’s got his company – Hong Kong’s largest shipowner by fleet size – running, it’s the 30-year lows in the lousy markets, that is driving him up the wall. Berglund, a Swedish national, took over Pacific Basin three years ago. His immediate priority was to strip away non-core businesses and return the line to its core area of expertise – handy bulkers. Out went roros and its towage business, while Pacific Basin embarked on a fleet build up, ordering a slew of bulkers two years ago that are still delivering. The focus is paying off; the latest quarterly results from the Hong Kong-listed firm show its handysizes and handymaxes are outperforming spot market rates by 39% and 15% respectively.
“My philosophy especially for a listed company is that investors want to know what they are buying into – it is best to be specialised,” Berglund says. It is also cheaper to focus on one or two sectors rather than many disparate shipping strands, he adds. Admitting Pacific Basin did not have a strong market position in roros and towage, he says it is easier to be focused and much harder for anyone to fool the company when it comes to handies.
“We put our money where do have an edge,” Berglund says, “We have good market penetration, the only problem is the market.”
The plan going forward for Berglund’s company is to redeliver expiring and long-term chartered-in ships and rely more on owned ships, complemented by shorter-term and index-linked chartered ships.
“Short-term charters are the only thing you can make money on in this market,” Berglund tells Maritime CEO, adding: “With long term charters you are burning cash.” This quick maneuvering in the markets requires “good footwork”, says the ex-Stena man.
Berglund says Pacific Basin has been positioned for upturn by buying much during the downturn, but it still has to be careful and maintain a strong balance sheet. It will seek out opportunities in the weak market to grow the fleet, but only very selectively.
“Secondhand prices are much more attractive than newbuild prices at the moment,.” Berglund comments.
In its latest quarterly announcement Pacific Basin stated the weak bulk markets would continue for the “medium” future. Berglund will not be drawn on how long the word ‘medium’ actually is, merely saying that today’s environment for dry bulk is an “extraordinary uncertain market”.
Still, Berglund is happy to be in handies rather than bigger tonnages exposed to iron ore and coal and the “whims” of Chinese imports.
“We prefer minor bulk exposure over major bulk exposure,” he says, explaining, because scale, expertise and people really make a difference in minor bulks.”
Pacific Basin’s ships are trading 90% laden, something larger ships can rarely claim these days.
“With capesizes and panamaxes you cannot do this as you are at the whim of Chinese coal and iron ore imports, you are exposed to the markets and do not control your own destiny,” he elaborates. “The smaller the ship, the more difficult the operating environment. We like more difficult; it makes higher barriers to entry than say capesizes or VLCCs.”
Pacific Basin operates 215 dry bulk ships of which 83 are owned, 41 are long-term chartered and 91 are on index linked or short-term charters. A further 15 owned and seven chartered newbuildings are scheduled to join the fleet over the next two years.