Norden to Exit Capesize Bulker Markets

Danish shipping company D/S Norden plans to cut the number of vessel types it operates to help it through a long-depressed shipping market that could be about to get worse due to a slowdown in China, the company's chief executive told Reuters.

With around 250 vessels, Norden is a major global player in areas such as small and mid-sized vessels, but is a minor player in the "capesize" segment of the biggest dry bulk vessels with only three ships, and plans to exit that area.

"We aim to be stronger in areas where we already hold a solid position," Jan Rindbo, who took the helm in April of the company whose competitors include New York-listed Scorpio Bulkers and Hong Kong-Based Pacific Basin, said in an interview, without giving any forecast of the impact this would have on the company's results.

In the so-called post-Panamax segment of vessels between 240 and 250 metres, Norden, which in August reported second-quarter core earnings of $51.7 million, only operates eight ships, and it is looking into exiting this area too.

Norden shares, which trade on a multiple of 13.2 times prospective earnings against a sector average of 7.7 times according to Reuters data, were down 0.5 percent at 152.3 Danish crowns in early trade on Monday. The stock hit a year's high of 188.5 crowns in July.

Having been hit hard by overcapacity, the global shipping market has showed some sign of improvement, after only 35 new vessels were ordered from shipyards this year and 316 older vessels were scrapped, 51 percent higher than the total scrapped in 2014.

Yet with a total of some 1,750 ships on order, the industry will need more older vessels to be taken out of service, or a significant increase in demand, to significantly change its outlook, given daily rates in the capesize segment languish at $8,662 compared with $200,000 before the 2007-2009 financial crisis.

"We don't see an improvement on the supply side before 2016. The demand is more uncertain," Rindbo said.

By Ole Mikkelsen