The Bangkok-headquartered handy specialist reported a full year loss for 2016 of $75.61m compared to a loss of $69.41m in 2015, however, in a positive sign Precious' Q4 2016 loss reduced to $3.34m compared to $42.16m in the corresponding period a year earlier.
The results came against a year Precious md Khalid Hashim described as the “worst ever” for dry bulk shipping with the “truly unthinkable” happening in the sector with BDI plunging to 290 points in February 2016. Other unthinkable events highlighted by Hashim included Brexit, the bankruptcy of Hanjin Shipping, the Ballast Water Management (BWM) Convention being ratified and the election of Donald Trump as US President.
“To put our annual loss for 2016 of $75.61m into perspective, please keep in mind that the average BDI for this year at 673 was the lowest in history,” he said.
Looking ahead Precious sees the demand side of the equation in 2017 as being characterized by “extreme volatility”. Downside risks included China's slowing economy, slowing imports of iron ore and coal into China, rising protectionism and shipyard overcapacity.
“But it is not all gloom and doom. The upside potential for 2017 consists of, amongst others, the ‘One-Belt-One-Road’ that China proposes to build linking some 65 countries from Asia/China to Europe at an expected cost between $1.4 to $21trn,” Hashim said.
On the supply side the level of scrapping is a key variable with 20.3% (160.16m dwt) of the existing world fleet that would be over 15 years of age during 2017 through to end of 2020. Current low freight markets and costly new regulations such as BWM convention should push these older ships to the scrapyard.
“If markets are bad, scrapping will be reasonably good in 2017. If that happens and ‘forced’ scrapping takes off due to the regulatory impact in 2018, we could have a few very interesting years ahead!” Hashim commented.
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