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Knightsbridge boosted by one-time gains as market recovery slides

Knightsbridge boosted by one-time gains as market recovery slides
Despite a soft market, Knightsbridge Tankers reported a profit of $6.3m in the second quarter, bolstered by one-time gains of $5.8m from settlements and charter terminations.

The company received $3.2m in settlements for damages and unpaid charter hire claims as well as $2.6m from the early termination of the Blegravia's time charter.

The second quarter was a transformative one for the bulk carrier owner as it signed a deal with Frontline 2012 to absorb its capesize fleet. On delivery of all of the ships, the deal will make Knightsbridge the largest US-listed capesize owner with 39 vessels.

Of the five 180,000 dwt capesize newbuilds the company bought from Frontline 2012 in April, four have been delivered so far with the final ship expect in September. The 2013-built capesize, purchased from Hemen Holdings in the same $360m deal, was delivered on 23 April.

Knightsbridge's sailing fleet is currently made up of nine capesizes, with an orderbook of 30 including the 25 ships to be bought from Frontline 2012 and delivered in 2014-2016.

In the second quarter the average time charter equivalent earnings for the second quarter were $15,000 per day, down from $16,900 per day in the same period last year. For the remainder of 2014, where the company expects rates to rise towards the end of the year, it estimates an average cash cost breakeven rate $13,000 per day.

Across the first half of the year, the company earned $17m in net income and an average TCE rate of $20,400 per day.

In its assessment of the market the company saw rates fail to meet expectations as coal and bauxite imports to China remain low, with added pressure from an abundance of panamax vessels looking for work.

Things look better in the iron ore trade however, where demand is expected to grow from both China and Brazil towards the end of the year. A positive sentiment in the market, including for forward freight agreements, leaves shipowners hesitant to commit vessels to long charters as they wait for better rates.

Knightsbridge's board remains confident that a recovery is coming, despite the fact it has slipped further back in the year than they initially expected.