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Pacific Basin puts in best quarter in Q3

Pacific Basin puts in best quarter in Q3
Pacific Basin Shipping managed average daily earnings in the third quarter for handysize and handymax of $8,350 and $9,630 which outperformed the spot market rates by 39% and 15% respectively.

This in turn led to the best quarterly performance so far this year, however ceo Mats Berglund warned in the quarterly operational update that market rates have been weakening since early September.

He attributed the good performance to Pacific Basin's proven business model and ability to maintain a high percentage of laden voyages. Berglund also pointed out that through the year-to-date, the company has managed to sustain handysize rates about $2,700 higher than the market level.

The better rates in the quarter were driven primarily by healthier conditions in the Atlantic Basin on strong exports during this year's better South American grain season. Rates have however been falling since early September as the season tapers off, Berglund noted, adding that until the North American season kicks in there has been "little upward effect" on rates so far.

Among positives, Berglund pointed out that supply has actually been weaker than expected, with "self-correcting" factors such as more delivery slippages and order cancellations and conversions reducing the expected fleet growth for 2015 to 2.5% to 3% from the 5% that was forecast previously.

Meanwhile Chinese imports of minor bulks have returned to year-on-year growth since March this year with bauxite rising on an annual basis and cereal grains and soybeans increasing substantially.

Chinese steel exports have also been increasing, and in response Pacific Basin's handymax fleet has also grown due to short-term "opportunistic" charters set against these exports, Berglund said. "There is a very positive demand future on grains and that will continue going forward," he said.

Elaborating on strategy for the rest of the year, Berglund said that amid the "uncertain market situation" Pacific Basin is focussing on cutting costs and optimising its proven business model while also redelivering expiring and long-term chartered-in ships and relying more on ore on owned ships, complemented by shorter-term and index-linked chartered ships.

Pacific Basin will remain prepared for a continued weak market in the medium term, he concluded.