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Belships – Gradual recovery in rates is paving the way for the better tomorrow

Belships reported nothing extraordinary this morning with the main quarterly figures broadly in line with our expectations. With some economies reopening and demand rebounding, there was a gradual improvement in spot rates during the quarter, which continues into 4Q. Longer term outlook remains promising seeing historically low orderbook, thus our positive stance towards the stock is likely to be reiterated with little changes to our estimates.

Supramax rates growing in 3Q20

With Lighthouse Navigation being very volatile, the focus should be on the Ships’ segment, which reported USD 17.0m in Operating Income, spot on our projections, while EBITDA came in at USD 5.7m (USD 7.2m expected). During 3Q20 a significant improvement in spot rates was observed and Baltic Supramax Index averaged USD 9,435 net per day (USD 5,210 in 2Q20). Demand rebounded with some economies reopening and September was the first month showing positive YoY growth since the pandemic outbreak. This was primarily driven by strong Chinese imports of grain and iron ore.

Source: Norne Research

Orderbook at historically low level

The longer-term prospects remain promising with the orderbook for Supra/Ultramaxes being 5% in 2020-2022 – a historically low figure, the lowest rate of supply growth in almost 30 years. As for the demand, China is the key country here and the continued credit growth and economic stimulus in China is expected to aid a recovery in drybulk in 2021-2022. Looking more to a short-term prognosis, the aforementioned Supramax index averaged USD 10,202 net per day in October, but the sentiment softened in the recent weeks due to weak demand outside China, while the usual seasonal slowdown in January and February is approaching.

With reassuring supply/demand prognosis and signs of the end of pandemic slowly but approaching, we are likely to keep our positive stance towards the stock with little changes to estimates.
Source: Norne Research

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