Bulking up

Safe Bulkers, an international provider of marine transportation services, was established in 2007, but its founders began investing in shipping over 50 years ago. It has a tremendous reputation in the industry, a massive current fleet of 25 vessels and a contracted fleet expansion of six newbuilds and one second hand. It transports dry bulk, particularly coal, grain and iron ore, along worldwide shipping routes for some of the largest global users of such services. The economic conditions led to 30 per cent slippage or cancellations in the global orderbook in 2012, due to lack of finance and excessive delays from shipyards. “The last year we experienced a very low charter market because of the excessive supply of newbuild vessels, the uncertainty of the global economic conditions and the lack of financing of the shipping sector. We have also seen a substantial number of vessel being scrapped,” says Dr Loukas Barmparis, president and director of Safe Bulkers. In 2012 scrapping was at 34 million dwt, compared to 23.8 million dwt during 2011. The scrapping rate continued in January 2013, amounting to 2.2 million dwt.

To retain a competitive edge in a difficult economy, Safe Bulkers adjusted its asset management policy, and acquired for the first time secondhand vessels; two second hand Panamaxes, both 2003-built, at $14.2 million and $13.8 million. Additionally Safe Bulkers has also contracted a third secondhand vessel, a 2008-built Kamsarmax at $19.4 million, with scheduled delivery in March 2013. “Our plan is to acquire selectively second hand vessels at attractive prices while the market and vessel prices are low so to be well positioned prior to the next shipping cycle. Shipping is not only about chartering, it is also asset management. We have a substantial number of vessels to operate and make profits from, when the market improves, but additionally we may gain on asset sales of older vessels,” highlights Loukas. Safe Bulkers also plans to buy shallow-drafted energy efficient newbuilds to keep ahead of its competitors.

With a history and reputation of operating excellence, which is reflected in its utilisation rates and operating expenses, Safe Bulkers has built long term relationships with leading yards, banks and charterers resulting in strong insight into the demand for commodities and repeat business. “Our clients are always looking at the newest vessels, because these present less problems, lower risk and better operational characteristics compared to a vessel over 20 years old,” says Loukas. The company, aware of this demand, has a young, shallow drafted fleet of 25 drybulk vessels, all built from 2003 onwards. It has also accommodated requests from clients for what it calls ‘slow steaming’, as Loukas explains: “Slow steaming is the requirement from charterers towards us to transport their dry bulk commodities at a lower speed to consume less petrol. A customer’s expenditure is the charter hire and the cost of fuel. As fuel prices rising, they are willing to go at a slower pace and save on fuel costs. We are trying to accommodate such requests as much as possible. On the other hand we maintain our daily operating expenses together with our daily general and administrative expenses, including management fees, among the lowest in the industry; $5,765 per day during 2012.”

There is a substantial orderbook throughout 2013, which should be a weak year, yet Loukas remains cautiously positive: “In 2013 we expect pressure from the supply of vessels to continue and we also expect to see more scrapping because the shipping market has taken a hit by the weak global economy. We hope that by the end of 2013 the majority of the orderbook will have been delivered, and subsequently as global economy is expected to recover, we hope to see an improved charter market for dry bulk commodity transportation during 2014.” Safe Bulkers has a comfortable order book in the two years immediately following 2013, and expects to see a noticeable market improvement by 2015. With this in mind, it has pushed its new building program up to 2015 and aims to operate its second hand vessels profitably during this challenging period. “Using our cheaper vessels in this market, and pushing some of our newbuilds in the future market makes sense to us. Our newbuild vessels also have additional benefits; some are eco ships and can consume even lower fuel compared to existing vessels and these would be good for a more demanding market,” explains Loukas. There has been a focus in the company on Japanese vessels due to their reliability, and also on eco ships, which are more efficient and burn less fuel, giving the company a competitive edge in the future.

Plans for the future are well set out for this highly reputable firm, as Loukas highlights: “We currently have 25 vessels but our expectation is that this fleet will grow with our second hand vessels, which will operate immediately, in the lower market. We also have a contracted fleet expansion of six newbuilds and one secondhand; this is our expansion and development strategy as we aim to profit from our secondhand vessels in the weak market and use our substantially numbered newbuild fleet to operate with when the market improves.”

Safe Bulkers
History and reputation of operating excellence
Young, shallow drafted fleet of 25 drybulk vessels
Substantial orderbook throughout 2015