Historically, Safe Bulkers has always outperformed the spot market through the strong performance of its chartering policy. A mix of long period charters and spot market exposure, gives a perfect balance to the company for its effective utilization and profit levels.
As per the company’s assessment of market conditions, Safe Bulkers intends to employ its vessels on both period time charters and spot time charters to some of the world’s largest consumers of marine drybulk transportation services. The vessels it deploys on period time charters provides them with relatively stable cash flow and high utilization rates, while the vessels they deploy in the spot market allows them to maintain its flexibility in low charter market conditions.
Effect on financials
Daily vessel operating expenses increased by 7% to $4,707 for the 1Q14 compared to $4,412 for the same period in 2013 mainly due to the increase of the growing spare, store, and provision expenses as a result of three new build vessels that SB took delivery during the 1Q14.
However, the company has an average lower vessel operating expense as compared to peers—Diana Shipping Inc. (DSX), DryShips (DRYS), Navios Maritime Holdings (NM), and Navios Maritime Partners (NMM)—mainly due to the young age of fleet and high management ownership effectively enabling the company to focus on cost efficiency. The Guggenheim Shipping ETF (SEA) tracks the shipping companies.
For the remainder of 2014, open days for its fleet stands at 64% of anticipated ownership days, 85% in 2015, and 90% in 2016 offering substantial upside potential for revenue. Looking ahead, the company seeks to employ its vessels mainly in the spot market to take advantage of the flexibility in low charter periods and the upside potential with marketing groups.
During the 1Q14, SB owned and operated an average of 29.86 vessels and achieved a utilization rate of 98.8%, compared to an average of 24.97 vessels and the utilization rate of 98.5% during the same period last year. The average daily time charter equivalent rate per vessel for the first quarter of this year was $13,921 compared to $18,113 during the same period last year.
Meanwhile, $36.3 million arbitration award proceeds were collected during the quarter in relation to a cancelled Capesize class vessel.