Star Bulk’s newbuilding program
Prior to its merger with Oceanbulk, Star Bulk Carrier Corporation (SBLK) had a newbuilding program for 11 dry bulk vessels, all with fuel-efficient specifications and ordered at top-quality shipyards in Japan and China. Deliveries will be in 2015 and early 2016. The company will also seek to capitalize on any additional opportunities in the secondhand market through timely and selective acquisitions of vessels in a manner that it determines accretive.
Star Bulk expects to fund its newbuilding program as well as any acquisitions of additional vessels with cash on hand, free cash flows, and proceeds from new debt financing.
What is Star Bulk’s outlook with a larger fleet?
Going forward, Star Bulk Carriers’ (SBLK) focus remains on integrating the newly acquired fleet into its highly efficient platform. It will also continue to monitor and assess the market for further accretive growth opportunities. With the recent softness of the freight market, there are attractive points of entry, considering the attractive demand dynamics of the iron ore trade and the contained vessel supply growth over the next two years. This may be positive for peer companies like Diana Shipping Inc. (DSX), Knightsbridge Shipping Ltd (VLCCF), Navios Maritime Holdings (NM), Eagle Bulk Shipping Inc. (EGLE), and the broader industry index Guggenheim Shipping exchange-traded funds (or ETFs) (SEA).
Overall, SBLK foresees dry demand bulk fundamentals to remain intact, as additional high quality, low cost iron ore mining capacity continues to come on line in Australia and, most importantly, Brazil, over the next two years. Coal trade will be further boosted from increased Indian seaborne imports.
Star Bulk has the largest fleet on water by deadweight tons out of all U.S. listed dry bulk companies. The acquisition willalmost double the size of the fleet on the water from 3.5 million dwt to 6.6 million dwt by December 2014 (full delivery of acquired vessels). The enlarged fleet size will offer greater participation in the expected freight market tightening in 2015. Also, the company will benefitsfrom economies of scale of a larger diversified fleet by lowering operating expenses per vessel.