Shipping is the pillar of global trade and remains the most efficient mode of transportation for mass bulk commodities

Shipping continues to be the most cost-effective means of transporting essential commodities and accounts for 90% of all international trade by volume.

Attractive market dynamics

The geared dry bulk market is characterised by constrained world fleet growth with a near historically low orderbook and stable demand for shipping capacity due to generally improving global economic conditions and due to the nature of Handysize and Supra/Ultramax cargoes which serve basic population needs.

Demand is resilient and diversified

The group of cargoes which primarily make up Handysize and Supra/Ultramax vessel cargoes are Grains and what are called ‘Minor Bulks’ with demand largely driven by GDP and population growth.

Handysize vessels are relatively small in dimension and carrying capacity amongst dry bulk vessels (a typical Handysize vessel ranges from 28,000 to 42,000 dead-weight tonnes) while Supra/Ultramax vessels are slightly larger (from 42,000 to 70,000 dead-weight tonnes). They are the only ‘Geared’ segments of the global dry bulk fleet meaning that they have on-board cranes to self-load and discharge, which is particularly attractive where shoreside infrastructure is not as developed. Due to these features and their shallower draughts, Handysize and Supra/Ultramax vessels are able to access a far greater number of ports around the world than larger ships.

The characteristics of flexibility, versatility and port accessibility, coupled with resilient underlying demand that is typically less dependent on discretionary spending, result in a natural diversification of risk, barrier to entry and downside protection for the Handysize and Supra/Ultramax segments.

Supply growth at near historically low levels

New ordering for geared dry bulk vessels is near 20 year lows with an uptick in orders unlikely with shipyards near capacity with orders for other vessel types until the end of 2025 and beyond, low margins for small ships, lack of financing, increase in newbuild price quotes, and lack of future-proofed designs. We believe that the industry-wide focus on environmental concerns has also led to a pull-back in capital investment in newbuild vessels.

Environmental regulations reducing supply and discouraging new ship ordering

In terms of future environmental operating parameters, the marine transportation industry is in the early developmental stages for future propulsion systems (which may include a variety of fuels) with uncertainty over future ship design to meet lower carbon emission standards. Given the long expected operating life of a vessel, we believe that regulatory and technological change may continue to constrain newbuild orders until there is a technological breakthrough which is widely applicable and commercially viable for our vessel types.

In addition, recently-introduced IMO emissions targets are expected to gradually lower operating speeds of the global fleet, reducing effective supply and catalysing scrapping of older, less efficient tonnage, particularly in the Handysize segment which has the oldest age profile of the global dry bulk fleet.