Resilience of demand and diversification of risk
Due to their smaller size and shallow draught, the vessels are able to operate in most ports around the world making them extremely versatile and attractive. Geared vessels also have their own loading and discharge equipment (cranes) which allows these vessels to call at a far greater number of ports than larger vessels, including those where shoreside infrastructure is not as developed.
Our Handysize vessels carry a variety of dry bulk cargo, primarily necessity goods such as food, fertilizer and basic building materials. The group of cargoes which primarily make up Handysize vessel cargoes are called ‘Minor Bulks’ with demand largely driven by GDP and population growth.
The characteristics of flexibility, versatility and port accessibility, coupled with underlying demand that is typically resilient and less dependent on discretionary spending, results in a natural diversification of risk and downside protection for the Handysize segment.
Attractive market dynamics
The Handysize Market is characterised by constrained world fleet growth and strong demand for shipping capacity due to generally improving global economic conditions and due to the nature of handysize cargoes which serve basic population needs for food, fertiliser and construction materials.
On the supply side, new Handysize ordering is at its lowest in almost 20 years with an uptick in orders unlikely mainly due to reduced yard capacity, 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, social, and governance concerns has also led to a significant pull-back in capital investment in newbuild vessel supply.
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 no clear solution at the current time. Given the long expected operating life of a vessel, we believe that regulatory and technological change and uncertainty may continue to constrain newbuild orders until there is a technological breakthrough which is widely applicable and commercially viable for all merchant vessel types. In the meantime, TMI has set ambitious goals around emission targets in addition to its commitment to comply with those targets set by industry bodies (please refer to the Sustainbility section).