Mar 12, 2021
[4 min Read]
Demand will surpass fleet growth in 2021 and 2022
Quote from a reputable data-driven shipping company “we firmly believe that 2021 and 2022 will deliver demand growth that exceeds the fleet growth. This will increase freight rates. While we do believe that higher freight will trigger more newbuild orders we expect supply growth to trail demand growth in the coming 5 years due to the uncertainty around the choice of fuel and propulsion systems”
Article discussing shipping costs to rise in 2021 here
CTRM has more vessels and Dry Bulk shipping rates are rising.
The Baltic Dry Index is reported daily by the Baltic Exchange in London. The index provides a benchmark for the price of moving the major raw materials by sea. Link here
CTRM has added a number of new carriers to their fleet. This is a good sign, and as they start to take delivery of these vessels they will be able to take advantage of higher sipping rates and sign profitable charter agreements. I calculated the potential revenue based on Dry Bulk Charter rates today and estimated the number of days each vessel would be chartered for. Both of these calculations are quick estimates of potential revenue for CTRM.
For reference if you can earn about $6M/year with a Kamsarmax the payback period is about 2.5 ~ 3 years. This is seen from the price recently paid for these vessels.
|# of Ships||Rate Per Day||Days Chartered (Low Case)||Revenue (Low Case)||Days Chartered (Ideal Case)||Revenue (Ideal Case)|
Breakdown of CTRM's current vessels - total capacity of 1.2 million dwt
Cargo Ship info here
Link to rates here
A summary of recent vessel acquisitions by CTRM
The total cost for Castor to acquire these vessels was ~$63 million. This is significant and leads me to my next point - they needed to raise money to acquire these vessels.
Recent Financing Activities
Over the last 3 months CTRM has access to $49M - this was and will likely be used to pay for vessel acquisitions
Typically, it is a good assign if institutes are holding a decent number of shares. The table below shows institutes hold a decent number of shares in CTRM.
This next tables shows that institutes have been buying CTRM (and significant amounts) over the last few weeks, whioch is another great sign. If they didn't believe in potential upside they would have been selling their position in CTRM
TLDR: Financing through share issuance hasn't been great for CTRM, however they used this cash to acquire a number of vessels and increase their fleet. With demand in dry-bulk shipping increasing CTRM is well positioned to take advantage of higher shipping rates. Intuitional investors are also staring to buy into CTRM - typically a good sign.