Summary
Jinhui Shipping (Oslo:JIN.OL) reported disappointing numbers coupled with a gloomy outlook on the near-term market, despite the recent recovery in dry bulk rates. I agree with their market forecast, but Jinhui's near-term prospects have more to do with capacity.
Analysis
Jinhui is one of the few companies not touting the recent rate recovery as a sign that the dry bulk market has turned the corner. Citing the unchanged fundamentals of the industry, Jinhui views the current market as very temporary.
They should focus more on their own fundamentals. Jinhui specializes in Supramax vessels, whose near-term prospects are much better than other size segments. They somewhat lost that focus in recent years by chartering-in Capes and Panamax vessels.
With 80% charter coverage in 2009, this should not be a problem. However, Jinhui, like many others, has been beset by slow charter payments and charter party defaults. Quite a few of their chartered-in vessels have 2009 expiry dates, which should allow Jinhui to start exiting this trade.
However, this creates another problem. For 2010, they have only 50% charter coverage for a year most expect to be very weak. Further, their operational days drop from 9715 in 2009 to 5850 in 2010. Earnings will fall dramtically. Jinhui, in the last few weeks, disposed of two 2008 vintage Supramax vessels to raise cash.
Instead of dabbling in the larger fleet segments, Jinhui would have been much better served to maintain their focus on their core competencies. Circumstances seem to be forcing them to make rather poor decisions to ride out the weak market.
