Taylor Maritime Investments (TMI ) has suffered a double whammy of falling ship values and lower charter rates, as commodity stockpiles and protectionist policies softened freight markets.

The £291m specialist shipping fund reported a difficult fourth quarter as its net asset value (NAV) dropped 13.5% in the final three months of 2024 to $1.28 per share.

Over the period, the market value of the fleet slid 8.2% to $560.2m, as second-hand ship prices fell from their highest levels since 2011. This was linked to concerns about increasing protectionism in the US since Donald Trump took office.

Fund manager Edward Buttery acknowledged this would inevitably have ‘spillover effects on trade and growth, particularly with regard to China’. It dampens sentiment and counters previous expectations of seasonal commodity demand strength, he added.

However, he was keen to stress the prices of second-hand dry bulk vessels are still above their long-term average. They are underpinned by a favourable supply outlook, built up liquidity in the market following several profitable years for all shipping sectors, and historically high new build prices, which remain near their highest levels since 2009.

Charter rates fell to a fleet average of $12,150 a day, down from $14,211 a day at the start of the quarter as transits through the Panama Canal normalised. This released ‘previously tied-up tonnage which placed downward pressure on charter rates’, Buttery said.

‘Meanwhile, seasonal commodity strength typical of the period failed to materialise with Chinese stockpiles of key commodities already high and uncertainty concerning the incoming US administration’s trade policy negatively impacting sentiment,’ he added.

With 2025 likely to see only ‘modest’ dry bulk demand, Buttery will no doubt be pleased to see the back of NAV updates as Taylor Maritime moves from an investment company to a commercial shipping operator. 

This means the company will no longer have to report quarterly asset valuations. Instead, it will have a new focus on earnings and other operational metrics. This transition is expected to complete on 10 February.

Battling geopolitical tensions

Shipping forecaster Clarksons is forecasting a 2.5% uptick in bulk volumes and a 1.5% increase in grain volumes this year. In the short-term, tensions in the Middle East will likely remain high with continued diversion of tonnage. However, Buttery hopes the Gaza ceasefire may lead to a gradual normalisation of Suez Canal transits releasing some supply back into the market.  

Nevertheless, he said clear risks remain, given heightened levels of geopolitical and macroeconomic uncertainty. In particular, he cited potential protectionist US trade policy and its direct impact on trade between the world’s major economies and indirect impact on dry bulk commodity demand.

Taylor Maritime sold 13 ships in 2024, taking the total offloaded to 28 over a two-year period, with all sales at or close to NAV. The proceeds were used to pay down $208m of debt and pay a previously announced special dividend of 4 cents.

Debt currently stands at $252m, down from $283m at the end of September. Softer asset values offset the overall reduction in debt over the quarter.

The fund remains focused on strengthening its balance sheet, and intends to continue to repay debt from agreed and future vessel sales and operating earnings, subject to working capital requirements. It will target future look-through leverage of 25-30% of gross assets.

‘We want to ensure resilience through a potentially volatile 2025 given macro uncertainty, while maintaining our ability to benefit from the positive medium-term outlook for our segment,’ Buttery added.