Recently, news about major shipowners advancing newbuilding plans has been constantly emerging in the market. Against this backdrop, the Greek dry bulk giant Star Bulk Carriers has clearly stated that it absolutely will not order new ships at this time.
Key Concerns for Refusing to Order Ships
This Athens-headquartered, Nasdaq-listed shipowner is accumulating cash by selling ships. Due to factors such as the unclear prospects for next-generation marine fuels, excessively high newbuilding prices, and full shipyard order books, the company currently has no plans to venture into the newbuilding sector.
The company’s President, Hamish Norton, pointed out that there are currently no plans to order new ships. “We believe the current newbuilding prices might be too high,” Hamish Norton stated at the Capital Link Forum during London International Shipping Week.
“And the shipyards are very happy with their situation—they already have a large number of orders from other shipowners, covering various ship types like container ships, LNG carriers, tankers, and more,” he added.
Speaking about the fuel selection dilemma, Hamish Norton noted that if Star Bulk were to order a new ship now that runs only on fuel oil, “in about four years, when we start having to pay penalties, we might regret it deeply.”
As for ordering ammonia dual-fuel ships, “it’s theoretically possible, but currently, no one has practical experience with using ammonia as a fuel.”
Hamish Norton further pointed out: “And you have to consider, another question is, can we even find crew for the first ammonia-fueled ship? That’s a question worth pondering. Also, is the first design actually safe? Might we have to wait for the second design to ensure safety?”
Therefore, Star Bulk is not acquiring new ships but is instead selling ships that “need to be disposed of to renew the fleet.”
Hamish Norton said: “We will either use the cash from ship sales to buy back shares or reserve the cash for other more suitable uses. The one thing we absolutely will not do right now is order new ships.”
From “Industry Consolidation Giant” to “Ship Seller”
In the dry bulk shipping sector, no company is more deserving of the title “industry consolidation giant” than Star Bulk.
In recent years, this US-listed shipowner has grown into a behemoth in the field through one deal after another—using its stock as “currency” to acquire fleets, even entire companies—boasting a fleet of over 160 vessels.
In 2024, Star Bulk completed the acquisition of Eagle Bulk Shipping. Prior to that, Star Bulk had also acquired Arne Blystad’s Songa Bulk.
But as the value of its stock as an M&A “currency” has drastically shrunk, with the share price far below net asset value (NAV), the company has returned to the “basics of ship finance”: selling ships at NAV while repurchasing its own shares at a discount of 25% or even higher.
Analysts at Clarksons Securities noted in a research report released in early August that this strategy has been effective: through a combination of selling 8 ships and repurchasing $54 million worth of shares, this Greek shipowner narrowed the gap between its share price and NAV in the past quarter.
This strategy aligns closely with Star Bulk’s adjusted capital allocation priorities announced at the end of 2024. After the adjustment, share buybacks became the top priority for capital allocation.
Image Source / Star Bulk
Given that the gap between the share price and NAV still exists, and management decided last quarter to reinstate a $100 million share repurchase fund, more buyback operations are highly likely in the future.
Previously, Star Bulk sold 6 Ultramax bulk carriers and 2 Kamsarmax bulk carriers, generating net proceeds of $104 million, of which $18.9 million was used to repay debt.
Clarksons Securities predicted: “As long as the share price is below NAV, the company will prioritize share buybacks. If the gap between the share price and NAV narrows and asset values remain unchanged, it will shift to accumulating cash reserves.
