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For the last twelve years shipping companies have been struggling to recover from pre-2008 market highs. The outlook for profit improved significantly this year as market factors like uncertainty about future bunker fuels have limited new building while the rate of older vessels being scrapped has increased. Then came COVID19. Along with nearly every other stock in the market, shipping company stock tumbled in March of this year.<\/p>\n
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Eagle Bulk Shipping (EGLE<\/a>), the well known US-based fully integrated drybulk shipowner-operator, is no different. From January 1st to April 15th its stock price tumbled from over $30 to under $11 per share<\/a>. Under these market conditions, it\u2019s easy to understand the industry\u2019s need to tighten the belt, especially when faced with problems \u2013 like the crew crisis \u2013 which the IMO says is the responsibility of nations (not companies alone) to solve<\/a>. It\u2019s easy for them to say the problem is too big and the solutions too expensive for them to pay alone.<\/p>\n <\/p>\n Great companies, however, find a way<\/a>.<\/p>\n <\/p>\n \u201cThis year seafarers have endured a great deal due to COVID19.\u201d said Gary Vogel<\/a>, CEO of Eagle Bulk, in a conference call this morning<\/a> with shareholders. \u201cThe government imposed travel restrictions made it almost impossible to crewchange seafarers. Thankfully some of those restrictions have eased but it\u2019s estimated that more than 300,000 seafarers are still waiting to go home. This is simply not acceptable.\u201d<\/p>\n <\/p>\n But rather than using words to express frustration and demand government action, Eagle Bulk CEO Gary Vogel, took action and got his crewmembers home. As of November, the vast majority of Eagle Bulk crewmembers who were overdue for relief have been changed over, with just 26 seafarers (out of ~1000) beyond their contractual working period. \u201cWe are now fully focused on those 26.\u201d said Voge<\/a>l.<\/p>\n <\/p>\n While Vogel did not discuss specific tactics the company used to solve the problem, we do know that repatriating mariners has cost the company countless man-hours. Additionally, the Company incurred $0.7 million in costs relating to COVID-19 for procurement of personal protective equipment, test kits, and crew changes. Crew change costs alone have increased 50% due to the virus.<\/p>\n <\/p>\n In addition to direct costs, Vogel committed the two biggest sins for any shipowner: diversion and off-hire costs \u201cTo solve this problem we had to divert ships and put ships off-hire.\u201d said Vogel. \u201cDuring the last quarter, we incurred 40 off-hire days. This increased our OPEX significantly.\u201d<\/p>\n <\/p>\n Now we know that changing crew is possible, the question remains, how many other shipowners are willing to pay the price that Vogel and his team have?<\/p>\n <\/p>\n In the light of recent increases in incident rates globally and the importance of seafarer mental health and welfare to the bottom line\u2026 the better question is how many ship-owners can afford NOT to follow Eagle\u2019s lead and solve the crisis \u201cActa Non Verba<\/a>\u201c\u2026 with\u00a0actions <\/strong><\/em>(including cash) not words<\/strong><\/em>.<\/p>\n <\/p>\n The market punished Eagle with a 4.27% decline in stock price at the open of the market this morning<\/a>. I don\u2019t invest in shipping stocks but I do invest heavily in great leadership teams that invest in their people. Upon hearing Vogel\u2019s investment in his seafarers\u00a0I purchased stock in EGLE via a new Robinhood account I recently opened<\/a> and I\u2019m very bullish on the prospects of this<\/a> high-value investment.<\/p>\n <\/p>\n