South Korea’s bulk carrier Pan Ocean Co. reported a 10.3 percent on-year gain in operating profit for the third quarter, performing its best since going under Harim Group in 2015 thanks to a surge in freight rates and weaker local currency.

The company in a regulatory filing on Wednesday said its consolidated operating profit for the July-September period reached 63.4 billion won ($54.1 million), up 25.5 percent from the previous quarter and 10.3 percent from a year earlier. It beat the market consensus of 60.8 billion won with the highest profit since it went under the country’s leading livestock and animal feed company Harim Group in 2015.

Its net profit also jumped 27.7 percent from three months ago and 48.5 percent from the previous year to total 54.8 billion won. Sales added 7.9 percent on quarter but fell 11.6 percent on year to 682.2 billion won over the same period.

Pan Ocean shares closed Thursday up 1.69 percent at 4,500 won in Seoul.

The robust performance was largely driven by the traditionally higher demand in the bulk carrier market in the peak season that has elevated bulk materials freight rates, according to market experts.

The Baltic Dry Index (BDI) that tracks the cost of shipping raw materials, such as coal, iron ore and grains that Pan Ocean mainly delivers, has climbed 26.3 percent in the quarter from a year earlier to 2,030, helping improve the company’s operating profit margin in the bulk carrier business by 1.3 percentage points to 11.5 percent.

The weaker Korean won against the U.S. dollar also helped boost the company’s profit. The U.S. dollar gained 7.8 percent on year to 1,196.4 Korean won as of the end of September.

After peaking at 2,500 point recently, the BDI has skidded to 1,300 level. But market analysts are upbeat about Pan Ocean by benefiting from stricter sea environment-protection regulations.

Analysts expect the BDI would improve next year after the International Maritime Organization (IMO)’s new regulation that requires marine fuels to contain less than 0.5 percent sulfur by weight, down from the current 3.5 percent, takes effect. Every ocean-going vessel should use low-sulfur fuels or install a facility that reduces sulfur level, and the cost makes small- and mid-sized shippers abandon aged ships.

Pan Ocean as a leading bulk carrier is expected to enjoy higher shipping demand from the situation, according to market analysts.

“The BDI is expected to remain on the upward trend as sea freight volume is forecast to rise in line with a recovery in iron ore export from Brazil in 2020, and old vessels should be kicked out from the market at a rapid pace,” said Park Seong-bong, an analyst at Hana Financial Investment Co. “The company will start to receive six very large ore carriers (VLOC) later this year and begin to ship materials under long-term contracts,” which bode well for the company’s sales.

Pan Ocean is adding more ships to its fleet – six this year and 13 next year. The company is planning to deploy 13 new vessels to meet the growing demand next year with efforts to better respond to the IMO regulation, said an official at Pan Ocean.

A possible ease in the trade friction between the U.S. and China is also expected to help boost shipping orders, other analysts said.

By Woo Je-yoon and Lee Ha-yeon

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