Upon Ulysses' epic return to Ithaca from the Trojan War, he found that the journey had meant more to him than the destination. The modern Ulysses -- a new dry bulk cargo vessel -- appears similarly destined to remain at sea.
In fact, following a substantial restructuring to weather stormy market conditions, Ulysses' owner, Navios Maritime Holdings (NYSE:NM), is positioned to keep a substantial portion of its fleet operating at favorable charter rates for some time to come. The Greek shipper released passable third-quarter earnings of $30.7 million yesterday, while substantial cost savings and an impressive portfolio of charter contracts were the sweetest siren songs to this Fool's ears.
Unlike competitors like DryShips (NASDAQ:DRYS) and Excel Maritime Carriers (NYSE:EXM), with pesky levels of exposure to spot market pricing, Navios retains contracts that cover 82% of the fleet through 2009 at an average daily rate of $28,515. While that fleet coverage drops to 59% for 2010, the average lease rate for those contracts increases to $35,917. Even the newly commissioned Navios Ulysses begins her career with a five-year contract priced at five times the present spot market rate of $6,156.
Incredibly, spot market daily rates for the larger Capesize vessels have broken to below $4,000, after fetching as much as $233,000 just six months ago. That's no typo … but rather a stark indication of how violent this reversal from boom to bust has become for the dry bulk shippers. The Chairman of China's Cosco Holdings believes the storm "came fast and will be gone quickly." If that forecast proves correct, then a company like Navios may actually experience little impact as long-term charter contracts provide a bridge over troubled water.
Still, this is no time to be cavalier about the future. Taking a cue from Diana Shipping (NYSE:DSX), Navios will reduce its dividend by one-third. After canceling orders for three new Capesize vessels, Navios now has long-term contracts in place for six of the remaining seven ships on order. Along with nine additional cancellations, the company will trim $326 million from previously projected expenditures.
If China's stimulus program rekindles demand for raw materials from miners like BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP), then seaborne freight rates could snap back sharply. On the strength of its defensive restructuring and long-term contract portfolio, I continue to view Navios Maritime Holdings as one particularly seaworthy shipper.