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Derivative Instruments and Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Instruments and Fair Value Measurements DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Forward freight agreements

The Company assesses risk associated with fluctuating future freight rates and, when appropriate, hedges identified economic risk with appropriate derivative instruments, specifically forward freight agreements (FFAs). These economic hedges do not usually qualify for hedge accounting under ASC 815 and as such, the usage of such derivatives can lead to fluctuations in the Company’s reported results from operations on a period-to-period basis.

Fuel swap contracts

The Company continuously monitors the market volatility associated with bunker prices and seeks to reduce the risk of such volatility through a bunker hedging program. The Company enters into fuel swap contracts that are not designated for hedge accounting under ASC 815 and as such, the usage of such derivatives can lead to fluctuations in the Company’s reported results from operations on a period-to-period basis.

Interest rate cap

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and interest rate caps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract.

The estimated fair values of the Company’s forward freight agreements and fuel swap contracts are based on market prices obtained from an independent third-party valuation specialist based on published indices. Such quotes represent the estimated amounts the Company would receive or pay to terminate the contracts. The interest rate caps contracts are valued using analysis obtained from independent third party valuation specialists based on market observable inputs, representing Level 2 assets.

The following table summarizes assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023:
Asset DerivativeLiability Derivative
Derivative instrumentsBalance Sheet Location09/30/202412/31/2023Balance Sheet Location9/30/202412/31/2023
(unaudited)(unaudited)
Margin accounts (1)
Other current assets$4,226,396 $3,751,257 Other current liabilities$— $— 
Forward freight agreements (2)
Other current assets$— $— Other current liabilities $121,884 $1,217,820 
Fuel swap contracts (2)
Other current assets$— $— Other current liabilities$1,665,659 $523,233 
Interest rate cap (2)
Other current assets$1,626,239 $3,384,137 Other current liabilities$— $— 

(1) The fair value measurements were all categorized within Level 1 of the fair value hierarchy.

(2) These fair value measurements were all categorized within Level 2 of the fair value hierarchy.

The three levels of the fair value hierarchy established by ASC 820, Fair Value Measurements and Disclosures, in order of priority are as follows:
 
Level 1 – Quoted prices in active markets for identical assets or liabilities. Our Level 1 fair value measurements include cash, money-market accounts and restricted cash accounts.
 
Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
 
Level 3 – Inputs that are unobservable (for example cash flow modeling inputs based on assumptions). 
The following table presents the effect of our derivative financial instruments on the consolidated statements of operations for the nine months ended September 30, 2024 and 2023:

Unrealized gain (loss) on derivative instruments
Three Months Ended Nine Months Ended
Derivative instruments09/30/20249/30/202309/30/20249/30/2023
(unaudited)(unaudited)
Forward freight agreements$(712,929)$941,518 $1,095,937 $(736,983)
Fuel Swap Contracts(3,253,659)3,430,759 $(1,142,426)$2,941,250 
Interest rate cap(1,994,636)159,635 $(1,757,898)$555,792 
Total (loss) gain$(5,961,224)$4,531,912 $(1,804,388)$2,760,059