Diana Shipping 3Q14 Earnings Call Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Chinese steel demand only forecast to grow 1% in 2015

“”As for Chinese steel demand this is expected to grow by only 1% to 748.3 million metric tons this year mainly due to the cooling down of the real-estate sector and the government’s efforts to rebalance the economy. The weak growth momentum will probably continue into 2015 and the WSA forecast that steel use will grow by 0.8% in 2015 and reach 754.3 million metric tons.”

Don’t expect big increases in charter rates next year. Panamax fleet is still oversupplied

“We expect the result of demand growth being closed to expect the supply growth to be volatility and further expect average time charter rates for next year of about US$18,000 per day for Capes and no more than $11,000 per day for Panamax. According to Commodore Research, the Panamax market continues to show signs of severe over supply. Expansion of the Panamax fleet is expected to slow the 6.5% in 2014 and 4.3% in 2015. However, unlike Capesize fleet very large growth has continued in the Panamax fleet again this year up until the last few months. It will still take time for the Panamax sector to truly recover from robust fleet growth that has only recently begun to ease.”

People are finally turning negative on the market

“What is real is that we recently had analyst, banker, private investors saying that they don’t like what they see, this is a good starting point. You remember that we were the only ones that we were talking about something like this. Now that people start seeing clearly that things are not so good, but we’ll make the market better and on the supply side as you are saying, we are seeing a better attitude from the investors, form the ship owners stalwarts, new building stalwarts putting more and more vessels into the water. We are on the right direction as regards thinking about the market not being so well for the near future. I know that it sounds contradicting but it’s a bad thing when everyone — it’s a good thing rather when everyone thinks that the market is really bad and we are going towards that direction, because that’s the way the market is going to turn positive at day point.”

Chinese pollution controls worry us more than anything

“What worries us a lot is the realization now in China that the country cannot continue on the path that they have been following up till now as regards pollution. Now that may have profound effect on the production of sea the importation of coal and general movement of bulk commodities that we have been talking about.

Now that only shown is far more important than any other structural changes might take place worldwide, either in developing nations or developed countries, because if they all these influences in structural changes fail in significance compared to what might happen if China imposed strict regulations in an orderly way on pollution.”

At this stage the best thing we can do is keep reinvesting

“consistency says to us that as the lower part of the cycle, we should keep our dry bulk to invest in order to create shareholders value, differentiating in a manner by introducing a dividend just to gain $0.20 on the share price, or $0.30 is something that is not an option for us. We find this part of our industry, this timing a very attractive one to invest as much money as possible and by doing that we will create a much greater value for our shareholders rather than giving them a small or a big dividend at this stage.”