Star Bulk Carriers 1Q16 Earnings Call Notes

Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q1 2016 Results

Commodity prices appear to have reached bottom

” after more than two years of strong declines commodity prices appear to have reached the bottom during the first quarter of 2016.”

Some fundamentals improving in China

“We expect that the ongoing monetary in the system stimulus taking place in China will boost steel consumption in the medium-term. As a matter of fact house prices and building permits have been recording healthy increases during the first half of 2016. Furthermore, we find very encouraging that both iron ore and coal production in China are reported to have recorded strong declines during the first month of 2016.”

Scrapping could be slower in the second half of the year

“if you look at last year’s scrapping the way scrapping went last year there was a lot of it in the first half and much less in the second half. So, depending on people’s expectations we will also see how scrapping moves. I think that probably scrapping in the second half of the year will reduce in comparison to the first half, but it will depend a lot on how rates go, if rates are strong scrapping will slowdown.”

China will be importing coal from different locations

“Well, what we’re seeing is that Indonesia is supposedly going to cut exports by about 50% going forward because of needs for domestic consumption. We think that China has raised its bottom of — I mean the downside of Chinese coal imports have reached their bottom. And we think that China will be obliged to import this coal now mostly from South Africa, Australia and probably also Colombia especially with the new Panama Canal coming into play.”

A year from now the market for ton miles should be better than it is today

“Just one thing I want to say. I believe that in a year or a year and a half from now we will see a better market as far as ton miles are concerned in various sectors like coal as we already discussed, iron ore because we see that Brazil is going to be exporting many more tons probably more than 100 million tons starting as of mid ’17. And Australia has much less to export in addition to what it’s already exporting and that is a major factor in the market it’s more important than tons, ton-miles it should be more important than tones. And then we think that there is going to be much more trade in bauxite because Indonesia again is curtailing their exports in bauxite and we’d probably see it coming from Africa. And we think there is going to be more grain trade which by definition is long ton miles. So, we believe that the upturn of this market is going to start from that sector more than anything else”

Scrapping will be a key to a better market in 2018

“I think this year there is going to be more scrapping than last year I don’t know by how much. And oil prices are important because if it stays around $50 versus $30-$35 that we were seeing last year will probably contribute in slowing down vessel speeds. And we see China looking more towards infrastructure and we see more housing permits starting up, so we think that there are reasons why we should be looking at a better future. However, as we said more strain on ordering and more scrapping this is going to be the key of a better market in 2018. Thank you very much operator.”