Star Bulk Carriers 3Q16 Earnings Call Notes

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Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q3 2016 Results

Commodity prices appear to have reached bottom

“. After more than two years of strong declines, commodity prices appear to have reached a bottom during the first half of 2016 and have experienced a strong recovery rally during the last couple of months. We believe that the monetary and fiscal stimulus that took place in China during 2015 and first half 2016 has resulted in a healthy recovery of steel consumption as well as electricity requirements. Home prices have continued to increase, while steel mill production and profitably has also improved. It is encouraging that both iron ore and coal internal production in China have continued to record strong declines during the first 10 months of 2016. This has partly been the result of government regulation, such as a 276-workday restriction on coal mining that came into effect during the second quarter of 2016.”

No reason to be that positive on the market until after 2018 or 2019

“The major problem is if we become too positive about the market, which I don’t think there is a basis right now. I think there is a basis to become very positive about the market after 2018, 2019. I think we will see a very strong market after that. But for 2017, I don’t see the reason to be that positive. I believe that this additional deadweight will require demand of about 4% to 5%, which we will probably not see. And the problem is going to be that people might stop scrapping. Not to mention potentially some people ordering.”

Customers don’t view the current market as sustainable

“Hi, Herman. Well, first of all, I think that charters believe that the market is not sustainable. That’s number one. So they would not experience for let’s say one-year because they probably think that at some point later on in time, the rate would fall again. However, as the market is pretty strong right now, and especially in the Atlantic, what charters do is they give us like one-year charters. Because if they don’t, they will have to pay $15,000 and $17,000 and $18,000 a day for the next trip.”

Capital is not as available as it used to be. We have all lost a lot of money

“Well, hi, Ben, thank you for the question. I think that first of all, equity capital is much less than what it used to be. We have lost – all of us have lost a lot of money. So on that side, I don’t see much capability for newbuildings. Also, the Western banks will probably not finance newbuildings. I mean, the banks have talked – I think it’s the last thing in their agenda right now. I think the only risk of ordering comes through China in case Chinese banks in cooperation with the state decide to give 90% finance to finance vessels in their home yards. That’s I think the only risk that we are in right now.”

I don’t know what the Trump affect is going to be

“Now I don’t know what the Donald Trump affect is going to be in the market. You guys are all in the States. You can probably judge better than I can. On the one hand, maybe there’s going to be measures that boost the American economy. On the other hand, if there is issues with the trade act with other countries that could create protectionist – build protectionist walls for trade. So I don’t know the plus or minus what is going to be the final effect there.”