Star Bulk Carriers 2Q17 Earnings Call Notes

Petros Pappas

Generally positive about the market

” We’re generally positive about the market from the second half 2017 onwards and we believe that every subsequent year will fare better than the year before. This however is a fragile balance, which may tilt against us if ship owners embark in massive newbuilding ordering. We therefore highlight once again that the most important factor for market balance is owners newbuilding ordering discipline, in order to ensure a sustainable recovery as environmental regulations gradually come in to force. This environmental regulations will thereafter not only contribute to a transition towards a cleaner environment, but it will also assist shipping in reducing vessel supply and will therefore lead us to better markets as of 2020 onwards.”

Not concerned about Iron Ore stockpiles in China

“I think that the present stock is about the 142 million tons. Now, if you think that China consumes 1.6 billion, perhaps even more than that – billion tons of iron ore every year that is about a 140 million tons per month. Therefore 140 million tons of stock is one months’ worth. Now, I don’t think they would go below 70, so even if they decided to draw on their stocks that would be 15 days’ worth. I’m not saying this wouldn’t affect the market. This would probably temporarily affect the market, but it is not really such a great amount to be extremely worried about. I do not rule out that at some point that potentially iron ore prices go very high, they might temporarily draw on those stocks and that would have a transient effect on the market, but I do not consider this as a huge amount of stocks that would do permanent damage to the market.”

Diana Shipping 4Q16 Earnings Call Notes

Anastasios Margaronis

2% projected market increase in 2017

“According to Clarksons, in 2016, a 7% increase in total Chinese seaborne dry bulk imports has been offset to a large extent by a relatively broad decline in dry bulk shipments to other key regions. By current estimate, seaborne dry bulk trade growth is expected to be 1.3% in 2016. The estimate for 2017 stands at $5 billion tons, an increase of about 2% compared to 2016.”

Fleet grow low

“The Clarksons estimates for fleet growth in 2017 is mere 1%. According to Banchero Costa, new orders for – of dry bulk vessels in 2016 amounted to just 36 units, a sharp decline from the 380 new orders placed in 2015 and a massive 933 new order placed in 2013. Only three orders for Kamsarmax were replaced in 2016, compared to a total of 93 units ordered in 2015.”

Steel production peaked in 2014

“According to Clarksons, world steel production declined to 1.3346 [ph] billion tons in 2016. This represents a drop of 0.7% compared to 2015, continuing global production decline since 2014, when production reached the peak of 1.6477 [ph] billion tons. According to Banchero Costa, Chinese steel output during the first 11 months of 2016 was 739.5 million tons, up 0.4% year-on-year.”

There are high stockpiles of iron ore but the behavior is unpredictable

“With stockpiles of iron ore in the past, we have, all of us, not us in Diana proven to be wrong. Every time we felt that iron ore stockpiles are very high. The Chinese would buy more. And when we felt that they didn’t have enough, for some reason they would stop buying. So unfortunately, it’s unpredictable. Their criteria have to do more with how they view the cost of acquiring iron ore and the prospect of utilizing it in their steel industry. So from here onwards what we are looking at is pretty high stockpiles admittedly. But that is not sufficient in itself to make us draw the conclusion that the Chinese are not going to continue buying iron ore, if they feel that it is a opportunity to do so for them.”

Andreas Michalopoulos

Not in a restructuring mood

Hi, Amit, there’s always dialogue with your lenders and we are currently there nonetheless not in any kind of restructuring or any such mood. As we said many times, we let the dust settle. We pay our obligations and that’s where we stand today.

Diana Shipping 3Q16 Earnings Call Notes

Diana Shipping’s (DSX) CEO Simeon Palios on Q3 2016 Results

Anastasios Margaronis

If Trump’s criticism leads to action then the effects would be profound

“Macroeconomic developments now, the recent election in the United States has seen Donald Trump elected to the Presidency of the largest economy in the world. Some of the policies he has been advocating prior to his election are implemented. There are fears that the new era of protectionism will see global trade as a share of world GDP fall. Several trade agreements that have so far been criticized by the President elect. If his criticism will lead to actions then the effects on world trade would be profound.”

Outlook remains difficult, but recovery more likely than it was a few quarters ago

“All in all the outlook for the Panamax market remains difficult. Fleet capacity is projected to grow by around 1% in 2016 and 2017. However this slow rate of growth does not yet appear to be enough to help support a significant improvement in the market environment. Significantly more scrapping is required going forward to help bring equilibrium to the market sooner rather than later. All we can say with a reasonable degree of confidence with the dry bulk carrier market is that if the supply continues along the path it has been following for the last 18 months or so and further down the road demand growth picks up from present level the market is bound to eventually reach equilibrium. The prospect of such an important development has become much more likely now that it was a few quarters — than it was a few quarters ago but only few ships were being demolished and owners were still ordering new buildings in large numbers.”

$8000 per day rates give us the opportunity to go beyond 2018 without a problem

“any rate in the vicinity of an average of $8,000 it gives us the opportunity to end up well after the beginning of 2018 without having a cash problem. Let alone the fact that today as we speak you can fix a Capesize vessel at $11,200 for a year on a time charter basis with an 8 lakh charter and a Panamax at $8,000.”

Not modelling any further acquisitions

“The model that we used earlier describing our ability to sustain in that environment for till the middle of 2018 did not include any further acquisitions. However, depending on the charter these has assumptions above the charter rates that we estimate to receive in 2017 which possibly is having a low side but if the market showed signs of improvement we may consider investing $20 million let’s say for one or two vessels. Don’t forget that this acquisition is not burning any cash because if you buy a vessel full equity for example today, you don’t burn any cash with the existing time charter rates. But the cash flow position described earlier does not include any further acquisitions.”

We have a main shareholder who is going to participate in any equity offering

“The termination of discussions, it is because we are considering one year and a half as time that maybe sufficient not to need to raise equity for the company. And as regards the reason why we are resisting in issuing equity today is because it is not necessary and because we do not want to dilute the existing shareholders but certainly another thing that it should be clear to everyone is that — the main shareholder is going to participate in any equity offering if it happens after a year from today or a year and a half. And he is not — we are not resisting in diluting the shareholders and Mr. Palios. We are resisting in diluting the shareholders because even if it was to be an equity offering today Mr. Palios was going to participate.”

Ioannis G. Zafirakis

Explanation for stopping talks with lenders

Hi, this is Ioannis speaking. Let me start by saying that we initiated the coal story proactively and we took the decision to stop the discussions. The reason why the discussion were stopped it was because we were not getting anywhere although we had a good reference point. At the end of the day we couldn’t arrive into a meaningful result for everyone. So the same way we initiated as I said, the same way we stopped the discussions.

Don’t have a cash flow problem until the second quarter of 2018

“we have the power to sustain even worse charter rate scenario to date easily till we first — up to second quarter of 2018 before we have a cash flow problem. In the scenario where you run the numbers with existing charter rates then you go even after third quarter of 2018. So why should we be talking about an equity offering or some analyst talk about an equity offering.”

Star Bulk Carriers 3Q16 Earnings Call Notes

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.”

Diana Shipping 2Q16 Earnings Call Notes

Simeon Palios

We are in talks with banks about repayment schedules

“We are currently proactively and we are active before a problem arise, if it does, to come with an agreement with the banks as regards possible using on the repayment schedule. If we do not manage to come to an agreement, we have to continue business as usual. And at this stage of the cycle we are considering cheap assets, cheaply purchased vessels at the bottom of the cycle, as good as cash or even better.”

We are considering a 40-80m investment within the next 4 months,/strong>

“So there is some truth in what you have said because we are ready to buy vessels, certainly not spend the entire cash position that you see, which is substantial, but an investment within the next four months, equal to $40 million-$80 million is certainly something that we are considering seriously.”

Anastasios Margaronis

Slight improvement in dry bulk carriers’ earnings prospects

“The second quarter has seen a slight improvement in the earnings of bulk carriers across the board. The Baltic exchange industries reflect quite accurately this development. At the beginning of the second quarter the Baltic Dry Index stood at 450, and on 30 June it was at 660. The Baltic Cape Index started at 345 and closed at 996, while the Baltic Panamax Index similarly recovered from 535 to 662.”

22m dwt sold for scrap in industry

“Demolition now — the first half of this year saw record numbers of ships heading for the scrapyard. According to Clarksons, 36 ships of 11.1 million deadweight of Capes were scrapped during this period, also 88 Panamaxes or 6.3 million deadweight headed for the scrapyard during the same period. A total of 22.2 million deadweight of bulk carriers were sold for scrap during the first six months of this year, which was 35% more than the first six months of 2015.”

Iron ore trade expected to be up 2% this year

“According to Clarksons seaborne iron ore trade is expected to increase to 1.391 million tons, which would be 2% higher than in 2015. An increase in construction activity in China has supported a firm recovery in the country’s steel production in recent months. According to Clarksons it has helped support higher iron ore imports by China. This increase is expected to outweigh declines of imports into other countries.”

Analysts predict an improvement in bulk carrier earnings, but not sustainable recovery

“on balance, analysts predict an improvement in bulk carrier earnings during the rest of this year but do not foresee a sustainable recovery until the circle of tonnage created by the uncontrolled speculative ordering of bulkers during the last three years or so are absorbed through scrapping and higher demand.”

Ioannis Zafirakis

Raising equity is out of the question. We still have plenty of time ahead before we have real problems

Certainly raising equity is out of the question, especially proactively. That’s why I keep talking about the proactive part of the story. We still have plenty of cash aside and we still, by adding our models and you are adding yours, you can see that we have a nice time ahead of us before we have a real problem, where we can discuss with the banks again.

There are unencumbered assets that could be sold before raising assets even at a higher price than paid

” before the raising of equity you can sell the unencumbered assets…Even at a higher price than what you have paid today.”

Diana Shipping 1Q16 Earnings Call Notes

Diana Shipping’s (DSX) CEO Simeon Palios on Q1 2016 Results

Dry Bulk market unlikely to reach anywhere near the levels of earnings and asset prices seen eight years ago

“Even in the best case scenario, it is very unlikely that the bulk carrier market will reach anywhere near we have the levels of earnings and asset prices seen eight years ago.”

You’ve seen ship yards closing in China as government support diminishes

“Now, regards to the general question, the only thing we can say that we’ve seen at least in China something that you have for sure noticed as well that most of the private shipyards do not get much funding anymore from the state government on banks and therefore are silently closing one by one. And you have already seen quite a few shipyards closing which can only be a positive for the overall but this has already happened. There is still a few more to go but not much more.”

Ioannis Zafirakis

Raising equity would be a last resort

“We have stated many times that our model works together with our shareholders at good part of the market raising equities. Our model works if we treat our shareholders with the utmost respect. And therefore diluting them in this part of the cycle as a choice is something that we do not consider. Only out of necessity, we may consider something like this in the future, something that we haven’t — is not a level that we have reached to-date. It’s going to be our last resort. We will eliminate all the other possibilities before we do an equity offering. We know that if let’s say two years past from now and we’re still in the same bad market position et cetera is going to be probably more diluted, if we do an offering. But nevertheless, we have to do our best to avoid and offering period.”

We still need to see more scraping but we are getting to the bottom because no one feels prepared for what’s coming

“we still have a way to go as regards to scraping and laying up. We need more cleansing. One thing is for certain that we have reached the level where everyone and by everyone I mean every shipping company feels like is not very well prepared for what is coming. And this is for me the absolute bottom of the market. It’s a good thing that almost everyone is pessimistic about the market because the cleansing is going to happen.”

This is the absolute bottom

“today we are at this level in the market where nobody really thinks that he is well prepared for what is coming. So radically speaking, we need all the money that we have aside, in order to gain some more breathing space. We know very well but the name of the games, who have been today offense but nevertheless this is shipping and this is the absolute bottom and this is where nobody wants to be to play smart because seeing ahead you need all the dry powder in order to gain sometime. We are very, very fortunate that we manage to buy a lot of vessels at the lower part of the cycle. It has been always a case that not a lot of people buy out the absolute bottom.”

Diana Shipping 4Q15 Earnings Call Notes

Diana Shipping’s (DSX) CEO Simeon Palios on Q4 2015 Results

M&A is not attractive in this industry at this time because you can buy the assets that you want

“As we have said in the past the consolidation in our industry is not such an attractive opportunity, you can understand that you can buy cheap assets out of the market instead of buying a company that probably has vessels that you don’t want. Also the due diligence is getting more and more difficult especially nowadays, so M&A is not very attractive proposition for anyone or I would rather say only for those that they want to be safe, but we do not consider that as an attractive opportunity for our company.”

We don’t think this cycle lasts as long as the 80s recession because banks are acting more quickly

“we don’t really see as I mentioned earlier that this recession lasting the five plus a years that 1980s recession last and we say this because of the ability to take ship to demolition and at the same time the attitudes of banks which tend to become much quicker much faster than they used to in the old days. The only difference here now that we have with further below interest rate, which make banks more patient to a certain degree and more reluctant to arch for the border to send ships to scrap yards if the ships are of a certain age. But we’re confident the things are going to happen faster in spite of what I just said, because ships will be scrapped very quickly and in larger, larger quantities. ”

There’s a lot of surplus that needs to be taken out in the Panamax sector

“The problem is that there is a lot of surplus to be taken out in the Panamax sector in particularly the Ultramax sector which is competing the Panamax sector for certain cargos, it looks pretty awful, it tied between various specific for overall bulk carriers.”

We can’t go much farther down on earnings, but we’re not near the end of recession yet

“we have to be ready for a good number of quarters there of weak earnings. We can’t go much further down on the earnings, as we agreed, but at the time that these earnings will remain low that [Indiscernible] hopefully as I said less than 1980s, but we’re not near yet at the end of recession.”

Interest rates have changed the equation

“Really they’re not a lot of differences, but Stacy was right in mentioning the interest rate because don’t forget as those days the interest rate was almost 23% or even higher and today it’s almost zero. So that is a huge difference, which makes the lagging effect between the chartering graph and you say in terms of graph come to a shorter as it totally points much quicker, that is quite it.”

There are so many more shipyards today able to bring vessels to market

“Don’t forget that the biggest shipyards in the world in 2000 was Hyundai able to build 58 vessels per year, which was, every week one vessel and we thought it was huge. Today there are so many yards who are capable of building more vessels. And that also changes the forces which will bring the [indiscernible] a different market, provided of course on this will be wise to not accept ordering again.”

It’s also different than the 80s because recommissioning costs will be higher

“I think Stacy mentioned that the numbers, in his little presentation, which is not all that much today. The difference so between the lay-up tonnage in the 80s and today is that the quality of the vessel of the 80s is completely different from today. Today when you lay up a vessel you may have a problem in re-commissioning the ship because of the technology involved”

Ioannis Zafirakis

We’re focused on survival but need to take entrepreneurial risk as well

“Yes, you see the most important number one factor that we have to worry about the surviving and we pay a lot of attention in giving to the company the appropriate breathing space to do that. We think that we have done a very good job there and if there is also the ability of the company to make some best decision as well. Without a danger a lot the survival period of the company; we are there to do it. You have to understand that we have to take some entrepreneurial risk as well

Lack of maintenance from other companies is good for the long term

“Certainly in bad time, people cannot afford to properly maintain their vessels, companies cannot afford to maintain their vessels properly and this is a determent of the quality or the useful life of the vessel. And eventually this is one of the factors why the market stands positive at same point where you have a lot of scrapping of down grade vessels, really bad condition vessels”

Andreas Michalopoulos

The market turns when nobody believes it will

” the market turns when nobody believes is going to turn, but we will do everything we can to make sure that we will be there where the market turns, when the time comes.”

The debt level we have is what’s necessary to earn a proper return at this point in the cycle

“Fotis, as we said earlier we are entrepreneurs and we would like to produce a nice return for our shareholders eventually. Taking positions as the lower part of the cycle is the best thing we have done up to now. Having invested as you said having vessels more than 20 vessels at the lower part of the cycle. It means that this is very, very profitable that it will create lots of value for our shareholders from the moment the market turns. The safe level of money today is what we having in our balance. After a year from now, it maybe a lower number and it has to be a lower number. And again, we have to say that we are here to have an entrepreneurial reach in order to produce a nice return. If we were not ship owners, we wouldn’t have done this. We are very, very happy with our debt level at the moment, because being at the absolute bottom of the market, having the debt level that we have, we continue to be the most appropriate debt level to have in order to produce nice return.”

Star Bulk Carriers 4Q15 Earnings Call Notes

Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q4 2015 Results

2016 should be one of the most challenging years in dry bulk history

“”We expect 2016 to be one of the most challenging years in dry bulk history. Practically this should ultimately be seen as a positive factor for the medium-term as it will encourage further scrapping and we’ll discuss newbuilding orders and further train the order book through cancellations and conversions.”

Absence of ordering and increased demolition is putting a cap on fleet growth

“Absence of ordering and increased demolition since early 2015 is slowly putting a cap on fleet growth for the next couple of years and is creating the foundation for a sustainable recovery to take place sometime in the not too distant future. ”

Cost of laying up ships is $2000 per day

“Let’s say that the cost is $2,000, let’s say that the operating expense of vessel is $5,000. If the market rates are at $3,000, we are losing $2,000 a day that is exactly the point where you have to decide whether you keep on operating or you lay-up the vessel because whether you lay-up the vessel or you keep on operating you lose $2,000 a day. So there the decision is qualitative, you have to think what is going to happen during the next two, three, six months onwards and it’s not an exact sense, but we have to figure out how we believe a market to be going forward.”

Star Bulk 3Q15 Earnings Call Notes

Star Bulk Carriers’ (SBLK) CEO Petros Pappas on Q3 2015 Results

Hamish Norton – President

Deferring deliveries

“During the year, we’ve actively been negotiating with our shipyards and we have managed to agree on some measures that benefit the company’s liquidity. In Q3, we agreed to defer the delivery of four new building vessels from the fourth quarter of 2015 to 2016 preserving our liquidity and you know at some point increasing the vessel resale value as its going to be one year younger.”

Lower than industry operating expenses

“Star Bulk has operating expenses as we’ve said of $4,325 per vessel per day which is 17% lower than industry average excluding Star Bulk of $5,245 per day.”

Petros Pappas – CEO and Director

First half of 2016 may be especially challenging

“looking into 2016, we expect that the first half may be especially challenging which should ultimately be seen as a positive factor as it will encourage further scrapping and will largely discourage new building orders. The second half should start improving and we expect that during 2016 as a whole, demand should start picking up in comparison to 2015.”

There has been a slowdown in scrapping as people expected the market to go up

“ell, the first reason why scrapping slowed down, we should remember that the first six months of the year was about 21 million tons. And right now there’s another 7 million tons for their four and half months of the second half. The reason for this slowed down is because people expected that the market go up, but there is no question about that, that’s one reason.”

We definitely have structural problems around Chinese demand in the industry

“I think we definitely have a structural problem in two ways, first of all, there’s no question that there is a slowdown in China and that steel production will be much lower – the growth of the steel production will be much lower if not remaining around the same from where it is. So that’s the one structural issue. And a second structural issue is coal. There is also a trend there for less use of coal, so in that sense we have a structural issue.”

We’re in a new normal in this business with slower demand growth

“in my view, we’re starting in – we’re going to having a new normal in this business. I don’t gap I’m not sure that for a few years we’ll be seeing very high demand. This year demand was – is going to be about zero or thereabouts. We expect demand next year perhaps to be around 2% or 2.5% there’s number of reasons that I can discuss later on if you need about that. ”

We need to see a bit of blood in the streets. We’ll get there

“We need to see a bit of blood in the streets so that people don’t order and people scrap. And we’re not extremely far away from things turning around because in 2017 for example, our calculation is that net supply is going to be about 1.5%. And 2018 is going to be about 1%. So if you ask me I believe that we’ll get to the point that you ask, somewhere in 2017 onwards.”

First semester of next year will be time to buy

“I think that the best point in time to buy is going to be the first semester of next year.”

Christos Begleris – Co-CFO

Debt to net assets covenant at 80%, we are in the 50s or 60s now

“we have a corporate net debt to market value of the assets that is say that 80% and is tested on a quarterly basis. Net debt accounts for debt less cash available for the company. On the basis of evaluations of as of September we are actually in the high 50s or low 60s. So there is obviously significant room there. And market value of asset is defined to include the book value of work in progress at the yards.”

Diana Shipping 3Q15 Earnings Call Notes

Continue to expand the fleet

“In keeping with our sound strategy we have continue to expand our fleet. Today we announced that on November 10th, we took delivery of a newly built 180,960 deadweight capacity drybulk vessel renew or lease”

Industry ordered too many handymaxes. Panamax Deliveries lower from 2017 onward

“The problem in the dry bulk order book lies with the Handymaxes where a massive 38.6 million deadweight tons are on order equivalent to 22% of the existing fleet. Most of the ships like the Panamaxes are scheduled for delivery in 2016, from 2017 onwards deliveries are significantly lower across the board. ”

Scrapping prices are $285 per light ton displacement

“Scrapping prices have come down and vary depending on the type of ship. For bulk carriers they now stand around $285 per light ton displacement. For container vessels scrappers are usually willing to pay about 20% more per light deadweight count.”

Regrettably demand growth has not continued at the same pace as the last few years

Regrettably as explained earlier on demand growth did not stay at the level seen during the last few years. Therefore it did not come to any of us as a surprise that trades have more or less collapsed over the last few months together with the rate of demand growth.”

We see the light at the end of an unfortunately long tunnel

“Now that at long last new-building ordering has subsided and scrapping [indiscernible] we see the light at the end of an unfortunately rather long tunnel. There is reason for hope in the long run provide that nothing happens in the interim to disrupt the beneficial effect we posted now at work to make the dry bulk shipping markets a profitable industry in which to invest.”

Psychology continues to deteriorate, which means that it is moving in the right direction

“I think that we are in the right direction and things are moving forward the way we have described it should go. The sentiment is going further and further down and moves like the one you’ve described prove that point. What we keep saying is that people should realize that it has to take some time where you have people not believing that there is an end lies at the end of the tunnel. What we know based on past history and based on the cyclicality of our industry is there is a light at the end of the tunnel, but we cannot see. The people that will keep walking in that tunnel and they will be still alive they will reach that point.”

There are lots of distressed vessels coming to market

“Yes indeed, there are a number of vessels that are potential candidates both on the Panamaxes and on the capes and on the Kamsarmaxes. And as we are going along more candidates are coming into the markets. The potential buyers are very few and of course as we are going along that process will accelerate.

Rest assured that the light at the end of the tunnel will come

“you have to bear in mind that we are in an industry where supply and demand plays a huge part. And the dry cargo industry in contrast with the container industry a mature industry so we have been watching the numbers very carefully since 1947. And the cyclicality is always there and whenever the market is down we are trying to find new words to describe the market. This time is different from the previous, but I can ensure you is not, is exactly the same the supply and demand. And it will never change. There is a light at the end of the tunnel the problem is as we said all along we don’t know when we will reach this light at the end of the tunnel, but rest assure that one day we will see the light at the end of the tunnel.”

The fact that you are asking about structural changes shows how close we are to the bottom

“Fotis, sorry to interrupt the fact that people start talking like you about structural changes and things are different et cetera is a good starting point for the right forces to take effect and the market to turn. It goes with the psychology that we were saying earlier.”

If demand growth is slower than the market will come into balance with supply response

“If demand grows at a faster rate than we are seeing now and which Clarkson are predicting then the recovery will come sooner. If it remains as it is now, scrapping will be higher, new building ordering will be at the minimum if not disappear completely. And it will take that little bit longer because we will need longer to absorb for the market to absorb rather the tonnage, which is surplus tonnage today.”

The thing to worry about is the imbalance of supply and demand

“people keep forgetting and we keep saying that what you should worry and what we should worry about is the imbalance between supply and demand. And many scenarios now they can decrease this imbalance that we have today and many scenarios that can keep the imbalance the same and many scenarios that can increase this imbalance, either at lower levels or at higher levels. You should not expect that to give you [indiscernible]. But I predict this time, but we can explain we can even explain a situation where is there is a big drop in the demand and a further drop bigger drop of the supply where it’s going to create an imbalance at lower level, but higher charter rates.”

Low interest rates are helping to stretch out this cycle

“the first response that you’re going to get to that question it has to do with the interest rate for example how expensive is the financing cost and at the moment everyone is telling you of course that the financing cost is very low, the interest rates are very low and the banks are nursing various problems that exist and therefore there is a bigger endurance of an uneconomical market as you described this. And certainly higher interest rate environment will move things faster”

People have to believe that recovery is not imminent to get scrapping

” at the same time what is very important together with various macro factors that exist around this period, it has to do with the psychology as well if people are still prepared to burn more and more money thinking that the recovery is eminent. From the moment they will see that the recovery is not eminent then you will have laid up vessel, you will have scrapping and you will have certainly no new building orders.’

We have seen bad markets for many years in the past

“in the past we have seen periods of a bad market of seven years, we have seen two years, we have seen 10 years, but the question is together with the macro-environment you have to put there the anticipation and the psychology as regard to when they think the market is going to turn.’

Debt LTV levels have increased as asset prices have fallen, but we feel comfortable (would generally agree with 50% LTV assumption)

“The numbers are more or less correct what I can say only is that indeed the market values have dropped significantly. The only comment that we can make though is that we have absolutely no issue with our covenants, with our bank covenants so although your numbers are pretty correct and we feel comfortable with those. I don’t think we need to comment further.”