Diana Shipping 1Q17 Earnings Call Notes

Stasi Margaronis

Dry Bulk shipping market is back in balance

“So what we can say now is that we are not able to tell you whether we’re going to see another 2007, 2008 market developing. All we are saying is that it appears that we are at a point of balance between supply and demand. And depending on the strength already factors affecting this balance, the market is going to move rather up or down. We hope it will not go down, but it might. The chances are that unless something totally unpredictable takes place, it will move gradually upwards. So that’s all we can say at this point. We are just watching the market quarter after quarter. And this might be the first quarter where we can say with a degree of certainty that we are at the point where demand and supply have reached balance.”

Ioannis Zafirakis

This is a very very important development

“Ben, this is very, very important. It is one of the most important developments we’ve had the last seven years or so that we are in a position to say with a certain degree of certainty that we are in a balancing stage. This is very important because the previous years, a lot of time was wasted trying to see what the next period is going to be by calculating forecasted demand and supply, coming up with a number, which had no effect whatsoever or even the opposite effect than anticipated simply because we were not in a balancing stage and we kept saying that. I don’t want to repeat myself. But we were at the stage that we had, let’s say, exaggerating, 1,000 extra vessels. And people were talking about a positive effect of 50 vessels. And they were expecting the market to improve from 1,000 to 950 extra, the market to improve. You know that this never is going to happen. But if we can say with certainty that we are in a balancing stage, then the forecast, if they are correct, that will have an effect. This is what we are saying.”

We have managed to buy at the lowest part of the cycle

“We have managed to buy at the lowest – the lower part of the cycle as many vessels as possible. We have managed to leverage up the company to the maximum without having to restructure. And if the market improves as we expect the market to improve from now onwards, all the benefit of that is going to go to our shareholders and not to anybody else and especially not to those people that they offered a restructuring to the companies, of course, taking most of the upside of the market. So what we expect to happen is that if and when we end up at the upper part of the cycle, the company most probably will – we will reintroduce a dividend and we will renew the flip, getting rid of the older tonnage. And most probably, we are going to continue exactly the same strategy as we’ve done in the upper part of the previous cycle and remunerating and rewarding our shareholders for having invested in our company. “

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.”

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.”

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.”

Diana Shipping 2Q15 Earnings Call Notes

Raised 63m in debt last quarter

“During the past quarter we further enhanced our financial capacity by raising $63.25 million in a public offering of senior and secure notes due 2020. The net proceeds can be used for the acquisition of additional vessels as well as general corporate purpose and working capital.”

Dry Bulk Indexes have recovered somewhat over the course of the quarter

“On April 1, 2015 the Baltic Dry Index was at 596 and closed yesterday at a much better level of 1,100. The Baltic Cape Index started the quarter at a miserable 463 and closed yesterday at 2,116, the Baltic Panamax Index was at 596 on April 1st and closed 1,044.”

At last it seems the seeds have been sown for a potential balance in supply and demand

“we at Dianna Shipping will continue to seek investment opportunities in a world of lower and lower asset value. At last, it seems that the seeds have been sown for potential balance between supply and demand leading to a lasting increase vessels earnings. The facts indicate that the new-building orders are going down; scrapping has gone up, especially the beginning of the year and ship financing is getting more and more scarce. This may lead someone to believe that we’re heading towards substantial market improvement. However, this depends on whether there will be higher demand to support this positive trend.”

RBS is very old and well established in shipping loans

“I think RBS is very old established bank that know shipping very well. And I don’t think that whatever they do, they will do it in a disorder manner. I think anything they’ll do is going to be orderly and very professionally. Don’t forget that they have been perhaps one of the two banks, only two banks which have been the oldest established banks, going back to Williams Deacon’s, Williams Inc. [Ph] and now Royal Bank of Scotland. So whatever they are going to do, it’s going to be order and professional.”

Diana Shipping 4Q14 Earnings Call Notes

The end of 2014 was disastrous

“There is no doubt at the last quarter of 2014 brought a great disappointment to owners and huge movements in earnings of all bulk carriers unfortunately on the downside. A year ago capesize vessel time charter rates stood at around $40,000 a day and hopes were high for 2014. As we say prices at the time approach US$60 million. As we all know by now 2014 ended in a disastrous way despite seaborne Chinese iron ore import increasing by about 100 million tons.”

Wide over-capacity

“the Baltic dry index slumps with lowest point in 29 years hit by a shipping glove, falling commodity prices and declining import demand from China. We agree with these analysts and the most important factor in the Baltic dry indices decline is industry wide over capacity.”

Steel capacity utilization in China only 72%

“The crude steel capacity utilization ratio in December 2014 was 72.7% which was 2.4% lower than in December 2013. Average capacity utilization in 2014 was 76.7% compared to 78.4% in 2013. ”

Panamax rates are below operating expenses

“As of the first week of February the average spot market earnings for capes have dropped to a miserable US$5,125 per day. As if this was not bad enough the equivalent rate of Panamaxes stood at $3,906 per day, a rate which is definitely below operating expenses.”

Rates to stay low for a long time

“The result of this trend is unfortunately that rate unlikely to remain low for a long time as the industry overcapacity works itself out of the shipment that will in all likelihood remain the case even if global mainly Chinese commodity demand recovers substantially. So this is once again the environment which the management team of Diana Shipping is implementing investment strategy which we have repeatedly stated and explained.”

Market will gradually strengthen from 2016 and beyond

“Our priorities to preserve these strength and integrity of our balance sheet and gradually increase leverage towards the 60% to 65% or even 70% mark and asset values, we believe that purchasing vessels at this point in the cycle will prove to be profitable investment as the market strengthens gradually from 2016 and beyond.”

Constraint in ordering will eventually lead to better industry

“We also believe that provided there is a continued restrain in ordering, the lack of bank finance and the even greater lack of investor appetizing the capital markets will eventually lead the industry to better days. All the ships will be scrapped and earnings will gradually increase, this should find our company in the advantageous position of owning mostly very modern ships to the large income generating capability. That will be the time when our dividend can be reintroduced and older vessels can be sold at very advantageous prices. The company can then expand through the essence of fresh equity which will enhance both our ability to pay dividend and the level of those dividends.”

Repurchased shares

“During the second half of 2014 we repurchased and retired 2.8 million shares for an aggregate cost of about $25.3 million and subsequently to year-end we additionally repurchased and retired 413,804 shares for an aggregate cost of $2.7 million.”

We’re still pessimistic about the market

“we have no change whatsoever in our bearish view about the market. We have not seen the scrapping and the laying up of vessels that we want to see before will start going up this scale. The psychology as regard to market turning positive should turn little bit more to the less and less optimistic. But not at the pessimistic level. We won’t achieve that before and some other things as we have explained in the past, before we start going up in the scale of your question.”

There is appetite still that has to go away

“The vessels have definitely to lay up and things are moving to the proper direction in putting the market in a different phase all together. And this up to now it has not been some for example our ships today capes that they have been inspected by almost 10 people. There is still appetite admittedly at lower levels but the appetite is still there and psychologically that appetite has to go away.”

First priority is to ensure survival of the company

“As we have said in the past our first priority is to ensure the survival of the company for as long as possible. At the same time we want to keep buying vessels in this lower part of the cycle because we strongly feel that we should shed this type of investment. And we have — as we kept saying in the past we’re talking about one vessel every two months and we tell we will try to spend let’s say something like in the vicinity of $15 million every two months. And at the same time we will make sure that our cash flow, our loans et cetera are going to be serviced in such a manner that we will buy some more vessels for the next year at least. And then from then onwards we can survive a bad environment for another two to three years. This is our target.”

buying back shares same as buying ships

“You should consider the repurchasing of our shares as an investment at this part of the cycle. So it goes together with our vessel acquisitions, so from the moment we said we will keep the same pace and we will make sure that w”

For us to really be positive we’d have to have analysts not wanting to ask us questions anymore

“The next time that we will have less and less analyst really interested about the dry bulk sector it would be a very good point for the market to start for us to start thinking positively.’

Diana Shipping 3Q14 Earnings Call Notes

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.”