Diana Shipping Inc (DSX) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Natasha and I will be your conference facilitator today. At this time I would like to welcome everyone to the Diana Shipping first-quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) It is now my pleasure to turn the floor over to your host, Edward Nebb, Investor Relations.

Thank you, Natasha. This is Ed Nebb, the Investor Relations adviser to Diana Shipping Inc. We thank you for joining us for the Company's 2006 first-quarter conference call. The members of the Diana Shipping management team who are with us on the call today are Mr. Simeon Palios, Chairman and Chief Executive Officer; Mr. Anastassis Margaronis, President; Mr. Andras Michalopoulos, Chief Financial Officer; and Ms. Maria Dede, Chief Account Officer.

Before management begins their remarks, let the briefly summarizes the safe harbor notice which you can see in its entirety in the news release we issued yesterday afternoon. Certain statements made during this conference call which are not statements of historical fact are forward-looking statements and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on assumptions, expectations, projections, intentions and beliefs as to future events that may not prove to be accurate. For a description of the risks, uncertainties, and other factors that may cause future results to differ materially from what is expected or forecast in the forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission including the prospectus under the heading risk factors.

Now with that, let me turn the call over to Mr. Simeon Palios, Chairman and Chief Executive Officer of Diana Shipping.

Thank you, Ed. I am pleased to welcome investors and analysts to our conference call to discuss the financial results of Diana Shipping Inc. for the first quarter of 2006. Comparing our performance to the year ago period, you can see that we have expanded our fleet to capture opportunities in the dry bulk market, produce stronger revenues and profits, and continue to reward shareholders through our dividend policy. Before the members of our senior management team provide you with our market outlook and financial review, I would like to comment on some key developments.

As you see from our press release, we have declared for the first quarter of 2006 a dividend equal to $0.345 per share. With this dividend of $15.5 million, total dividends to our shareholders since we became public in March 2005 will amount to $76.9 million. Since the first quarter of last year, Diana Shipping has acquired four Panamax vessels, expanding the size of our fleet to 13 ships. In keeping with our strategy of operating a young fleet, all of our newly acquired vessels were built in 2004 or after. This fleet expansion is directly responsible for the increase in our voyage and time charter revenues.

We have continued our strategy of balancing long-term and short-term type charter contracts in order to best position the Company to respond to conditions in our market. Today we have 10 vessels under long-term charters, of which six vessels at fixed rates through late 2006 and beyond and for vessels with adjustable rates. Three of our vessels are time charter for short periods. The average daily time charter equivalent rate for our fleet is now $20,165.

We completed the acquisition of our fleet manager, Diana Shipping Services, as previously announced at the time of our IPO. We feel that this action enables us to integrate the management to our fleet with the rest of our operations and is the most appropriate structure for future growth. We have delivered on our commitment to our shareholders to pay dividends that are equal to 100% of our available cash from operations each quarter after providing for certain operating expenses and debt repayment.

Finally, we maintain a strong balance sheet which we believe is an essential position for growth as well as a buffer against the occasional changes of our industry.

With that, I will now turn the call over to Mr. Margaronis. Thank you.

Thank you, Simeon. I'd like to start as we have been doing during the recent conference calls with the development in the dry bulk shipping market by looking at the various indices starting with the Baltic dry index, which on January 1, 2006 stood at 2,438 and today just closed at 2,491 which represents an increase of 2.2%. The Baltic Panamax index was at 2,403 points but today closed at 2,322, a drop of 3.4%. The Baltic Capesize index study at 3,105 and today closed at 3,217, a rise of 3.6%. This trend justifies our conviction as stated during our last conference call that the bulk freight market would be steady to slightly firmer during the early part of 2006 compared to the last quarter of 2005. This was contrary to some shipping analysts forecast of the significant drop in freight rates.

The world microeconomic environment influences the demand for the transportation of commodities. The commodities carried by our vessels are primarily iron ore, coal, grain and small quantities of cargoes such as fertilizers, salt, steel slags and alumina. In the first quarter of 2006, China gross domestic product grew on average at the rate of 10.2% per annum. China has now become the world's fourth-largest economy, something that was being forecast to happen by 2010. The Chinese Ministry of Finance is forecasting gross domestic product growth of at least 9.5% for 2006.

In Japan, the Bank of Japan reported increasing consumption during the first quarter of 2006, while land values and golf club membership fees have risen. Strange as this may sound, these are the most sensitive indicators of increased economic activity and corporate profitability. The economy is forecast to grow well in excess of 2.5% in 2006.

Looking now at dry bulk trades globally, it is estimated that approximately 2.6 billion metric tons of cargo will be shipped in 2005 and about 2.7 billion metric tons in 2006, an increase of 5% year-on-year. Most of this growth can be attributed to iron ore trade, which is expected to increase by 8.2% in 2006 and accounts for nearly 30% of total dry bulk trade volume. Therefore we can safely say that demand for transportation of dry bulk cargoes will be strong during the forthcoming year.

Global demand for seaborne iron ore rose from 596 million tons in 2004 to 651 million tons in 2005. It is estimated that 694 million tons of iron ore will be shipped during 2006. Chinese demand for imported iron ore could exceed 350 million metric tons in 2007, compared to 275 million metric tons in 2005. According to Clarksons Research Services, the outlook for seaborne iron ore demand is positive at least in the short run. Longer term, demand will be determined by the rate of growth in the demand for steel. The vulnerability of the shipping markets to such volatility will be smoothed out by the concentration of iron ore demand by China.

Australia and Brazil are expected to capture the larger share of this trade while the rate of growth in Indian exports is expected to decline. This will lead to greater per ton mile demand as the new suppliers will require longer sea passages compared to the Indian suppliers. As regards iron ore price negotiations, miners continue to insist on increasing prices by 20%. This has meant that negotiations have been extended beyond the April 1 deadline, which in effect means that suppliers and customers will continue to trade at last year's prices. Whatever premium will finally end up being agreed will be settled retroactively.

As regards coal, world trade is expected to increase moderately by 3.2% in 2006. Coal demand is being driven by strong consumption growth in both India and China, as well as Japan. For coking coal, growth in seaborne trade may temporarily ease due to weaker steel pricing and production growth. To compensate these factors, Indian demand for metallurgical coal remains strong on the back of increasing steel production. Demand is set to surge according to Clarksons Research over the next ten years in part due to new government initiatives and a move to allow an increase in foreign investment in the local steel industry.

Looking at steel or thermal coal, the major exporters from Richard's Bay in South Africa exported just under 17 million tons during the first quarter of 2006 compared to 14.8 million tons for the same period of 2005. In 2005, total exports of thermal coal from the Richard's Bay area amounted to a 69.2 million metric tons and the estimate for this year is 76 million metric tons, an increase of just under 10% year-on-year.

It was reported last month that in Japan a Japanese District Court ordered the shutdown of Japan's second-largest nuclear reactor, which had only recently started to operate, due to earthquake-related risks. As nuclear power accounts for one-third of Japan's electricity production, if the plant remains closed for a long time, there will be significant long-term boost to Pacific thermal coal shipments to Japan. This can be particularly pronounced if the recent economic recovery in this mature economy, which imports 90% of its coal requirements continues gathering pace, thus increasing demand for energy.

Turning to the grain trades, at the end of March the International Grain Council published a forecast for world wheat trade for the 2005/2006 trade year at the 109 million metric tons, at the same levels as the previous trade year. On the smaller bulk trades according to J.E. Hyde Research, the Chinese share of alumina and bauxite trades has grown from under 4% at the beginning of the decade to well over 10% last year. This share is likely to follow the same course as seen for iron ore, now well over 30% of global trade, as Chinese demand for more advanced materials expands over the coming decade.

Concluding our remarks on the demand side, we agree with a view expressed by Clarksons Research that growing iron ore and coal trades will continue to support Capesize shipping demand in the 2006; global seaborne iron ore trade focused at 694 million tons; and total seaborne coal trade forecast at 708 million tons. In the medium to long term, the Panamex market tends to follow a similar pattern as the Capesize market. The increase of iron ore imports to China and coal imports to India will play an important role. On the other hand we should not fail to take into account the substantial number of new buildings mentioned below. At the moment Clarksons are forecasting a fairly balanced market this year with the usual seasonal fluctuations. We indeed concur with this view.

From the above information, we can safely assume that at least in the medium term, demand for the transportation of commodities carried in our Company's vessels will be firmly underpinned by strong worldwide economic growth.

Since all appears to look fairly positive on the demand side, what is happening on the supply side? The total Panamax bulk carrier orderbook going out to the middle of 2009 comes to 254 vessels representing approximately 21.2% of the existing fleet; about 7.2 million tons deadweight are scheduled for delivery during the rest of 2006; 7.8 million tons during the whole of 2007; and about 5.4 million tons from 2008 and beyond. The total Capesize orderbook for the same period counts 141 vessels, representing 25% of the existing fleet. Here again about 7.2 million tons will be delivered during 2006; 6.4 million tons in 2007; and about 14.8 million from 2008 onwards.

As regards scrappings, a total of 1 million tons deadweight of bulk carriers have been scrapped to the end of April, 2006, of which about 0.4 million tons were Panamax and Capesize vessels while the rest were smaller bulk carriers. This is slightly lower than we have been forecasting but still considerably higher than the near zero number of scrappings during 2005. It is possible that the rate of scrapping will pick up later this year as ships continue to age and more and more reach their fifth or even sixth special survey.

The lack of general optimism in the shipping industry on the future course of freight rates should lead owners to the rational decision of selling their over aged vessels for scrap now that the prices for scrap are still firm and lock in sizable profits earned from trading these old units.

Congestion is another factor affecting the supply of tonnage by artificially draining ships from the market. According to [Mersck] Broker, the first quarter of 2006 started out with relatively low levels of congestion worldwide; however by mid-February, congestion had started to increase at both iron ore and coal loading ports in Australia. Delays in West Australian ports stands at approximately nine days, the highest level for 18 months, while East Coast Australian ports average delays of about 10 days. Even though the delays at the iron ore ports were caused by tropical storms, the backlog is not being absorbed due to the continuous arrival of vessels to load at an already stretched loading port network. The East Coast coal loading port delays have recently eased slightly.

However now we have indications that congestion is also increasing in some of China's ports such as the iron ore discharge port of Beilun. If we put all this information together, we have to conclude that barring any unforeseen negative developments affecting the rate of economic growth in any of the major economies in the world, there should be no serious weakness in the freight market for dry bulk vessels.

Apart from seasonal variations in rates, cash flow should remain reasonably steady. Ship values however, should other things being equal, weaken during the next couple quarters to reflect the fairly significant drop in earnings during last few quarters. In this environment, Diana Shipping will utilize its strong balance sheet and competitive advantages to continue its fleet expansion and chartering strategies so as to increase free cash flow and dividends per share, thus adding value to investments.

I will now turn the call over to our CFO, Andreas Michalopoulos, to provide you with our financial results for the first quarter of this year.

Thank you, Stacey. Good morning. I'm pleased to be discussing today with you Diana's results for the first quarter of 2006. For the three months ended March 31, 2006 compared to the three months ended March 31, 2005, net income amounted to $11.7 million and decreased by $2.8 million or 19%, compared to $14.6 million for the same period in 2005. This is mainly attributable to declining trading conditions.

Net income reported for the first quarter of 2006 has been reduced by the non-cash amortization of the prepaid time charter revenue of the vessel, Thetis, which amounted to $0.8 million. The EPS of $0.26 for the first quarter of 2006 without this reduction would have been of $0.28. Voyage and time charter revenues increased by $0.3 million or 1% to $24.2 million in the first quarter of 2006 compared to $23.9 million in 2005. The increase, which is attributable to the increased operating days of the first quarter of 2006 compared to those of the first quarter of 2005 was offset by the decreased time charter rates and the amortization of the prepaid time charter revenue of the Thetis.

The increase in the operating days resulted from the enlargement of the fleet after the delivery of Clio, in May 2005, the acquisition of the Erato and the Thetis in November 2005, and the delivery of the Coronis in January 2006. The additions of those vessels in our fleet increased our ownership days from 723 in the first quarter of 2005 to 1,146 in 2006, an increase of 57%.

Fleet utilization was 99.6% in 2006, compared to 99.3% in 2005 and the time charter equivalent rate for the first quarter of 2006 was $20,165 per day, compared to a $30,805 per day in 2005. Voyage expenses increased by $0.2 million or 13% to $1.8 million in 2006 compared to $1.6 million in 2005. Voyage expenses mainly consist of commissions from freight and higher revenues and bunkers. The increase in voyage expenses is mainly attributable to the increase in commissions in 2006 compared to the same period of 2005.

Depreciation and amortization of deferred charges increased by $1.9 million or 100% to $3.8 million for the three months ended March 31, 2006, compared to $1.9 million for the same period in 2005. This increase is primarily the result of the increase in the number of our vessels and ownership days in 2006 following the addition of four vessels to our fleet.

Operating expenses increased by $1.7 million or 53% to $4.9 million in 2006 compared to $3.2 million in 2005. The increase in operating expenses is attributable to the increased ownership days resulting from the delivery of the four vessels in our fleet, as mentioned earlier, and to increased repairs and maintenance costs. Daily operating expenses were $4,299 in 2006 compared to a $4,393 in 2005, representing a decrease of 2%.

Management fees increased by $0.2 million or 50% to $0.6 million in 2006 compared to $0.4 million in 2005. The increase is attributable to the increased number of vessels under management in 2006. Following the acquisition of our fleet manager as of April 1, 2006, these expenses will be eliminated from our consolidated financial statements as intercompany transactions. However, we will incur the direct expenses of operating our fleet manager as a wholly-owned subsidiary.

Interest and finance costs decreased by $0.9 million or 53% to $0.8 million for the three months ended March 31, 2006 compared to $1.7 million for the same period in 2005. The decrease primarily resulted from the decrease in interest expenses due to the decreased amounts of investments outstanding during the three months ended March 31, 2006 compared to 2005 and also due to decreased amortization of financing costs as in the three months ended March 31, 2005 and there was a write-off of financing costs relating to the repayment in full of the indebtedness outstanding during that period.

Turning to dividend policy for the first quarter of 2006, the Board of Directors had decided to declare a dividend of $0.345 per share. Diana declares and pays quarterly dividends that are substantially equal to available cash from operations during the prior quarter. In calculating the cash dividend, we take into account expenses, drydocking reserves, contingent liabilities and capital needed to support the Company's operations. In times we have debt outstanding, we calculate dividends per share as if we were refinanced entirely with equity.

Thank you for your attention. We would be pleased to respond to your questions and I will turn now the call to the operator, who will instruct you as to the procedure for asking questions. Natasha?

Doug Mavrinac, Jefferies & Co.

Just had a few quick questions. One having to do with your vessels that are currently on time charter contract, you have a handful that expire this year. What are your expectations for employing those vessels as the current contracts expire in terms of the duration of the time charter contracts you would be looking to renew at those times?

Well, for a Panamax which is free today, you should expect something in the vicinity of $17,000 daily for a year and apparently the same for four to six months. So the answer is $17,000 for either four to six or one year.

Do you have a preference if you would like to have that vessel or other vessels expire in the spot market at current levels or is your preference to lock those up on time charter contracts?

Well, the initial idea and it is still the same is to try and catch the market, so we have a number of vessels on long-term time charters and we have others on shorter terms and some on the spot market.

Okay, then as it relates to asset values, Stacey mentioned something in his comments about where you viewed asset values going over the next few months. I was wondering if you could elaborate on that little bit in terms of how you expect any seasonality to affect asset values and whether or not you believe even at current levels asset values are attractive?

Well I don't think the issues are really on the charters we use to have ages ago. I think the seasonality is not there anymore. But what we're trying to say is that today the sale and purchase [scale] is very far away from the freight market scale and as long as the freight market continues as it is today, the prices of the ships have to come in line with the freight market or rather have to come closer to the freight rate scale.

Okay, great. Just one final question. What are you guys hearing about any older ships being -- I know that your fleet is very modern, but are your hearing any scuttlebutt or any talk in the market about older ships being circulated for sale or for scrap just as maybe that would form any expectations as far as what future scrappings may be for the rest of the year?

Yes, there is an increased activity in the older ship sale of purchase market from what we hear brokers reporting. There are as I mentioned in my short speech there are a number of, an increasing number of ships which are becoming either 25 or 30 years old which are significant ages because of the survey positions. And while the scrap market is holding up between 350 and $380 per scrap like ton displacement, there is interest for owners to scrap their ships. The problem today has been that all ships that do not have to face surveys still trade profitably and that has caused the postponement of the decision which has been of course more so the problem last year and the year before.

Now however, because as I mentioned the prospects of the market are that things are not going to explode on the upside or conservatively they might stay where they are or they might even drop slightly. It is really easy to envisage a situation where the owner of an old vessel starts eating into the profits that he has made by facing repairs, unexpected repairs as well as scheduled repairs which have become extremely costly.

So going back to your original question, yes, we have increased activity in the sale and purchase market, several negotiations are taking place and deals are being done, more so than we have seen during the last 12 months.

Great. Thank you very much.

Scott Burk, Bear Stearns.

A couple quick questions. First for Andreas, you mentioned that some deferred revenue that affected your time charter (indiscernible) rate. Can you repeat what you said about that? Is $800,000 -- I just didn't catch it.

You're talking about the Thetis, about the amortization of --?

Exactly.

Actually yes, we have a prepaid -- let me give you an explanation on that. First of all prepaid charter revenue is an asset which is recognized by the Company pursuant to the acquisition of the vessel called Thetis on her delivery on November 28, 2005 was placed on an existing time charter contract assumed from its previous owners through arrangements with the respective charterers. The contract, which expires between July to September 2007, is at the rate of $25,000 per day. So the Company upon delivery of the vessel evaluated the charter contract assumed and recognized an asset of $5,443 with a corresponding decrease in the vessel's purchase price.

As of December 31, 2005 and March, 31, 2006 the unamortized balance of the asset amounted to $4,144 and $4,324 respectively and is reflected therefore in the prepaid charter revenue in the accompanying consolidated balance sheets. The amortization for the three-month period ended March 31, 2006 amounted to $820,000 and is actually included in the voyage and time charter revenues in the accompanying 2006 sale statement of income. In other words, it is a non-cash amortization, this amount of $820,000 and if you did not have this amount we would have an EPS of $0.28 instead of an EPS that is shown today of $0.26.

That shows up in your voyage expenses or is that just netted out in your voyage and time charter revenues?

That is shown up in the revenues.

Going forward are you going to have a similar level of amortization through the end of that contract then, July 2007?

Exactly, every quarter.

Okay and that should not affect your dividend but it will affect your earnings?

Exactly.

Thank you for that clarification. Another question, big transaction announced this morning, 17 vessels sold to one of your competitors. I just wondered what you guys think of the economics of that transaction and if you bid on it, and if you are currently in the market? It sounds like you're planning to wait, but what do you think of that transaction that happened today?

We have received the details which were published and we are still studying them and we have not yet formed an opinion that we would like to express at this point in time.

Did you guys consider bidding on those assets?

We were aware of the transaction well before it took place, yes.

Okay, and then one final little modeling question. In terms of drydocking coming up for the next couple of quarters, do you have any scheduled drydocking days?

Actually the next scheduled drydock for us is on the second quarter of 2007 with the vessel, Pantelis SP.

That makes sense with your vessels being [so new]. Okay, thank you very much.

Gregory Lewis, Fortis.

I just have a question. You have about $150 million in available debt to purchase ships. Do you have a preference between whether you purchase Capes' or Panamax's? And if so, why?

Well, we are looking on both segments of the market, both Capes' and Panamax's, but our main concern is the purchase to be accretive to the --.

Okay, because right now both of them are about what --? Both sawed-off about 30% from my guess last year's highs -- okay. And so when you talk about vessels declining further, so you see vessels declining --?

Let me give you an example. When we purchased the Pantelis SP, purchased the vessel at $63 million and we charter here for three years at $47,500. Now if you want to purchase a similar vessel today which namely at least a vessel like that in the market and it was purchased by a Greek company yesterday, we have to pay $57 million and the time charter rate for three years is less than $24,000. That is what we mean by lag between the freight and the (indiscernible) purchase.

Okay. Then I just have one other question. You have three boats remaining that will need to be drydocked this year?

No ships are going to be drydocked this year anymore. We had three ships that went into drydock during this first quarter and namely the Danae, the Triton and the Oceanis. Those three ships during the first quarter went into drydock. The next ship to go into drydock, as I said previously, is going to be the Pantelis SP, which is going to go into drydock on the second quarter of 2007.

Okay. Thank you very much.

Dustin Yagerman, Wachovia Securities.

We have talked about this before and I am just wondering what it is really going to take to bring asset values down in your opinion? Because if you look out, you've got shipowners who still have quite a bit of wealth from the strength that we saw in the last couple of years and you have a market where you guys are talking about very healthy fundamentals generally underlying that should support at least the rates that we are seeing now. So is it going to take a capitulation of the market for asset values to get more attractive?

Basically where we stand is that there does not have to be any forceful sales coming on to put pressure on asset values. All we feel has to take place is the conviction in the minds of most purchasers of ships that rates are not going to move up soon and by a lot. If this happens, then there is only one way prices can go, which is down. We're not talking about a precipitous fall but we are talking about an adjustment as the chairman mentioned earlier of prices closer to the earnings that we can attract today because especially on Capesize ships, they are completely out of sequence here now.

The returns on equity investment today if one were to buy a ship which is offered without employment, are very low, much lower than they have been for a number of years. So that is basically what we think is going to bring prices down, a realization and conviction that prices will stay either where they are or move up or down only slightly and there will be no large move on the upside.

So it's worse now on the Capesize versus any of the other classes of vessels?

I think it is pretty much the same.

Would you consider doing some charter in strategies in this kind of market rather than take on the kind of asset risk at the values that these ships are?

Yes, we do look around for that sort of thing and for cargoes to.

What are the comparable -- I guess I have seen some of your competitors go to the Asian markets and charter ships in and be able to then charter them out at today's rates and make a margin on them. Are those opportunities available to you? Do you look at them and what kind of market is that looking like right now? Is that also out of whack?

Definitely we are in touch with certain people for that sort of thing. But our main business is ship owning rather than operating cargoes and we would like to stick to that.

Okay, that's fair. Then I guess I'd just like to get your sense. I feel like you guys are usually very close to the matter. Where do you think this iron ore issue is going to work itself out if the pricing has not come across yet? And how do you think that will affect the market when pricing does actually hit?

The iron ore negotiations, as I mentioned, are dragging on and [CVRV] has taken the unilateral move of just declaring an increase of about 24% in the iron ore contract to sell from now onwards. The clients have not agreed, so nobody knows exactly what will happen, but for sure the movement of the commodity itself is not being hampered by these negotiations. The whole issue becomes one of cash flow for the customers for them to plan what they will have to pay for the product that they have been shipping from April 1 onwards. Eventually our guess would be that there will be an increase of between 15% and 20% in the iron ore shipments and per ton and basically what will happen will be a financial adjustment and payments will be made to the miners to reflect this increase. But this has been dragging on more than expected because the Chinese government has intervened and has tried to play sort of our role in these negotiations and the three main producers have strongly resisted this.

Thank you, gentlemen. I appreciate your time.

Alan Silverman, Shields & Co.

I have two questions. The first one is why are rates up so sharply so far in May in your opinion? The Panamax rates?

Well, we have not seen a sharp increase in the sense that we have witnessed during the last two years, but what we feel has been driving now the rates on Panamax is a few of the factors that I mentioned earlier on and that is basically coal shipments primarily from South Africa. And at the same time we have the Northern Hemisphere, sorry, the Southern Hemisphere grain season absorbing some ships as well and there is a limited amount of congestion as well mainly in canals such as the Panama Canal draining some tonnage from the markets.

My secondly and I apologize, I got on a little late, if this has been discussed, but your operating expenses per day, what are they now compared to last year and are they the lowest of the public companies?

I will tell you that our daily operating expenses for Panamax -- let's start with Panamax -- are of $4,232 compared to the same period last year where they were $4,156, so 2% higher. But the Cape daily operating expenses are of $5,086, compared to $8,792, which means 42% lower. So overall for our fleet our daily operating expenses are $4,299, compared to $4,393, which are 2% lower this year compared to last year.

And compared to other people?

We consider that we are competitive with the other companies.

Thank you.

[Michael Kristatalo], [Inwood Capital].

Kalimera, gentlemen. I've got a few questions. First of all I'm trying to reconcile some of the comments you have made about port and canal congestion with the new supply absorption and I'm wondering if you are aware of any measures whereby we could try to understand how much of the existing supply is in fact sitting around waiting to unload or stuck in a port? The analog that I have seen here in the United States is in the trucking business there used to be two trailers for every tractor and that has expanded to four or five in the sense that the highways have become more inefficient and we are going to just in time unloading in warehouses. Do you have any thoughts or comments on that?

Unfortunately the industry is not so simple as to enable us to have the measures similar to what you just referred to to count the effects of congestion. What we can measure with great difficulty because congestion changes continuously in ports around the world is the approximate number of days lost on with ships waiting. Now, there are some statistics which come out every now and then from various shipping analysts which we try and source and check before we use them, but what we can say is that at the peak of the congestion at the end of 2004 and early 2005, just under 10% of all available bulk tonnage was tied up waiting at some port or another to either load or discharge.

Now, on the ship days lost, unfortunately we do not have up-to-date information. Our information ends up during the third quarter of 2005 and it relates also specifically to Australian iron ore ports, Brazilian iron ore ports and Australian coal ports and that is where most of the detailed figures which can be relied upon emanate from. From the Chinese ports we have great difficulty in getting reliable information. So this chart that I mentioned earlier relating to Australia and Brazilian ports we are going to update and if you wish we can come back to you later on with the numbers that we have received from those ports.

That would be great. Just in terms of port infrastructure spending if we're going to have 20% more ships over the next three years, that is gross before scrappage, and if we're going to have clearly some increase in demand as you cited the expectations for higher Chinese imports of coal and iron ore, is there any thought that these ports are going to be able to keep up or could we actually see that congestion statistic go up to 10%, 15%, 20% of the fleet?

There are significant projects for port expansion under way, but the main problem within the project is that they take a lot of time to complete. We believe that yes, there will be congestion and at the same time we have to remember that it is not sufficient to increase port facilities and shore facilities to know the discharge, you have to improve also the land transportation and infrastructure. And that could be one of the main problems in Australia with the railwagons and railway lines which lead to the ports where the coal and iron ore are being shipped from. So there will be bottlenecks if not at the ports which I'm sure there will be definitely on land because there the projects are much more complicated and also in many respects costlier to implement.

Okay, a few more questions if I may. I observed today that this deal that Quintana did has [Bungee] as the signature on all those charters and my understanding is that grain and fertilizer are clearly smaller in terms of tonnage than iron ore and coal, but I was wondering if you had any perception as to an increase in demand on the agricultural side over the next three or four years if in fact some of the recent trends continue to bear out? Namely that China has stopped exporting corn and is now importing corn likely from the United States and that Korea is no longer getting corn from China, that they are needing to do long haul procurement from the United States or from Brazil. Any read as to how that component of the dry bulk tonnage could increase over the coming few years?

Yes, there are certainly signs that it is increasing and we monitor closely May's shipments in particular and at the same time of course all the other grain products. Simply because the amounts are smaller than iron ore and coal that is mentioned earlier, people don't pay so much attention. But definitely there will be underpinning demand for ships and there is a change in the route structure for a lot of grain products, maize being one of them, and also the various other products used in the animal feed industry and we think that China again is going to play a role there and we are trying to gather reliable statistics in order to present in future conference calls.

Great. My last question I think you mentioned that there was a comparable ship to the Pantelis SP that just traded in the market to another Greek shipowner. And I'm trying to understand how they could pay a price it is 10% below what the Pantelis cost you and yet the charter rate is half? Are you saying that there are independent or nonpublicly traded company owners out there that are willing to do single-digit return on equity investment deals?

What I am referring to Formosa bulk [Duke], which was sold yesterday, a vessel which was built in 2001, 170,000 ton and built in Ishikawajama-Harima and it was sold by Formosa Plastic at $57 million to (indiscernible) management and that was the amount which was reported sold. And I have no doubt that that is correct. If you have that vessel which is free by the way in August, it will be delivered in August, or rather July/August, maybe the rate which I mentioned of $24,000 may be a little bit high. It may be $23,000 or $24,000. So that is correct.

Okay. Thank you very much, gentleman.

[Jack Garibaldi], [Royal Capital].

Good morning. I'm trying to get comfortable that you can maintain your current dollar level of your dividend, given that it exceeds adjusted earnings per share and exceeds free cash flow post maintenance CapEx. Can you just walk me through how the dividend gets maintained here at $0.35 that we can get comfortable and if not at $0.35 then how we can determine where it is headed?

As you know, our policy as it is clearly stated in our different prospectuses the dividend is decided by the Board of Directors after the proposal of the CFO. The dividend this quarter is of $0.345, as I mentioned earlier. What we have done first of all, we can not guarantee that it will be maintained at this level forever and you can understand that because it is a direct function of our available cash flow distribution and of our strategy.

Now the way this quarter it was calculated we have taken to catch items of the profit and loss accounts and as we have stated before, we have taken the total amount of our debt for the quarter which is $51.425 million and we have issued shares as if we have made -- we have calculated the dividend as if we had issued shares for this amount. In order to do that, we calculated a determination price as we always stated we would do of $12 and we issued [$4.499 million – 688 -- sorry shares]. Having done this calculation we came up with the number of $0.345, which is the dividend that we will distribute. I hope that is clear because there are a lot of numbers here and sometimes it is difficult to explain.

That is helpful. What is your quarterly or annual maintenance CapEx level?

Well, more or less our maintenance CapEx level is around 400 to 600 per day.

Okay, thank you.

I would now like to turn the floor over to Mr. Palios for any closing remarks.

Let me thank you again for participating in our conference call. We look forward to a bright long-term future in the dry bulk shipping market and we appreciate your interest in and support for Diana Shipping. Thank you.

This concludes today's conference call. You may now disconnect.