Diana Shipping Inc (DSX) 2007 Q1 法說會逐字稿

Good morning my name is Ray and I will be your conference operator today. At this time I would like to welcome everyone to the Diana Shipping First Quarter 2007 Earnings Conference Call.

(OPERATOR INSTRUCTIONS)

It is now my pleasure to turn the floor over to your host, Mr. Edward Nebb, President of Investor Relations for Diana Shipping. Sir, you may begin your conference.

Thank you very much. Welcome everyone. This is Ed Nebb, Investor Relations adviser for Diana Shipping, Inc. and I'm pleased that you could join us for the company's 2007 first quarter conference call. The members of the Diana Shipping management team who are with us today are Mr. Simeon Palios, Chairman and Chief Executive Officer, Mr. Anastassis Margaronis, President, Mr. Andreas Michalopoulos, Chief Financial Officer, Mr. Ionnais Zafirakis, Vice President and Secretary and Director, and Ms. Maria Dede, Chief Accounting Officer.

Before management begins their remarks, let me briefly summarize the Safe Harbor notice, which you can see in its entirety in the news release that we issued today. Certain statements made during this conference call which are not statements of historical fact are forward-looking statements that 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 expressed or forecast in the forward-looking statements please refer to the company's filings with the Securities and Exchange Commission.

And now let me turn the call over to Mr. Simeon Palios, Chairman and CEO of Diana Shipping. Please go ahead, sir.

Thank you, Ed. Good morning and thank you for joining us today. I am pleased to report to you about the strong financial and operating performance of our company for the first quarter of 2007. The excellent first quarter results were made possible by a strong trade market, our efforts to expand our fleet and our ability to ensure attractive time charter contracts with top-quality charterers.

Before the members of our senior management team share with you our market outlook and financial overview, I would like to highlight some of the company's key accomplishments during the first three months of this year. Net income for the first quarter was US$21.4 million, an increase of 83% compared with US$11.7 million for the same period of 2006.

The earnings growth is the direct result of the expansion of our fleet and our efforts to create a stable revenue stream. We declared a dividend of $0.50 per share for the first quarter of 2007 in line with our policy of rewarding shareholders with an attractive dividend. Including this dividend we will have paid out a total of approximately US$172.8 million to our shareholders since Diana Shipping became a public company in March 2005.

During the first quarter Diana Shipping continued the growth of our fleet while maintaining a very low average age for our ships. We announced plans to acquire three Capesize new buildings as well as the sale of an older Capesize vessel. These acquisitions as well as the previously announced vessel purchases scheduled for delivery in 2010 will expand the size of our fleet to 19 ships.

As the results of these transactions we will have a fleet with six Capesize vessels and 13 Panamaxes compared to nine vessels we operated in March 2005. The average age of our fleet excluding the ships on order for 2010 will be 3.1 years in November this year. This compares with an average age of 3.7 years at the end of 2006 making our fleet one of the youngest in the dry bulk sector.

We have taken advantage of market conditions to secure long-term time charter contracts that provide good earnings with ability for the next three to four years. Including the Capesize new buildings to be delivered in November of this year we will have eight vessels under long-term charters running through 2009 or beyond. Approximately 44% of our fleet capacity is committed to long-term contracts. I am also pleased to note that we have continued to expand our relationships with such prominent highly respected charterers as BHP Billiton and Cargill.

Finally, we have continued to strengthen the financial position of our company. Our initial follow-on offering generated net proceeds of approximately US$159.47 million allowing us to continue making accretive vessel acquisitions without burdening our balance sheet with excessive debt.

We have great confidence for the dry bulk shipping market in 2007 and are reasonably optimistic for 2008. We will continue to work to enhance shareholders value by taking advantage for market opportunities, increasing the earning capacity of our fleet and prudently managing our financial resources. With that I will now turn the call over to our President, Stacey Margaronis. Thank you.

Thank you, Simeon, and once again a warm welcome to all who have joined us for this latest quarterly conference call. We start by looking at what has happened in the dry bulk freight market since the beginning of the year. On January 2, 2007, the Baltic Dry Index stood at 4,421 and yesterday it closed at 6,262.

The Baltic Cape Index started the year at 6,026 and yesterday it closed at 9,107, an increase of 51%. The Baltic Panamax Index was at 4,272 and closed on the 2nd of May at 5,841, an increase of just under 37%. We will attempt to explain the reasons for this spectacular performance and try and ascertain if this strength is sustainable, and if so, for how far into the future. We will close by looking at the main risk factors in shipping analyst's predictions.

When we consider the main drivers of demand for dry bulk shipping, steel production features at the top of the list with all other factors appearing much less significant. According to shipping analyst Howe Robinson, in 2006 crude steel output increased by 105 million metric tons to reach 1.2 billion tons, an increase of 9% compared to 2005.

According to shipping analyst [Maersk] during the first three months of 2007 crude steel production reached 318 million tons, an increase of 10% over the first quarter of 2006. When we consider that just under half of all dry bulk trade is related either directly or indirectly to the steel industry we can see why we cannot afford to underestimate steel production's major influence on dry bulk markets.

It is no secret that what has been driving the continuously increasing demand for steel is gross domestic product and industrial production growth in China, India, the United States, Europe and Japan. According to Clarkson Research Services, China's gross domestic product grew 11.1% during the first quarter 2007 compared to the first quarter of 2006.

In Japan, GDP grew at 2.3% during the fourth quarter of 2006 while in Europe the rate was 3.3%. More importantly, however, for dry bulk shipping industrial production in China grew at 14.7% in 2006 and surged a further 16.25% during the first quarter of 2007 compared to the equivalent quarter in 2006. India's industrial production increased about 11% during the first two months of 2007 while in Japan industrial production grew at an average of 3.7% during the same period.

But let us look at how the above-mentioned developments affected the freight market during the first quarter. In doing so, we will start by dismissing one of the most popular theories for explaining the recent market strength. According to the Steel Business Briefing, iron ore stocks at China's main ports in February reached 42 million tons from 40 million tons in January. An interesting feature of the makeup of this stockpile shows according to Simpson Spence & Young, a reduction in the quantity of Indian iron ore reflecting Chinese importers' reluctance to pay for the higher Indian duties and preferring to pay for the longer haul ore from Brazil as a substitute.

Furthermore, according to Maersk, the seven main iron ore discharging ports in China reported a total of 28.5 million tons of stockpiles in mid-February 2007 while the figure was practically the same in mid-March 2007 at 28 million tons. These statistics can hardly support the theory that stockpiling to beat the 9.5% price increase effective April 1st was responsible for the strength in dry bulk rates during the first quarter of this year.

Looking at statistics from ports around the world we see that during the first quarter of this year there was a huge increase in port congestion especially at Brazilian and Australian iron ore and coal loading ports. According to Howe Robinson, in the Panamax and Capesize sectors combined, idle tonnage rose from about 6% of the fleet in early January to 12% by the end of March 2007.

In the Australian iron ore loading ports the queues stood at 31 at the end of January with the number reaching 56 by the end of March. It appears that weather-related interruptions and particularly Cyclone George are overwhelmingly to blame. According to Simpson Spence & Young, the average iron ore port delays have recently dropped by about a quarter.

In Brazil, the average number of vessels waiting to load iron ore rose from 12 in the fourth quarter of 2006 to 22 in the first quarter of 2007 with the brunt of the rise coming in March. In early January only eight vessels were waiting and by the end of March the figure had risen to 45. The difficulties there were associated mainly with the rainy season, also some port handling outages and above all, problems with the new [Bruguto] Mining project.

The average number of ships waiting to load at [Australian Cove] rose from 92 in early January to a staggering 156 by the end of March. According to Norwegian shipping analysts [Lorensen and Stomoco] to cope with this problem a new system has been introduced to match shipper tonnage entitlements to the declared Hunter Valley system capacity of 90.5 million tons. This implies a reduction of about 17 million tons against shipper nominations totaling 107 million tons.

The Port of Newcastle anticipates that as a result of the introduction of the system the queues will be reduced to about 39 vessels by the end of June 2007, a significant reduction from today's 68 ships.

The second reason for the first quarter of 2007 freight market strength relates according to Howe Robinson to the coal trade. The reduced Chinese exports of thermal coal have resulted in other Asian nations seeking longer haul suppliers whilst at the same time China itself has increased the imports and seen huge increases in coastal coal shipments. We will be expanding on this issue when we present the latest statistics on coal demand.

The third factor influencing the dry bulk markets over first quarter 2007 developed in March with the early and strong onset of the South American grain export season which created additional pressure on Brazilian ore freight rates as the last remaining Panamaxes which could have handled the balance of Cape cargoes were diverted to the more lucrative grain trade.

We can now look briefly at the overall demand patterns for the major bulk commodities and try and establish how they will influence the dry bulk freight market going forward. Starting with iron ore in the first two months of 2007 Chinese imports totaled 64.6 million tons, up by 25.6 year on year. According to Clarkson Research Services the projection for 2007 imports has been revised upwards and now totals 265 million tons representing a year-on-year increase of approximately 12%.

The forecast for total iron ore imports worldwide is 762 million tons, an increase of about 6% compared to last year. In coal the picture has recently become more interesting for shippers and ship owners. With almost all the data for 2006 now available it appears that total coal shipments from the leading exporters increased by around 60 million tons in 2006, a figure far larger than many analysts had estimated.

According to Howe Robinson the current outlook for 2007 saw further increases in shipments from all major international exporters with the exception of China and Russia. Howe Robinson's initial forecast for 2007 coal shipments, on the assumption that Chinese exports continue to fall, are for increases totaling 46 million tons offset by a combined fall from Russia and China of about 21 million tons, giving a net change of 27 million tons.

However, in ton-mile terms there will be further gains as both China and Russia supply close by markets and substitute supplies will have to come from more distant suppliers. The extent of coal's influence in the dry bulk freight market will be even greater than the above might suggest because of the massive growth in Chinese coastal shipping.

In actual fact Chinese coal export cargoes lost to the international market are increasingly not lost to the dry bulk market. Since China experienced problems with power shortages caused by bottlenecks in the inland coal transportation network the Chinese government has been pursuing the twin policies of upgrading the rail network and hugely increasing the coastal shipment of coal. Most of this coal is shipped in old Panamax bulk carriers from the northern coal mines to the power generating plants in the south and east of the country.

According to Clarkson Research the estimated total quantities of coal to be imported in 2007 should reach 726 million tons, up from 707 million tons in 2006 excluding the Chinese coastal trade referred to above. Furthermore the ton-mile affect also referred to earlier is not reflected in these figures.

Turning to grain, the USDA forecasts for grain trade for the 2006 to 2007 season show a net increase of about 3.2 million tons compared to the 2005/2006 season with the largest increases shown in soybean and soybean meal shipments. Overall, the grain trade influence is not a market driver but seasonally shifting patterns of shipment continue to exert a considerable influence. We have already mentioned how the expansion of Panamax grain shipments from Brazil played an important role in supporting the markets advance in March. That influence is expected to intensify in the coming quarter.

Looking at the overall picture, shipping analysts expect an additional 160 million to 170 million tons of dry bulk commodities to be shipped during 2007 compared to 2006 raising sufficient demand to absorb the new tonnage entering the market during this year. This is a good point to turn our attention to the supplier tonnage. Things have not changed much since our last conference call as regards the short and medium terms.

In the longer term, we have seen some increased contracting for all types of ships but especially for Capesize bulkers and Handymax vessels. The latest statistics show that there are 269 Capesize vessels on order of about 52.4 million metric tons dead weight for delivery over the next four years. From the above 8.6 million metric tons are scheduled for delivery in 2007, 7.6 million in 2008, about 11.5 million in 2009 and 24.7 million metric tons from 2010 onwards.

According to Clarkson's research the Capesize fleet is forecast to reach 128.7 million metric tons dead weight by the end of 2007, up by about 6.5% year on year. Clarkson's statistics also show that there are 315 Panamax bulkers on order of about 25.5 million metric tons dead weight for delivery over the next four years or so. From these 7 million metric tons will be delivered during 2007, 6.6 million metric tons in 2008, about 5.3 million metric tons in 2009 and 6.6 million metric tons from 2010 onwards. The Panamax fleet is expected to be 109.3 million metric tons dead weight by the end of 2007, up 6.7% year on year.

Given the current total effective utilization of the fleet every percentage tick change in the supply/demand balance has a substantial geared effect on dry bulk rates. On the Capesize bulk market items this effect is magnified even further through cargo splitting. Historically a new building order book of the size now facing the dry bulk market would cause a collapse in freight markets. Under the present circumstances it could be argued that if the underlying rate of demand size growth remains at about 6% rather than its previous average level of 3% per annum the order book is still inadequate to meet demand especially when account is taken of the fast increasing numbers of over-age ships some of which will eventually be scrapped thus reducing effective fleet growth.

Furthermore it is becoming increasingly clear that the expansion in Chinese coastal shipments principally of coal but of other raw materials as well are fast becoming one of the major supporting factors of dry bulk demand, which is not fully reflected in the available demand figures. Sentiment should not be ignored either and looking out into the future the market has become increasingly convinced of the sustainability of the demand side growth rates of the last 3.5 years. Ship values have, therefore, risen as have new building contract prices. This market structure is acting so as to increase the amount of shipbuilding capacity through the development of new yards and by dry cargo increasing its share of existing building capacity, which in some cases has resulted in the conversion of large tanker orders to bulk carrier orders.

This last issue has conveniently us to the risk factors we can see in this undoubtedly rosy scenario for the future of dry bulk shipping. We will only summarize these as we have referred to them in great length in past conference calls. Having done that, we will add one more which we consider to be a relatively recent addition to this list of risk factors.

We have mentioned about the potential increase in the supply of vessels through the creation of new shipbuilding capacity and to a more limited extent to all the switching in favor of bulk carriers as the new building contract prices rise. We have also identified the risks from the possible disruption of the industrialization process in China, India, Brazil, Russia, Vietnam and other nations which through their fast rate of industrialization have underpinned demand for the transportation of bulk commodities.

Such disruptions can be caused by several factors, most important of which, at least in the case of China is the growing inequality between the prosperous few Chinese living in the coastal areas, and the significantly worse off hundreds of millions living in the rural inland provinces. A significant slowdown in the economies of the United States and Europe would also adversely affect the export trades on the Asian economies thus reducing their growth rates of industrial production and gross domestic product.

More recently, we mentioned the deficiencies in the present international legal framework of financial regulation in controlling the systemic risk in world financial markets. We argued that even a short-lived interruption of international capital flows would seriously disrupt international trade and adversely affect confidence in the financial markets with devastating results for the shipping industry.

The latest addition to our list of potential risks has been the fast-driving Chinese stock market. According to a recently published article in the Economist magazine titled, The People's Republic in the Grip of Popular Capitalism, a fast-growing number of low-income Chinese investors are opening stock brokering accounts at the rate of more than 200,000 a day. Some economists fear the share prices on the Shanghai Stock Exchange are moving far ahead of company's earnings to a degree scarily reminiscent of Japan in the late '80s just before the market crashed.

The ever-growing involvement of low-income groups such as students and pensioners could make a crash more painful. If this stock market bubble were to burst it would have a much more significant impact on social stability than any previous downturn in the stock market's 16-year history. We hope that the Chinese government will act in time to effectively stop matters running out of control. Because of the importance of this risk factor we have added it to our list and will remain vigilant in case any signs of weakness emanate from the Chinese financial markets, which could affect shipping. I will now pass you on to our CFO, Andreas Michalopoulos who will provide you with the company's financial highlights for the first quarter of 2007. Thank you.

Thank you, Stacey, and good morning. I'm pleased to be discussing today with you Diana's operational results for the first quarter 2007. Net income for the first quarter 2007 amounted to $21.4 million, an increase by $9.7 million or 83% compared to $11.7 million for the same period of 2006. This increase is attributable to increased average hire rates and also to the enlargement of the company's fleet that went from 13 vessels at the end of the first quarter of 2006 to 15 at the end of the first quarter of 2007.

The earnings per share of Diana Shipping amounted to $0.40 compared to $0.26 for the same period of 2006. Voyage and time charter revenues increased by $14.3 million or 59% to $38.5 million in the first quarter of 2007 compared to $24.2 million in 2006. The increase is attributable to increased average hire rates and the increase in the number of vessels in the fleet after the acquisition of the Naias and the Sideris GS in 2006.

Ownership days were 1,350 for the first quarter of 2007 compared to 1,146 in the same period of 2006 due to the enlargement of the fleet mentioned earlier. Fleet utilization was 98% in the first quarter of 2007 and 99.6% in the same period of 2006. The daily time charter equivalent rate for the first quarter of 2007 was $27,283 compared to $20,165 for 2006.

Voyage expenses decreased by $0.1 million or 6% to $1.7 million in 2007 compared to $1.8 million in 2006. The decrease in voyage expenses is attributable to the elimination of the 2% commission of the management company after its acquisition as of April 1, 2006. This decrease was partly offset by increased commissions due to the increase in revenues.

Operating expenses increased by $1.6 billion or 32% to $6.5 million in 2007 compared to $4.9 million in 2006. The increase in operating expenses is attributable to the 18% increase in ownership days resulting from the delivery of the new vessels to our fleet and also to increases in crew costs and repair.

Daily operating expenses were $4,830 in 2007 compared to $4,299 in 2006 representing an increase of 12%. Depreciation and amortization of deferred charges increased by $1 million or 26% to $4.8 million for the first quarter of 2007 compared to $3.8 million for the same period in 2006. This increase is attributable to the increase in the number of vessels to our fleet and was partly offset by a reduced depreciation expense due to the agreement to sell motor vessel Pantelis SP.

Management fees amounting to $0.6 million for the first quarter of 2006 have been eliminated from our consolidated financial statements in the first quarter of 2007 due to the acquisition of our fleet manager. However, the acquisition of our fleet manager has caused an increase in general and administrative expenses which for the first quarter of 2007 amounted to $2.2 million compared to $0.8 million in 2006 representing an increase of $1.4 million.

Interest and finance costs increased by $1.3 million to $2.1 million for the first quarter of 2007 compared to $0.8 million for the same period in 2006. The increase is attributable to interest costs relating to long-term debt outstanding during the period, which did not exist in the same period of 2006. And to interest relating to the financing method of accounting for leased property of the management company.

Turning to dividend policy, for the first quarter of 2007 the Board of Directors has decided to declare a dividend of $0.50 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, dry docking reserves, continued liabilities, and capital needed to support the company's operations.

Pursuant to our amended dividend policy on September 22, 2006 the first quarter dividend had not been increased with interest expense and is not calculated as if we were financed with equity for the outstanding debt, as the qualifying debt on our balance sheet did not exceed $150 million.

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

Thank you. (OPERATOR INSTRUCTIONS). Our first question is from Justin Yagerman of Wachovia. Please go ahead.

This is actually Tim in for Justin this morning. How are you gentlemen?

Hi, Tim, fine.

Great my first question is obviously you were able to capitalize on the strength in the Capesize market this quarter by making a few Capesize acquisitions. Looking forward do you still see as much opportunity for vessel acquisition in this special class? Or do you think there's the potential for more attractive acquisitions in say the Panamax or [Camsurmax] vessel class?

Well, as you know, the Capes have established a price of themselves regarding their value. So the value today of a fairly prompt Cape with delivery let's say within 2007 is approximately $810 million to $815 million. So today the time charter rate for a Cape for five years is approximately 55 -- depending of the quality of the charterer it's between $52,000 and $55,000 daily. That gives you an [excellent] return. Now this return, I think, is better than the return you are getting for a similar vessel, a Panamax vessel and for the same long-time charter period. So I think the preferred size today is definitely the Cape. And as to regards whether there are ships like that in the offering, yes there are.

Okay and we've also been hearing that the Port of Newcastle will likely reduce production capacity by up to 20%. How you do you think this will impact potentially ton-mile demand? Is there enough capacity in Indonesia and Hay Point and Gladstone to pick up the slack. Or do you think there's the potential for increased imports to China from Colombia and let's say South Africa?

What is true is that whatever is going to happen whether the first is going to take place or the second it will be beneficiary for increasing the charter rate of the ships.

The capacity to supply whatever will be missing from the Newcastle area I believe exists in most of the areas that you mentioned, but we don't know to what extent the speed for loading the ships will be there in order to efficiently supply the cargo. So the shippers will go to the most efficient supplier, taking into account both the length of the voyage, the speed of loading, the quality of the cargo, and the price. But as Mr. Palios said, any of the areas that you mentioned can be used, and if they are used we feel it's going to be beneficial to shipping rather than the opposite. But we have some doubts as to whether a 20% reduction is actually going to actually come through at the end. But it has been talked about, yes.

Okay, thanks.

It has been talked about but don't forget that the majors have contracts of affreightment to fulfill. And they cannot very easily change the destination so they have to fulfill their contracts of affreightment and I doubt whether they will be capable of changing the destination all that easy.

Okay and just I guess one last question for Andreas, looking forward how should we look at the G&A run rate going forward? It looks like it's up close to $2.2 million versus the fourth quarter. How should we look at that going forward?

I think as we have stated previously we should look at that as being steady at this level. We have to mention that during this quarter we also had the dollar/euro rate, you know, and I have mentioned before that on our P&L this is the only line that is basically mainly euro-denominated. And if you compare to last year's rate you will see that the dollar/euro rate was -- we would have had G&As of 8% lower than what we have now. So it's fully in line with what we have budgeted, the number that you see, and we have budgeted the same number for the quarters to come.

Okay that's all I have. Thanks so much.

Thank you. Our next question comes from Scott Burk of Bear, Stearns. Sir, please go ahead.

Thanks good morning.

Good morning, Scott.

With a lot of the new vessels you have acquired you've put on these longer term four- and five-year charters. Is there any change to your desire to be more or less spot-oriented in terms of your charter coverage? And if so what is kind of your view -- what's kind of an optimal amount of charter coverage to have in the current market?

Well if you -- see we have a number of vessels which are coming open by the end of this year, we have the Oceanis which is coming open in about a month's time. We have the Naias, which is coming open until September this year and we have the Thetis also coming open the beginning of October if they use their optional period they have. We have also the Dione coming open by January and we have also the Erato coming open by January. Now if I add to those vessels, which I mentioned, the Oceanis, the Naias, the Thetis, the Dione and the Erato plus the Nirefs which is on four average TC we have six ships which are on the spot market.

So I think the way we have covered the company it's fair to say that we will go spot on those ships.

So it stays spot on the remaining six ships that leaves I guess about 13 that would stay on longer contracts?

Yes, something like that.

Okay and then going forward that would be a kind of a similar amount of spot cargoes we would expect going forward or spot exposure going forward. Then once you get into 2008 and other ships are rolling off is there a desire though for coverage or it's just dependent on how many -- the vessel acquisitions that you've done?

Well, the idea is to adjust basically the ratio of spot to long-term charter vessels depending on how we feel the short-, medium- and long-term freight market will behave. It's a continuously adjusting basically percentage, which depends on our perception about the future of the market. And today this is what we consider the optimum. Now if we speak early next year I am sure that it's going to be different but I can't I think foresee now whether it's going to be different in favor of the longer term employment ships or the spot vessels.

Very good, okay thanks a bunch. And then one other question about the -- let's see, I guess that's it for me. Thanks.

Thank you.

Thank you, our next question comes from Doug Mavrinac with Jefferies & Co. Please go ahead.

Great thank you, good afternoon. Just had a quick question on the market in general. I saw earlier today the Indian government reduced their iron ore export taxes on some of their lower grade ores. Can you share with us your thoughts on how that may affect the dry bulk fleet in the near term? Any sort of shifts in loadings and what not that you may expect as a result of that?

Well, in the near term it's unlikely to have any effect because most of the near term shipments are the subject of contracts which have been signed already or will be signed imminently. So the Indian government possibly -- I am not sure what they are thinking, decided that they overplayed their hand on the export duties and what I mentioned earlier about a lot of South American iron ore being in the ports of China compared to the previous quarter and the quarter before and compared to the Indian origin iron ore has possibly scared the Indian government that the Chinese have very quickly found a substitute for the iron ore they were buying from them. So they're trying now to adjust and fine-tune the export duty to a degree that they would divert sufficient iron ore for the domestic steel industry but at the same time not lose completely their foreign exchange income from places like China and their other foreign customers which they might need in the future.

Okay, I mean but would you expect maybe more coming out of western India where most of the lower grade comes from as a result?

Well, there might be a little bit more but we're not in a position to know what mostly the Chinese and other, of course, buyers of iron ore will do. Some people, once they source their commodity from a certain supplier, they tend to stick with them and they won't go back because the Indian government made a small change in the export tariffs. Others are more susceptible and more price sensitive and they will. I think the effect will be minimal if I were to take a guess.

All right, great. Thank you very much, Stacey.

You're welcome.

(OPERATOR INSTRUCTIONS). Our next question comes from Adam Thalhimer of BB&T Capital Markets. Please go ahead.

Good morning gentlemen, most of my questions have already been asked but I just had one on vessel pricing. Are you guys comfortable with the prices that you're seeing out there in the marketplace?

Well, I think that you are if you think that also if you want you can charter the vessel for a five- or four-year charter and the return you are getting is in line with what you are paying regarding the price. So if you think about it is perhaps better to pay for a Cape today $110 million and charter it here at $52,000, $54,000 daily for five years with a first class charterer doesn't pay for the same ship, $50 million or $60 million and charter here at $20,000 daily for four or five years.

Okay great. That was it, thanks guys.

Thank you. There appears to be no questions at this time. I would like to turn the floor back to Mr. Palios for any closing comments.

Well, I wish to thank you again for your support of Diana Shipping. We are proud for our results for the first quarter of 2007 and we look forward to continued strong performance during the remainder of the year. Thank you very much.

Thank you. This concludes today's Diana Shipping conference call. You may now disconnect.