Diana Shipping Inc (DSX) 2009 Q1 法說會逐字稿

Greetings, everyone. This is Ed Nebb, Investor Relations advisor for Diana Shipping. I want to welcome you to the Company's 2009 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. Ioannis Zafirakis, Executive Vice President and Secretary; 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 we issued earlier today. 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 expressed or forecast in the forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission.

And, now, without further ado, let me turn the call over to Mr. Simeon Palios, Chairman and Chief Executive Officer of Diana Shipping.

Thank you, Ed. Good morning, and thank you for joining us today. I am pleased to report that Diana Shipping once again delivered a profitable performance, despite the challenges and uncertainties that have adversely impacted many sectors of the global economy.

Throughout the current period, we have continued to strive to execute on our core strategies, managing our fleet for maximum revenue visibility, pursuing relationships with high-quality charterers, and maintaining our strong balance sheet. Especially in the present phase of the business cycle when worldwide economic conditions remain precarious, we believe that these time-tested strategies will enable us to produce solid results for shareholders during the months ahead.

Now I would like to point out some of the highlights of the 2009 first quarter. Then the members of our senior management team will review our market outlook and discuss the financial results in greater detail.

Net income was $34.8 million, with voyage and time charter revenues of $62.7 million for the first quarter of 2009. This compared to net income of $53.2 million and voyage and time charter revenues of $78.9 million for the same period a year ago.

While prevailing time charter rates have declined as compared with the 2008 period, we are pleased that Diana has continued to obtain profitable charters from top-quality charterers. Since the start of this year, we have chartered the Danae, Coronis, Calipso, and Clio. With respect to the charterers, we have extended our relationship with Cargill and further diversified with Augustea Atlantica and TPC Korea.

Our revenue visibility is quite strong. Only two of our vessels have charters expiring in late 2009, while the rest are chartered through 2010 and beyond. By following a strategy of balancing longer- and shorter-term charters, we have achieved an average daily time charter rate of $34,898 for the first quarter, which covers daily vessels' operating expenses by a factor of more than six times.

Diana's balance sheet continues to be one of the strongest in our industry and improved further during the first quarter. Our cash position at March 31, 2009 was $104 million, up significantly from yearend.

Last month, we announced our agreement to acquire Gala Properties Inc. from a related party. Gala is the owner of a newbuilding, Capesize, dry bulk carrier with an attached time charter. In exchange, we will provide the owners of Gala with our interest in an identical vessel that was not yet chartered and had a later delivery date. This transaction should generate approximately $97 million of gross revenues for the minimum-scheduled period of the charter and at an incremental cost to us of approximately $15 million. The closing of this transaction took place earlier today.

Looking ahead to the balance of 2009, we do not underestimate the challenges of the current economic environment. Nevertheless, we have confidence in our strong balance sheet, prudent fleet management and chartering strategies, as well as excellent relationship with the world's leading charterers.

In recent quarters, I have noted that periods of great challenge also bring great opportunities. We continue to have confidence in Diana's ability to deliver solid performance in the near term, as well as capitalizing upon these opportunities to create value for the long term.

With that, I will now turn the call over to our President, [Stacey] Margaronis. Thank you.

Thank you, Simeon, and a warm welcome to all who have joined us in this conference call.

During the first quarter of this year, the turbulence in the world economy has continued to exert a profound influence on the dry bulk shipping freight market. However, during the first three months of 2009, the dry bulk market managed to rebound more than anticipated by most shipping analysts, with average spot rates more than doubling for some types of ships.

The Baltic Dry Index has started the first quarter of 2009 at $773 and yesterday closed at $1,897. The equivalent figures for the Baltic Cape Index were $1,361 and $2,528, respectively, while, for the Baltic Panamax Index, were $540 and $1,702.

There is no doubt that the future course of the freight market will be closely linked to the worldwide economic growth and corresponding demand for steel. According to the IMF, world output is expected to contract by 1.3% this year and expand by an anemic 1.9% during 2010. This latest forecast comes as Japan reported its first quarterly trade deficit in nearly three decades for the year to March 2009, highlighting the global downturn's effect on the world's second-largest economy, which remains heavily reliant on exports.

As regards steel production, this came to just 92 million tonnes in March, a 24% drop year on year. In the first quarter of 2009, world steel production was 246 million tonnes, a 23% fall compared to the first quarter of 2008. Only China showed a slight increase in steel production during the first quarter of 2009 of 1.4% year on year, at 127 million tonnes.

Contrary to a number of reports, some raw materials for the production of steel are not actually costing much less these days than, say, a year ago. For instance, thanks to a 40% export tax imposed by China on metallurgical coal, the price of this commodity today stands at around $430 per metric ton, which is roughly the price of the hot-rolled coil itself for the production of which it is used. It should be kept in mind, however, that the ratio of coking coal to HRC production is about 0.6 of a ton of coal for 1 ton of steel.

As regards iron ore prices, even though the spot price of iron ore exported by India to China has come down by about 65% to 70% from its peak price of $1,150 per tonne, in recent months, the long-term price of iron ore charged by the National Mineral Development Corporation to its domestic customers has declined a mere 25%.

In short, steel companies can hope for operational viability only if long-term prices of iron ore, coking coal, et cetera, are brought down by an average of more than 70% from their peak levels of last year. Chinese and Japanese steel mills, which generally lead the negotiations for long-term pricing of the raw materials used in the production of steel, with the mining majors in Brazil and Australia, have no option but to push hard for getting the miners to accept reality and agree to steep cuts in prices. After all, if the steel mills go down, that would spell doom for mining companies as well.

According to Bloomberg, the Rio Tinto group offered a temporary 20% discount to Asian steelmakers after the annual contract negotiations stalled. However, according to Citigroup, this offer falls short of the 40% to 50% cut that Chinese steelmakers are demanding because of falling steel prices.

However, it is not all gloom and doom. In China, record bank lending in March, a narrowing decline in power generation, and improving industrial production growth, which was 8.3% in March year on year from 3.8% in January and February, demonstrate that government spending is stimulating industrial activity.

Iron ore imports reached a record high in March for a second consecutive month. However, soaring imports which have underpinned the Capesize freight market during the first quarter have not been matched by corresponding increases in steel production. The latter was up only 2.4% in the first two months of the year. This has, in turn, led to a sharp increase in the iron ore stockpiles in China's ports, which reached 67 million tonnes by mid-April 2009.

To make matters worse, according to Imarex, more iron ore is expected to land at Chinese ports over the next few weeks as an extremely large amount of iron ore was purchased in February at relatively cheap prices. It remains to be seen if this iron ore will quickly make its way to Chinese steel mills or end up staying at ports for an extended period of time.

Turning now to the most credible forecasts of seaborne demand for the major commodities shipped in bulk, we wish to summarize these as follows.

On iron ore, Clarksons are forecasting that overall transportation of iron ore during 2009 will reach 792 million metric tons, a drop of 6% from 2008. Howe Robinson are more optimistic and are forecasting a drop of only 2.5% in iron ore shipment.

On coking coal, according to the latest report from the Iron and Steel Association, world steel production will certainly shrink during 2009. With this decline comes a reduced demand for coking coal used in the steelmaking process. Clarksons are forecasting the transportation of about 197 million metric tons of coking coal during 2009, a drop of 10% compared to 2008.

BHP Billiton is also forecasting weak demand in 2009 for metallurgical coal. The company expects shipments from coal ports on the east coast of Australia to mills in Asia to be affected later this year.

On steam coal now, the Clarksons' estimate for transportation of steam coal during 2009 is at a steady 572 million metric tons, a drop of just 1% compared to last year. Again on a more optimistic note, Howe Robinson expects overall seaborne coal trade to shrink during 2009 by only 2.5% compared to 2008, reaching 857 million metric tons, significantly more than the aggregate forecast by Clarksons of 769 million metric tons.

On grains, here, Clarksons expects world shipments to reach 227 million metric tons during 2009, a reduction of 5% compared to 2008. The overall expectation of Howe Robinson for the grain trade in 2009 is that volumes will remain flat compared to the earlier year. However, it should be kept in mind that, as in previous years, the grain trade will play a side role in the future scenario affecting demand for the transportation of bulk commodities.

Turning to the future supply of dry bulk tonnage, there are two main themes worth looking at. The first is the huge increase in scrapping, and the other is the cancellation of newbuilding orders.

Starting with the simpler of the two, scrapping, according to Simpson Spence & Young, during March alone, about 3.7 million tons deadweight of ships were scrapped. Most of these were non-tankers, and no such number has been scrapped since May 2003.

Nearly 5 million tons deadweight of dry bulk vessels have been scrapped so far this year. According to Clarksons, 13 Panamaxes and two combination carriers of this size range have been scrapped as of April 1, 2009. During the same period, a further five Capesize bulkers went to the scrap yards, together with 81 Handysize and Handymax ships.

If scrapping continues at this rate through the year, it is estimated that about 23 million tons deadweight of dry bulk vessels will have been scrapped, which is over four times the tonnage scrapped during 2008. According to Howe Robinson's assumption, nearly 25% of the existing dry bulk fleet will be scrapped over the coming three years. The effect among the different sectors would be uneven, due mainly to the different age profiles of each sector.

During the next three years, around 21% of the Capesize fleet should have been scrapped, with 17% of the post-Panamax fleet and 20% of Panamaxes going to the scrap yard over the same period. Not surprisingly, 27% of Handymaxes and 39% of Handysize vessels will have been scrapped as well.

Turning to newbuilding orders, here the picture is much less clear. By deadweight tonnage, about 70% of the world dry bulk fleet is on order. From this total, about 105% of the Capesize vessels are on order, and 52% of Panamax bulkers. According to Howe Robinson and Maritime Strategies International, the total bulk carrier order book will suffer slippage of 11.4% during 2009, 15.7% during 2010, and about 23.5% during 2011. As regards cancellations, they estimate these at around 6.7% for 2009 and around 22% per annum for each of 2010 and 2011, respectively.

When these numbers are applied to newbuilding orders, they produce the following forecasts for actual deliveries during 2009.

For Capesize bulkers, 30.41 million tons deadweight, representing 21.27% growth. For post-Panamax vessels, 4.63 million tons deadweight, with growth of 29.25%. And, for Panamaxes, 6.14 million tons deadweight, showing a 6% growth. The combined Panamax and post-Panamax fleet will grow by about 9% this year. Based on these assumptions, overall, gross dry bulk fleet growth during 2009 will be in the region of 15%.

According to Clarksons, during the first quarter of this year, the net growth of the dry bulk fleet was only 6,839,000 tons deadweight, which was just 1.6% of the existing fleet at the end of 2008. Unfortunately, however, the estimate is that the dry bulk trading fleet will grow to 466 million tons deadweight by the end of 2009. If this number materializes, the net growth will stand at about 10.5% year on year.

With the anticipated weakness in dry bulk demand, this does not bode well for the medium term developments in the freight markets. It is important to realize, however, that, with canceled orders, it is impossible to establish the precise number of vessels that will never actually be built.

The reason is that some well-established yards in China and South Korea, most of which are also financially supported by banks, have announced plans to build a number of ships whose contracts have been canceled by buyers and then try and trade them for their own account with the intention of selling them later at more profitable price levels. This means that these ships will not disappear but will compete for business with the other newbuilding tonnage, thus delaying the recovery in the freight markets.

As regard the short and medium term, we agree with the views expressed by Howe Robinson that, during the first quarter of 2009, the market recovered as trade recovered from particularly depressed levels. From March onwards, the start of the South American grain season has given the Panamax market further seasonal support. However, eventually, demand will adjust to lower levels, unless we witness a spectacular and unexpected growth in world economies.

Therefore, beyond the short-term optimism, it is difficult to envisage a scenario not centered on a sharp freight market recession. The length and depth of this recession will depend on the evolution of the global economy. Even though we agree with Howe Robinson that growth in China and India have a brighter outlook than that in the developed world, ultimately the shipping world cannot influence such developments.

However, the same cannot be said about the order book. Many ship owners and shipping analysts have not come to grips with the fact that an order book on the current scale will not only spell disaster for the shipping markets in the years ahead but could also produce a wave of destruction for banks to rival the subprime crisis.

According to Arrow Shipbrokers, in May 2008, the top ten ship-lending institutions had a portfolio of $240 billion. The next 15 largest banks had a combined portfolio of $105 billion. The outstanding value of today's order book exceeds the combined shipping portfolio of the top 25 shipping banks. These banks will have great difficulty in financing these acquisitions even in a normal credit environment.

Now, apart from the credit crunch, the rapid decline in values has led to a large number of covenant defaults in existing shipping loans. With the market capitalization of most shipping banks shrinking by between 40% and 70% since last May, one wonders how banks will manage to double the size of their loan portfolios within the next three years to finance the newbuilding order book.

Either owners will have to come up with the additional equity required in order to fill the void left by the banks, or many orders will have to be canceled and the deposits forfeited by the shipyards. Ironically, this perhaps may also spell disaster for shipyards in the years to come.

There is an urgent need in the interest of all shipping market participants to responsibly reassess future commitments in a manner which will permit the orderly development of shipyard capacity in the decade ahead. Unless this happens soon, the road to recovery will become littered with many more bankruptcies, and they will not just be of ship owners.

As mentioned in our previous conference call, the challenge for most shipping companies will be to survive over the next two years or so, and then optimism will hopefully return to the industry. In the meantime, opportunities will present themselves to acquiring expensive assets with significant capital appreciation potential.

We firmly believe our Company is certainly well positioned to take advantage of this period of freight market and asset value weakness. Our generally strong balance sheet with a strong cash position and secure cash flow from high-quality time charters will provide us with the ammunition to purchase assets as contrarians when pessimism reaches its peak, as the majority of players convince themselves that for dry bulk shipping things will be at least as bad as they were back in the 1980s.

I will now pass you to our Chief Financial Officer, Andreas Michalopoulos, who will provide you with our Company's financial highlights for the first quarter of 2009.

Thank you, Stacey, and good morning. I'm pleased to be discussing today with you Diana's operational results for the first quarter ended March 31, 2009.

Net income for the first quarter amounted to $34.8 million, and the EPS of Diana Shipping amounted to $0.47. Voyage and time charter revenues decreased to $62.7 million, compared to $78.9 million in 2008. The decrease is attributable to reduced average hire rates, which was partly offset by the increase in the number of available days after the acquisition of the Norfolk in February 2008.

Ownership days were 1,710 for the first quarter of 2009, compared to 1,688 in the same period of 2008. Fleet utilization was 98% in the first quarter of 2009 and 99.8% in 2008.

The daily time charter equivalent rate for the first quarter of 2009 was $34,898, compared to $45,191 for 2008.

Voyage expenses were $3.2 million for the quarter. Operating expenses amounted to $9.4 million and increased by 2%. The increase is attributable to the 1% increase in ownership days resulting from the delivery of the Norfolk and increasing crew costs and repairs, which was partly offset by decreased insurance and other costs. Daily operating expenses were $5,521 for the first quarter of 2009, compared to $5,458 in 2008, representing an increase of 1%.

Depreciation and amortization of deferred charges amounted to $10.8 million for the first quarter of 2009.

General and administrative expenses increased by $0.5 million, or 14%, for the first quarter of 2009 to $4.1 million, compared to $3.6 million in 2008. The increase was mainly attributable to compensation costs on restricted stocks and legal fees.

Interest and finance costs decreased to $0.8 million for the quarter, compared to $1.5 million in 2008. The decrease was attributable to reduced average interest rates during the first quarter of 2009 compared to 2008.

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

(Operator Instructions). Jon Chappell, JPMorgan.

Stacey made some comments at the end of his remarks about distressed asset opportunities and Diana's position to take advantage of that. Simeon or Stacey, could you maybe talk about where you're seeing asset values right now and then the returns that you're seeing based on the current charter market? And, really, when is Diana expecting to be willing to find some good opportunities? Are we talking the next month or maybe through the summer or the fall?

Well, Jon, you realize that three months ago when we talked again, we were three months behind of what we are today. We are closely watching the markets. I think that the prices are somehow coming down as we are expecting. And we are watching the possible yards that are going to have a number of ships to sell very, very closely. I think we are three months later than what we were three months before.

Do you think the pessimism has reached its peak yet? It seems like a lot of the macroeconomic numbers have shown some stabilization, and, obviously, the equities have started to move. But do you think there's more pain as far as ship owners' perspective that will allow those opportunities to come later this year?

I think that the yards will be more willing to discuss now than what they were before because their order book comes to an end. And I think that you have to understand that, since last September, there is no new orders in the books. So September is eight months ago, and they're coming to an end, the orders.

Jonathan, as far as pessimism goes, because we try to monitor that closely, our feeling is that we are not there just yet. There is -- first, to start, there has to be a realization, which we feel will be coming over the next few weeks or months, that the fortunes of the dry bulk shipping market might become decoupled from the fortunes of the equity markets and, also, about the future of world growth.

In shipping, we have our own issues to cope with, which I tried to summarize earlier on, from the supply side. And those have -- they're not completely independent, but they won't go away purely because the equity markets might recover and world economies might start showing some sort of growth. And that is what we are monitoring closely -- this decoupling. When it comes, then we might have renewed pessimism in the shipping industry, which will not be matched by pessimism in the equity markets necessarily.

Right. I agree with that. And, then, you have a little over $100 million of cash on your balance sheet. That could probably at today's prices, if we knew what today's prices were, help you buy a couple of assets. But, if the right opportunity came along to really make a transformational acquisition, have you been in discussions with your banks? Stacey laid out a scenario where the banks really aren't lending right now. But what's Diana's capabilities to add leverage for the right acquisition?

Well, I feel we're in a fantastic position to get a further leverage from the banks. And, although there are very few banks lending money, I think that we can manage to get some loans from existing banks. There is no problem there.

What type of leverage would you go to? Considering this might be the trough of the market, would you go up to 50% or 60%, or would you be more comfortable in the, maybe, 30% to 40% range?

Well, 50/50 I think is okay because the values are much, much less now.

Jon, if I may add, don't forget that we have said that our intention is to stagger our purchases and, therefore, slowly leverage our Company. We don't intend to have, at least at the moment, this kind of transformational type deal that you were mentioning earlier but more to sort of stagger our purchases, because we know that you can never hit the bottom the same way you can never hit the top.

Now, the ideal for us would be to arrive to 70% or even 80% leverage at the time where the cycle really shows clear signs of recovery. That would be the ideal.

And the last thing I want to mention is that, as we've said before, few banks are lending, and those banks are lending selectively. And we are fortunate enough because of the strategy that we have had in our balance sheet and the management of the Company to have the banks coming to try to lend to us versus probably other players.

Okay. That's very helpful. Thank you, Simeon, Stacey, and Andreas.

Justin Yagerman, Wachovia.

I wanted to follow up on a couple of the questions that Jon asked. Stacey, the scrapping and slippage numbers that you went through in your prepared remarks were fairly low, I guess, relative to maybe some of the expectations that are out there in the market. Is that what colors your guys' view right now? I mean, we've seen Panamax transactions at about the $30-million level. That's 60%-plus off of peak.

I guess, two parts to the question. Do you believe those numbers are what are actually going to take place? And, if so, how much more asset downside would that imply, in your opinion?

Well, to be honest with you, Justin, I think the further out we go in time, the less reliable the numbers and the forecasts. For 2009, which, for us, is the pivotal year, by the end of which we will have received very clear signs as to where we are going on the supply of newbuilding ships, we're going to see numbers, we feel, very close to what I just tried to summarize. And, therefore, what we're going to see is something like 10% net increase in the dry bulk trading fleet.

Now, if that increase does not negatively affect the freight market, then we have to look again at our assumptions not only on the supply but also on demand and reassess the whole situation as regards the balance and when it will come.

So, all I can say is that we put quite a lot of confidence on the numbers I described for 2009; but, for 2010 and 2011, of course, less confidence. But don't forget that as the world economy improves and the credit markets loosen up, the problems I described about the financing of the newbuildings are going to be affected as well.

Therefore, the 2010 and '11 deliveries become even more uncertain because we don't know how credit will affect the rate of cancellations of these vessels. So, all I can say is that, for 2009, we stand by these numbers. 2010, we put a small question mark and, 2011, a slightly larger one.

That makes sense. So, I guess, by the end of this year, that's when you'd be looking and trying to reassess and reevaluate. Do you think we'll have better order book data at that point?

I think so. Simeon?

Well, I think that you have a lot of buttons to press here. First of all, you have the appreciation, which is a key issue. And you can do that for certain ships when the time comes. But, in the interim, you have the possibility and you have the luxury to have charterers who are demanding from us certain types of ships.

So, that is not going to be 100% appreciation, but it could be an intermediary between the appreciation of 100% and a banking deal. So we can play in different scenarios here.

The key thing is to have a strong balance sheet to do your eventual purchases, and we are in a fantastic position to be in such a good position to do our program in a very, very efficient manner.

That's helpful. Thanks. Andreas, on the utilization, not a big drop off, obviously, but was that just the dry docking of the Clio and then putting that onto a spot charter? What was going on with utilization in the quarter?

The utilization of 98%, basically, the difference is the 24 -- it's 34 days in total. And the big difference comes from 34 in total. 24 days are due to the Calipso and to the Atlas charter that was not in place, so that was off hire. And that's the main difference there.

Got it. And, can you remind us of what dry docking you guys have going forward?

Yes, of course.

We have two dry docks to perform. One is the Protefs, and the other is the Erato. The Protefs is due for dry dock in August 2009, and the Erato, the same month and the same year. Those are the two for 2009 -- the two ships for 2009.

Do you have days and approximate costs for those?

Well, the cost -- because the vessels are new, we have no changes of plates. Therefore, they are going to be straightforward painting and cleaning the bottom. That's the main thing, which is not going to be more than $200,000.

Andreas Michalopoulos Together with that, I must say that we have also two intermediate surveys that are due. One is Sideris GS, due at the end of the year, and the other one is Semirio, due at the end of the year. That's for intermediate surveys.

Okay. That's all I've got right now. Thanks.

Greg Lewis, Credit Suisse.

My first question is regarding the order book. Clearly, there haven't been any orders. But, from a historical perspective, if we were to sort of look back five, seven, eight years ago, what was the typical turnaround time from ordering a ship to taking delivery of a ship?

How many years ago?

Say, like, in 2002, 2003.

Well, in 2003, for a Panamax, you will consider two years. Today, it's approximately, depending from the yard, about, maximum, eight months for a Panamax.

I'm sorry; so I could order a Panamax today and receive it in eight months?

(multiple speakers) which yard.

Really, what I'm trying to get at is the order book sort of ballooned up to three-year waiting time. And we haven't seen any orders in a while, but -- yes, we can sort of -- the ship owners actually have anywhere from, say, 6 to 10 to 12 months just to sort of put their order book back into, say, a historical type of delivery time. Would you sort of agree with that statement?

Well, assuming that there is space in the yard today, you can order a vessel today and get it in eight months. But, if there is no space in the yard, then you have to add it when the yard will have space.

Okay. Great. And then just one follow-up. It looked like SG&A spiked up a little bit in Q1 versus Q4. When we look at SG&A going out through the rest of the year, where should we sort of expect that number to be?

I think you should expect it at the same level as the first quarter. It's more realistic, and it's due to the higher compensation costs on restricted stocks, which would be the same throughout the quarters from now onwards.

Okay. Thank you very much, and congratulations on a good quarter.

Natasha Boyden, Cantor Fitzgerald.

I think you said during your remarks that you had several ships up for re-charter this year. Was that correct?

There are three vessels, if we get the earliest possible delivery date. Yes.

Okay. So, given where the current market is right now, are you going to continue to focus on the one-year charters that you've been doing for this year up to this date?

Our chartering strategy has always been to have a portfolio approach to our vessels, meaning that we want to place the redelivery dates from the charterers in such a manner that we do not have a lot of vessels to fix at the same time but, at the same time, to have a vessel to fix every now and then.

So, basically, what you should expect from us is to position, rather than anything else, that a delivery date of the next charter that we're going to do in such a manner that it is well positioned in our portfolio. When we charter a vessel for a year or two years or six months, for that matter, it doesn't mean necessarily that we are taking a view about the market.

Okay. So, the last few that you've done that, I think, have been about a year is not necessarily your view that --

Yes. We have done a year; we have done two years as well.

That's true. That's obviously true. Are you willing to sort of say -- give your outlook on the time charter rates for this year and next?

Today, a Panamax could be chartered at $22,000, if the vessel is free in continent for four to six months, which is a good rate, and perhaps it takes you away from the bulk of ships which we have coming free next year. So this is a consideration. But, as Ioannis said, you have to watch when the vessels are coming free, because we want to be always there to have free ships at any time.

Right. Fair enough. Okay. That's helpful. Thank you. And, then, just looking at, I think, your vessel operating expense line, it actually came down, I think, about $500,000 this quarter versus the last three quarters. Can you just give us the reasoning behind that and then what we can expect going forward?

I think you can expect around the same level of operating expenses again going forward. The main reasons it came down were crew costs this quarter that came down a little bit and also lubricants that came down a little bit. But crew costs will be probably offset next quarter and, more specifically, the third quarter. As you know, the third quarter, there are renegotiations with the crew, and, therefore, these are retroactive throughout the year. So, usually, you get a small spike on the third quarter.

But you should expect we have this quarter $5,521 per day per vessel. You can expect next quarter we have budgeted around $5,850 per day per vessel, on average. So I think, if you take that as a ballpark, you shouldn't see any major changes there.

Okay. And then, just lastly, in terms of trade credit with the banks, obviously, that was a huge issue last quarter. Everybody was talking about it. It was sort of a hot-button issue. What are you seeing now in terms of where the banks are and what they're willing to do in terms of trade credit? Have they loosened up a bit, or are they still very much unwilling to help or open up?

As pointed out earlier by Andreas in a related question, there are certain banks that are there to do business with clients which they have on kind of an "A" list of theirs and they consider good credit.

The price, of course, has gone up. There is no doubt that we are not going to be able to convince any bank to offer us the terms that we have, for example, on our revolving credit facility. And, therefore, we have to adjust to new pricing of loans for the ships that we will be acquiring and financing with debt of up to, roughly, 50%, as we indicated earlier. But we have a number of banks that are there to finance acquisitions, and we've got, of course, the remainder and the balance of our revolving credit facility to utilize.

So, in other words, yes, there are banks there. They're not as many as they used to be. And the cost has gone up. But the credit is there.

Okay. Great. Thank you.

Urs Dur, Lazard Capital Markets.

Good afternoon, everybody. My questions have been thoroughly answered. Thank you.

(Operator Instructions). There are no further questions at this time.

Thank you, again, for your interest in and support of Diana Shipping. We believe that our profitable results and formidable balance sheet are distinguishing qualities of our Company at a time of economic uncertainty and that we continue to be well positioned to take advantage of opportunities that may arise in this volatile market. We look forward to speaking with you next quarter. Thank you.

Thank you for participating in this morning's call. You may now disconnect.