Diana Shipping Inc (DSX) 2009 Q4 法說會逐字稿

Greetings, and welcome to the Diana Shipping Incorporated 2009 year end conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Edward Nebb, IR Advisor for Diana Shipping. Thank you, Mr. Nebb, you may begin.

Thanks, Rob. Greetings, everyone. This is Ed Nebb. I want to welcome you to the Diana Shipping Inc. 2009 fourth quarter and year end conference call.

The members of the Diana Shipping management team who are with us today include 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 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 assumption, 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 events to differ materially from what is expressed or forecast in our forward-looking statements, please refer to the Company's filings with the Securities and Exchange Commission.

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

Thank you. Good morning and thank you for joining us today. It has now been nearly five years since the IPO of Diana Shipping Inc. in March 2005. Since that time, and in spite of the recent challenging and uncertain economic environment, we have consistently delivered profitable results each and every quarter. I'm proud to report that this was again the case for the fourth quarter and year 2009. At the same time, we have maintained a sharp focus on our strategy to create and enhance shareholder value. We have expanded our fleet, managed our time charter operations to produce reliable revenues, built relationships with high quality charterers and established a strong balance sheet to support our growth and avoid the risk of excessive leverage.

One of the most significant events of recent months was the delivery in January 2010 of the Melite, a 2004 built Panamax dry bulk carrier of 76,436 tons deadweight purchased at a price of $35.1m. This was the first vessel purchased under our previously announced investment program whereby we will take advantage of the growth opportunities presented during the low phase of the shipping cycle. We're excited about the potential for this program, which is designed to create shareholders' value through purchases of attractive price vessels during the next 18 to 24 months in accordance with our technical and age profile standards.

Now, I would like to point out some of the other highlights of our recent performance. Then the members of our senior management team will review our market outlook and discuss the financial results in greater detail. Net income was $27.6m for the fourth quarter of 2009 and reached $121.5m for the full year. Voyage and time charter revenues totaled $58.6m for the fourth quarter of 2009, and $239.3m for the full year. Our average daily time charter equivalent rate was $31,003 for the 2009 fourth quarter, which covers daily vessels operating expenses by a factor of nearly 5 times.

We have continued to strengthen Diana's balance sheet. Our cash position increased to more than $282m at the end of 2009, or nearly $220m higher than at the end of the prior year. At the same time, we have continued to operate with considerably less leverage than virtually any other company in our industry. Long-term debt, current and non-current, at the end of 2009 was $281.5m against stockholder equity of $999m.

Our fleet employment strategy continued to balance consistency with opportunity. Approximately two-thirds of the fleet is chartered for periods ranging from 2011 to 2015. We have continued to build a relationship with top quality charterers. Through the 2009 fourth quarter and into early 2010, we enter into time charter contracts for the Houston with Shagang Shipping Company Limited, the Nirefs with Louis Dreyfus Commodities, the Erato with C Transport, the Thetis with Glencore Grain, and the Melite with the J. Aron division of Goldman Sachs.

Looking at the conditions in our marketplace, we continue to see a wide range of opportunity. While demand for the dry bulk capacity is expected to be reasonably strong during 2010 we believe that the actual deliveries of dry bulk vessels in the next two years will not be easily absorbed by the market. We believe that the impact of supply and demand forces on vessel prices will continue to provide many attractive opportunities to pursue our fleet investment strategy.

Going forward, we will seek to take advantage of our market opportunities in a disciplined manner, as we have done with the purchase of the Melite. We will maintain our focus on generating a steady stream of revenues through [fixes] with high quality charterers. And we will continue our proven and prudent approach to Diana's capital structure.

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

Thank you, Simeon. And a warm welcome to all who have honored us by participating in this morning's conference call. Last year will go down in shipping history as one of the most volatile years in recent times. The Baltic Dry Index started the year at 773 points to end it at 3,005, having gone up to 4,661 on November 19 last year. The question that is keeping most international economists and shipping analysts busy nowadays is where do we go from here?

The OECD recently increased its 2010 forecast for economic growth for the world's leading developed economies. The OECD's 30 members are now predicted to grow 1.9% in 2010 compared to an anemic 0.7% growth forecast made back in June, 2009. In 2011, the same organization expects growth to accelerate to 2.5% per annum. So with this relatively favorable climate in world economic activity, let us look at individual commodities and how they are expected to contribute to the absorption of an ever increasing world bulk carrier fleet.

Starting with steel production, during 2009 the global steel production fell by 110m tons, or 8.5%. Chinese steel production increased by 67m tons, or 13.5%, while Chinese iron ore imports rose by a massive 183m tons, or 41%, to reach 627m tons. As a result, despite unprecedented falls in imports by the European Union and Japan, global seaborne trade in iron ore actually increased by approximately 70m tons, or 8%. This pattern was followed in several other trades, most notably coal.

We agree with Clarksons and Howe Robinson that it is extremely difficult to judge just how robust and sustained the recovery in OECD steel production will be this year. The conservative estimates place Japan and the European Union producing steel at the level seen during 2002.

As regards China, the conservative consensus view is the 2010 output will be broadly in line with the annualized rate of production seen during the second half of 2009. This would obviously be a rather bearish [out-turn] for China and will mean a slowdown in economic activity. A more realistic forecast would be based on annual growth of steel production in the order of 8% compared to the annualized figure of the second half of 2009.

To conclude, most analysts predict that, on average, steel production worldwide should increase during 2010 by 11% compared to 2009, equivalent to 132m tons.

Let's turn to iron ore demand. According to Clarksons' research studies, underpinned by increases in steel production, world iron ore imports will probably increase by approximately 11% during 2010. This will mean that just over 1b metric tons will be shipped worldwide, with China importing approximately 662m metric tons during the same period. However, assuming iron ore shipments run at system capacity with only a modest allowance for operational disruption, there is a potential for the main iron ore trade to grow by some 15% in 2010.

How these substantial shipments will be distributed during the year will as usual depend on several factors, one of which is the contract pricing negotiations. There are hopes that the price might be agreed by April this year and contract prices are certainly set for an increase following the 33% decline during 2009. Spot prices for iron ore are currently well above the benchmark contract price, suggesting that a 30% increase for 2010 can and should be expected. The miners are well aware of the fact that in 2009 Chinese steel mills purchased approximately 60% of their requirements in the spot market. With spot prices well above the old contract prices this will be used by miners to push for higher prices with greater chances of success.

Another factor which will affect shipment patterns during 2010 is the level of stockpiling. Present levels stand at around 70m tons with an average of 63% iron content. This represents around a 30 day supply. Obviously the larger the stockpiles the greater the flexibility Chinese buyers will have in timing their new shipments. It is possible that this might result in short-term volatility in purchasing demand.

Turning to coking coal, here Clarksons is again forecasting reasonable increase in volumes to be shipped in 2010. The estimate stands at 215m tons, which represents an increase of about 3% compared to last year. It is noteworthy that India has reportedly started to place orders for Russian coking coal as Australian coking coal is becoming less competitively priced and the volume of available coking coal in the spot market continues to tighten.

Total exports of thermal coal are estimated to reach 599m tons during 2010, an increase of only 2% compared to 2009. Hidden behind these figures provided by Clarksons is the fact that the average stocks of thermal coal at Chinese power plants is about nine days worth of supply, as reported by Jefferies and confirmed by other shipping analysts. China's coal import needs have increased to such an extent that the country recently imported thermal coal for the first time from Colombia. If this trend were to continue the ton mile effect on demand will be profound.

Based on all the above forecasts, Howe Robinson predicts that overall coal exports in 2010 might easily increase by approximately 90m tons, requiring an extra 1,275 or so Panamax equivalent shipments, which, in ton mile adjusted terms will translate to an increase of trade of approximately 120 Panamax vessels.

Grain shipments. Here the forecasts are rather disappointing. The Clarksons estimate for 2010 grain exports stands at the total of approximately 228m tons, which, if true will represent a drop of 8% from the volume shipped in 2009. Unfortunately, the USDA is also predicting a drop in shipments for the 2009/2010 season, however smaller, at about 3% compared to the previous year. This fall reflects the unwinding of the exceptional strength seen in the wheat trade in 2008/2009 when, in spite of the credit crunch, volumes rose from 116m to 138m metric tons, providing much needed support to the Panamax market during the first half of 2009.

Chinese coastal trade. These shipments, which have been growing in importance recently, took a hit in 2009 with volumes dropping by 49m tons, mainly due to the drop in the coastal trade of coal. Towards the end of 2009 there were signs of an increase in coastal shipments and Howe Robinson expects an increase in 2010 in the coastal shipments of both coal and iron ore as the restricted availability of these products from international suppliers revitalizes demand for the local product.

Port congestion approached its June 2007 all-time high during the fourth quarter of 2009. Congestion in China increased to nearly 10 days waiting due to the high delivery volumes. Maersk Broker is estimated -- estimating 173 Panamax and Capesize bulkers waiting at anchorages outside the main coal and iron ore ports of Australia. According to Clarksons, port congestion is expected to increase during 2010 when exporting ports in Brazil and elsewhere will attempt to reach 2008 export volumes. Estimates vary and some say that as much as 5% of the world's fleet could be tied up in congested ports around the world during 2010. Congestion will continue to dominate the short-term imbalance between supply and demand, thus creating freight volatility during the year.

Scrapping. It is impossible to start addressing the question of supply/demand balance going forward without taking a view on future scrapping. During 2009, Clarksons have counted approximately 10m tons deadweight of bulk carriers which were scrapped. Maersk Broker placed that number at approximately 12.2m deadweight tons. Whatever the actual number, scrapping was not spread evenly during the year. After a fairly active three quarters, scrapping dropped dramatically during the fourth quarter of last year when a mere 1.2m tons deadweight of bulkers were scrapped. This was the result of the strength in the freight market, something that must be kept in mind when making forecasts for scrapping during 2010. According to Clarksons, so far this year a mere 600,000 tons deadweight have been scrapped. The total number includes one Capesize bulker and no Panamax bulk carriers.

Turning to the newbuilding order book, during 2009 about 41.5m deadweight tons of bulkers were actually delivered from an order book of over 70m deadweight tons. As of January this year, the Capesize order book stood at 144m deadweight tons, representing 83.7% of the fleet. From this total, 61.6m deadweight tons are scheduled for delivery in 2010, and a further 45.6m deadweight tons in 2011. As regards Panamaxes, the order book consists of 58.7m deadweight tons, about 49% of the existing fleet. From this total about 23.2m deadweight tons are scheduled for delivery in 2010, and a similar number in 2011.

Looking more closely to what analysts expect will happen in the newbuilding front during 2010, we hold similar views to those expressed by Howe Robinson in the recently issued annual dry cargo market report. More specifically, the low case delivery scenario places the attrition rate, as they call it, for newbuilding Capes at 45% of the total order book, and 40% for the Panamaxes. For smaller bulkers the attrition rate goes up to as much as 54%, giving an overall average attrition of about 50%.

On the basis of these assumptions the bulk carrier fleet should see a gross expansion during 2010 of between 13% and 15%. As expected, the greatest pressure will be felt in the Capesize sector, which will face deliveries of between 18% and 21% of the existing fleet. With Panamaxes seeing deliveries of between 11% and 12.5% of the existing Panamax fleet. The Handymax Handy size aggregated total works out to around 11%.

Assuming that Capes carry about six and a half times their dead weight in any 12 month period, Panamaxes around seven and a half times and Handys around eight and a half times, Howe Robinson reaches a total volume number of additional carrying capacity of approximately 416m metric tons, excluding scrapping. To reach this figure, Howe Robinson has made adjustments to take into account the effect of the fast expansion of the VLOC fleet of both newbuildings and conversions.

Let us go back to scrapping predictions for 2010. In the absence of a sharp contraction in freight rates, Howe Robinson would look for scrapping to run at levels which would effectively eliminate the fleet which is currently over 25 years old in the next three years. If scrapping increases by about 10m deadweight tons from 2009, which is by no means a certainty, this would result in an offset of less than 5% of the overall fleet. But the effect on the Cape fleet would be less than 2% in 2010 due to the young age profile of the fleet.

Therefore, unless there is a sharp drop in earnings during the year the overall net fleet growth estimates range from 8.22% to 10.5%. But, as expected, there are significant variations between vessel classes. The range estimate for net Cape fleet growth is between 16% and 19% while for Panamaxes it is between 5.9% and 7.5%.

So, if the above assumptions are realistic the only factor left to save the day is congestion. According to Howe Robinson, the effect of congestion during 2010 should be broadly neutral compared to 2009. Even if congestion increases more than anticipated it is highly unlikely that the overall supply will be reduced significantly to be absorbed by the additional demand mentioned below.

The optimistic supply side scenario we will be reporting now comes from JP Morgan. The assumptions made are, first, that 50% of the 2010 schedule deliveries will not hit the water this year. Secondly, to the 61.2m deadweight tons which will actually be delivered in 2010 we add another 2.5m deadweight tons of conversions. It's worth noting here that a single owner recently converted a container ship newbuilding order into bulk carriers amounting to approximately 540,000 deadweight tons.

Thirdly, from this total of 63.7m deadweight tons DWT, JP Morgan deducts 15.7m deadweight tons of bulkers which they hope will be scrapped during the year due to age-related factors. The limited statistics available for the year thus far do not support such a high rate of scrapping for 2010 without a dramatic fall in earnings over the next three quarters.

Finally, JP Morgan forecasts that 21.1m deadweight tons, or approximately 5% of the world fleet, will be removed from the fleet through congestion. If this assumption is realized, the freight market should remain relatively firm, which will in turn, unfortunately, affect scrapping.

If all the above assumptions hold, dry bulk supply will increase by only 26.8m deadweight tons, or 5.5% of the fleet. This figure, when set against a ton mile-adjusted dry bulk demand increase for 2010 of around 5.6%, as predicted by Clarksons and Howe Robinson, bodes well for the future strength of the freight market. It should be mentioned that JP Morgan offers a more conservative 3.2% ton mile-adjusted increase in demand for this year.

If the estimated net of scrapping increase of annual cargo carrying capacity of approximately 320m deadweight tons materializes this year then the 230m tons of additional dry bulk cargo demand for 2010, predicted by most shipping analysts, will create severe pressure on rates, particularly during the second half of the year. This could look even worse if the different size sector figures are taken into account as well, with Capes bearing the lion's share of the 2010 fleet increase, as explained earlier on.

If we look further out into the future, demand, scrapping and congestion would have to increase even more dramatically than in 2010 to absorb an estimated 14% net increase of the bulk carrier fleet estimated for 2011.

Before wrapping up this description of the state of the dry bulk shipping market, we should point out the most important demand side risks looming in the horizon, that is a double-dip recession or extremely anemic world economic recovery. This will be determined by the scale of the sovereign debt problems, as recently shown by the Greek government's debt situation, and the way in which central banks and finance ministers around the world coordinate the withdrawal of monetary and fiscal policy stimuli.

If either of these all-important policies develops in a negative way for world economic growth, then the demand increases we have assumed earlier on will not materialize and the freight markets will sink deeper into recession and take longer to recover than would otherwise be the case. As mentioned by our Chairman and CEO in his opening remarks, the management team at Diana Shipping has already commenced implementing the investment program in bulkers, mentioned on several occasions in the past. We believe this investment strategy will allow the Company to grow in an orderly manner with relatively low levels of debt, and reach the desired target by the end of next year.

This, combined with the chartering policy we have applied since the Company became public, should help us maximize the risk adjusted return to our shareholders' equity. At this point I will hand over the call to our CFO, Andreas Michalopoulos, who will provide you with the Company's 2009 yearly and fourth quarterly financials. Thank you.

Thank you, Stassis, and good morning. I am pleased to be discussing today with you Diana's operational results for the fourth quarter and year ended December 31, 2009. Fourth quarter of 2009, net income for the fourth quarter of 2009 amounted to $27.6m and the earnings per share of Diana Shipping amounted to $0.34. Voyage and time charter revenues decreased to $58.6m compared to $84.3m in 2008. The decrease is attributable to decreased average hire rates.

The decrease in voyage and time charter revenues was partly offset by the revenue earned by motor vessel Houston, which was delivered in October 2009. Ownership days were 1,813 for the fourth quarter of 2009, compared to 1,748 for 2008. Fleet utilization was 98.9% in the fourth quarter of '09, and 98.6% in 2008. The daily time charter equivalent rate for the fourth quarter of 2009 was $31,003, compared to $45,824 for 2008.

Voyage expenses were $2.9m for the quarter. Operating expenses amounted to $11.3m, and increased by 14%. The increase is attributable to the addition of motor vessel Houston in the fleet in October 2009, and to increases in all cost categories partly offset by decreased insurance costs.

Daily operating expenses were $6,238 for the fourth quarter of 2009, compared to $5,675 in 2008. Depreciation and amortization of deferred charges amounted to $11.7m for the fourth quarter of 2009. General and administrative expenses increased by $1.7m, or 55% for the fourth quarter of 2009, to $4.8m, compared to $3.1m in 2008. The increase is mainly attributable to increased cash bonus and compensation costs on restricted stock. Interest and finance costs decreased to $0.9m for the quarter, compared to $1.5m in 2008, due to lower average interest rates.

For the year ended December 31, 2009, compared to the year ended December 31, 2008 now. Net income amounted to $121.5m and the earnings per share to $1.55. Voyage and time charter revenues decreased to $239.3m in the year ended December 31, 2009, compared to $337.4m in 2008. The decrease is attributable to decreased average hire rates and increased off hire and dry dock days in 2009 compared to 2008.

Ownership days were 7,000 for 2009 compared to 6,913 for 2008 and operating days were 6,857 in 2009 compared to 6,862 in 2008. The increase in ownership days resulted from the acquisition of motor vessel Houston in October 2009 and the decrease in operating days was due to increased off hire and dry dock days.

Fleet utilization was 98.9% for 2009 and 99.6% for 2008. The daily time charter equivalent rate for 2009 was $32,811 compared to $46,777 for 2008. Overhead expenses amounted to $12m. Operating expenses amounted to $41.4m compared to $39.9m in the same period of 2008. The increase is attributable to the addition of motor vessel Houston in the fleet and increased costs in store spares and repairs. Daily operating expenses were $5,910 in 2009 compared to $5,772 in 2008, representing an increase of 2%.

Depreciation and amortization of deferred charges for 2009 amounted to $44.7m. General and administrative expenses for 2009 increased by $3.7m or 27% to $17.5m compared to $13.8m in 2008. About 76% of this increase is attributable to increased non-cash compensation costs on restricted stock awards and 13% of the increase to cash bonuses.

Interest and finance costs in 2009 decreased to $3.3m compared to $5.9m in 2008, due to decreased average interest rates.

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

(Operator Instructions). Our first question is from the line Jon Chappell with JP Morgan Chase. Please go ahead with your question.

Thank you. Good afternoon, guys.

Hi. Hi, Jon.

My first question has to do with the thought process behind the investment in the container ship business. I know that wasn't addressed in the prepared remarks and this probably isn't the time to talk about the supply and demand of containers. But if can you just talk about the returns that you foresee at this point of the cycle and at these asset prices in containers relative to what you're seeing in your core dry bulk fleet?

Thank you for your question. We are in the process of closing it. We cannot go into details because it is a private transaction.

Okay. I'm not sure if you can answer this either then. But, can you explain just a little bit the management roles in this new venture from the current management team in Diana?

Well, at this point we cannot disclose anything further than that.

Okay. If I can move on then to the dry bulk side. After Stasis's uplifting view on the market, how much further do you think asset prices can go down, if the environment plays out the way you're expecting? Do you think that we've passed the bottom or can asset prices go below the trough that we saw about 12 months ago?

I think that the sales and purchase market is directly governed by the freight market. So, if the freight market has to be depressed then the values have to be depressed also.

And when you think about the freight market, if we just think about the next six quarters, do you think that the first half of this year might be a little bit stronger and this pressure that you foresee with the overcapacity will really be a second half 2010 story, and maybe the first half of 2011?

Well, I think that Stassis was very explicit to give you a number of assumptions which we are making. It depends entirely to whether the assumptions, or the analysts, and everybody concerned, have the right assumptions or the wrong assumptions. So, it's almost impossible to predict.

Okay. And then finally, I know that you want to pursue a growth strategy. But, if the asset prices were to fall significantly and if you compare where you think that they may go relative to where you've purchased assets over the last few years, would it make sense to sell at current prices which may be far more robust than what you can buy back at in the future?

Not really, because we have so much cash available to do our scheme that we don't need to sell vessels to buy ships. So, we will be waiting when the market really moves up to try and sell the older units. Not now.

Okay. Thanks very much, Simon.

Thank you. Our next question is from the line of Gregory Lewis with Credit Suisse. Please go ahead with your questions.

Yes, thank you, and good afternoon. Stassis, when we look at the outlook for employment of the fleet, it looks like there are three vessels that are going to be coming off charter over the next one to two to three months. And it looks like all these vessels have had rates below market so we can expect them to get delivered probably towards the end of their redelivery dates. As you look at employing those vessels does the strategy remain where we're just sort of going to look at where the time charter market is and fix those or at a certain point in the event that there's not really depth in the time charter market, would you let those vessels float on spot?

Greg, this is Ioannis. How are you doing?

Good, good.

Greg, as we have said in the past, we have to keep consistent, to be consistent, with our portfolio approach. Every time we have to fix a vessel we have to see where this vessel is about to be to reopen for chartering based on the total picture of the fleet. So, you understand that we cannot say that today we're going to go spot or we're going to go for two or three years, it depends at the time we're going to fix a vessel each time, we will place it accordingly in the portfolio of the total number of vessels that we have. If we do what you say and spot the three of them then it's like taking a position that the market is going to get better after these charters are going to finish, something that we don't want to do. We are in a fortunate position to be able to have a hedging strategy in our chartering policy and this is what we do.

Okay. So, when you think about the portfolio, do you have a targeted duration for the portfolio or is that something that you don't really think about?

Basically, we want to have a vessel to charter as often as possible in order to get the average of the market at least.

Okay, great. And then my last question would be related to the SG&A expense. It looked like it spiked up a few hundred thousand dollars in Q4 versus Q3. Was that related to the container ship, work around the container ship joint venture?

No. Actually, not really. It's a mix of things for the SG&A. The bulk of it is the compensation committee decision to have some compensation stocks awarded to the Company staff and that's the major bulk of this SG&A spike in the fourth quarter.

Okay, Andreas, so then and related to the outlook you can't talk about that either. But, when you think about SG&A related to the container ship joint venture, should we anticipate that being maybe a few hundred thousand dollars in Q1?

This will be basically according to the percentage that Diana Shipping Inc. will have in this new company. So, you should budget accordingly. Of course, we will pay the SG&As that are according to the percentage that we have. Yes, you should budget that.

We can't go further into more details but this you will be aware of that as soon as this thing materializes.

Okay, great. Thank you very much.

Our next question is from the line of Scott Burk with Oppenheimer and Company. Please go ahead with your question, sir.

Hi, good afternoon, guys. I wanted to ask a question about your total capacity for acquisitions. Obviously, we know about the cash in your balance sheet but when you look at the cash flow you expect to generate and the debt availability that you have, what's your total capacity for acquisitions?

Well, actually at the moment, at the end of the year as you can see, we have an excess of $280m on our balance sheet in cash. Now, we have financed the new motor vessel Melite that we have bought at the beginning of the year that was delivered at the beginning of the year, 100% with our revolving credit facility from RBS. Remaining from this revolving credit facility is therefore after this finance $50m, taking into account the fact that the mortgaged vessels are only 11 out of the fleet on this facility. Now, having said that, we have two loans, one with Bremer Landesbank for motor vessel Houston that was drawn down $40m. And another one with Deutsche Bank that we intend to draw down for motor vessel New York of another $40m. So, what we foresee as a capacity is from $500m to $700m in acquisition capacity.

Okay. That's similar to what I'm counting, then you have cash flow on top of that. So, do you think that you've talked about doing potentially nine, acquiring nine vessels, it seems like there may be more potential to buy even more than that. That's what I'm getting at.

Of course, of course, most probably --- not most probably, surely, more than nine vessels. We don't give a figure. We prefer not to give a figure because you understand that will be according to the good average that we will have around the bottom of that market, acquiring vessels over the next 24 months, as we've said, in a steady and diligent way around what we feel is going to be the lowest end of the market. So, for sure, putting a number would be wrong because it depends on many things, size, type of vessels, price, SMP prices at the time, chartering market, etc., etc.

Okay. And then I wanted to shift gears and ask you about, a lot of headlines recently about the problems with the government debt problems in Greece, the government deficit, whatever. I just wanted to ask you is there any impact on Diana's operations either in terms of revenue, costs, or loan availability? What kind of impact might that have on Diana?

No, the operation here has very little to do with the Greek government and its finances. We do not rely on any financing paying locally to any appreciable extent. Nor do we foresee the tax situation to change imminently affecting our operations from Greece. So, all in all, the only effect that we see the Greek government debt situation having on shipping is essentially what we mentioned earlier, the general approach and the view of investors towards government debt. If that generally deteriorates obviously it's going to affect growth and through growth will affect the demand for the transportation of commodities of all kinds, including raw materials. So, that is the indirect effect that we can see the Greek government debt problems having on our operations and nothing more for the time being.

Okay. And Stassis, I guess maybe one more for you. Just you talked about a lot of the broker outlook and whatnot for supply and demand. I'm just wondering in the last month or two there seems to have been shift towards sentiment with Chinese government tightening financing that there may be a slowdown in demand in China. Just wondering if you guys are seeing anything specifically with your ships where there's been a decreased level of shipments to China or near term impact from that tightening.

Well, for the time being we haven't seen anything which is at least capable of being ascribed to such tightening. Our feeling is that any effects on tightening will initially hit the domestic market and the spillover effect on international shipping trade will take a bit longer to develop, if the tightening prevails or increases for the next few quarters. So, for the time being we haven't seen any effects.

Okay. Thank you very much.

(Operator Instructions). The next question is from Michael Webber with Deutsche Bank. Please go ahead with your question.

Good morning, guys, how are you?

Fine, thanks. How are you?

Good, good. Just a handful of questions getting back to your acquisition strategy. Obviously, you guys are looking to average down over about two years, how exactly do you think current asset values are? And is there one specific asset class you think you might see better value over the near term?

Well, I think we are going to stick to what we know. Namely, the Panamaxes, the Capes, and perhaps we could go a little bit higher than the Capes, to the 210,000 tonners.

Interesting. With regards to the Panamaxes over the near term would you consider buying one that was a little bit more expensive than the Melite or are you looking to average down from there?

Yes, yes, because it fits our requirement and the strategy which we have in mind, yes.

Okay. So, you would buy one potentially if there's more incentive?

We would if we have to.

Okay. Looking at I guess the potential to lever up, and you guys mentioned and you guys have, I think, nine vessels that are unencumbered right now. When you've had the conversations around potential financing would you look to mortgage all those vessels, would you look to leave some of them off of the facility? And I guess what kind of financing is available for you right now?

This will be done in a steady manner to mortgage the new vessels, you understand that. As we said in the past if banks are there to lend to somebody they are there to lend to Diana Shipping because of the strategy that we have followed, because of our balance sheet, and because of our basically operational reputation. So, I guess, banks are here to lend, the best example is actually the MV Houston that we took a brand new facility for that project with a German bank, namely Bremer Landesbank.

The other example is the motor vessel New York that we are about to get delivery of whereby we also have a brand new facility in place, which we're going to activate as soon as we get delivery. So, yes, banks are there and, yes, our intent is to use, as we said in Scott Burk's question, our firepower to basically have our strategy be implemented, that is the acquisitions along the next 24 months.

For the time being we feel that the most efficient way to finance acquisitions is on a single vessel basis because revolving credit facilities, as you probably are aware, are not offered either at all or by no means at competitive terms. So, we are not looking for anything as large as that for the time being. But, we'll take advantage of a debt as it is offered on the most competitive terms. For the time being this is the source of debt that we have tapped and we feel there is more there to be offered to our Company on a ship by ship basis.

Okay, that's helpful. With regards to the New York, I think within the release you mentioned that it could be delivered as late as second quarter. Do you have any specific color on when you would anticipate that being delivered or maybe a month or front or back end of the quarter?

Yes, the vessel had her successful trials about a week ago. There was no problem whatsoever on the ship and at the moment she is getting ready to be delivered the first week of March, which is next month. And, of course, simultaneously, she will be delivered to her charterer NYK.

Thanks, that's very helpful. And just finally, I know you guys take a portfolio approach and like to diversity the charters you put on your fleet. When you look at the longer period charters though how liquid is that market right now, specifically within three to maybe even five years, when you look at your Capes? Is there business being done in those markets right now and at what kind of discount would you be looking?

Well, today you can charter a vessel like a Cape of approximately 180,000 tons for three months --- for three years, the rate which you can achieve provided, of course, it's fairly early delivery, you can get approximately $30,000 daily, which is not a bad rate.

Do you think there's any activity longer than three years? Anything in the four to five year range?

Yes, you can go longer than that. But, maybe you have to reduce slightly the rate.

Right, that's all I have. Thanks.

Our next question is coming from the line of Rob MacKenzie of FBR Capital Markets. Please go ahead with your question.

Good afternoon. I guess the last question I have left or one or two, is you guys have historically gone with a sister ship strategy, particularly among your Panas, but I guess also among most of your Capes, to try and standardize and keep down costs. How do you think about managing that approach to cost management through an acquisition strategy which necessarily seems to entail buying one-off ships as they present themselves at attractive values?

Well, bear in mind that most of the machinery of the Panamaxes, whether they are built in Jiangnan or in Shanghai, or in any other major shipbuilders, are the same. So, we have no engines, main engines, apart from [mass and weight], all of them are the same. Maybe the sizes differ but that's all. The auxiliary engines, i.e., the generators, are the same, and the main engines are the same. So, is not very much difference even if they are not called sister ships.

Okay. That's helpful. And I guess as a follow up to that, you guys have stated your desire to consistently buy over a multi-quarter period here. Do you see the possibility of seeing a handful of ships coming in at one or more opportunities, as opposed to one-off acquisitions here and there?

Yes, there is a possibility that we will see a large number of ships, similar or dissimilar, offering themselves for sale and for us to purchase. We will try and avoid the temptation to buy too many ships at once so as not to ruin the averaging process that we have said we are going to follow until the end of 2011, say early 2012. So, the answer to your question is that, yes, we might be buying more than one ship. It's unlikely that we will be buying, let's say, more than five ships in one shot. Very unlikely.

Okay, thanks. Then I'd like to go back, I guess, to Stassis's introduction in terms of the macro environment quoting some different broker estimates. I wonder, Stassis, if you could give us the color, a little more color, which side of the spectrum you lean on and what event do you think might cause your expectation to vary from what you currently think?

Well, the main event, first of all, we lean towards the predictions offered by Howe Robinson on their assumptions, which I spent a little bit more time maybe than I should in presenting, which in other words shows an overtonnaging, especially towards the end of this year, early next, in the Cape size sector, and not so bad in the Panamaxes. And we believe that that will create pressure on rates unless we have demand increasing by more than anticipated. In other words, more than 220 or so extra million tons of cargo.

Now, what could go wrong? As mentioned again, the double dip scenario as far as world economic growth is concerned would certainly ruin the predictions and make them even worse and even anemic growth worldwide is going to be harmful to the freight market. So, those are our main concerns on the demand side.

Okay, thanks. I'll turn it back.

Thank you. Our last question is coming from the line of Anders Rosenlund with ABG SC. Please go ahead with your question.

Thank you for taking my question. My first question is regarding the operating expenses, which are currently running about $6,000 a day. Could you give us some sort of guidance or indication where you think that operating expense will be going forward, preferably on a split on Capes and Panamaxes?

Yes, hi, this is Andreas. The daily operating expenses for the year were as you mentioned, $5,110, and they were split evenly between Capes and Panamaxes, that is the same number basically that came out between Capes and Panamaxes.

Next year we would foresee the usual increase of about 3% to 4% evenly again for Capes and Panamaxes, that's what I would budget if I were you. You must take into account the fact that though between the quarters you have differences in the daily operating expenses, mainly due to the crew that gets its increases either typically during the third quarter, but sometimes during the fourth quarter, and this is retroactively for the year. So, you must take yearly figures when you put them in your models and check when these increases come more or less.

Excellent. I have a follow up as well. What do you think about the Cape Panamax spread going forward?

I would foresee that it would remain evenly spread for the simple reason that Panamaxes are typically older vessels for the moment at least, and therefore that's why they the costs are evenly spread between Panamaxes and Capes. Mainly because Panamaxes are basically slightly older.

But, in terms of TC equivalent spot rate development, the market spreads?

Sorry, you're talking about charter rates?

Yes.

Well, the four TC routes today for the Capes are standing at $32,500 daily whilst the Panamaxes are standing at $25,800 a day, the four TC routes. Anders, you understand when we have a market going down the spread is getting smaller and smaller and if we reach the level where we have a depressed charter rate then there may not be any kind of spread there.

Especially, if you take into account that the rate of new building deliveries during 2010 of Panamaxes and Capes.

I totally agree with you but your comment about investing potentially in even larger vessels, how does that compare with (multiple speakers)?

You see, Anders, that has nothing to do with the revenue of those vessels at that time. This is going to be pure asset play. It's going to do with the revenues of the vessels in the future and the values of those vessels. The bigger the vessel, the more volatile it is, and the price and the charter rate, so you are aiming for the future of that. Nothing to do with the revenues. You are in the fortunate position to have revenues from the other vessels.

Okay, that answers my questions. Excellent. Thank you very much.

Thank you. At this time I would like to turn the floor back over to Mr. Palios for closing comments.

Well, thank you again for your interest in and support of Diana Shipping. We are committed to actively pursuing opportunities to enhance shareholder value through our strategies in the coming year and we look forward to speaking with you in the months ahead. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.