Diana Shipping Inc (DSX) 2010 Q4 法說會逐字稿

Greetings, and welcome to the Diana Shipping Incorporated fourth-quarter 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, Mr. Edward Nebb, IR Advisor for Diana Shipping. Thank you, Mr. Nebb. You may begin.

Thank you very much. Good morning, and welcome to the Diana Shipping Inc. fourth-quarter and year-end 2010 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. Anastasios Margaronis, President; Mr. Andreas Michalopoulos, Chief Financial Officer; Mr. Ioannis Zafirakis, Executive Vice President and Secretary; and Ms. Maria Dede, Chief Accounting Officer.

Before the management begins their remarks, let me briefly summarize the Safe Harbor notice, which you can see in today's news release. 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.

Now 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. I am pleased to report that Diana Shipping emerged from 2010 and has entered 2011 in a position of financial strength. We have consistently followed a strategic course that combines prudent growth and conservative capital management. That approach was a significant factor in determining our performance during a challenging year for our industry.

I would like to review a number of key developments during the past year. We expanded our fleet during 2010, ending the year with 25 ships, including two Newcastle-max vessels now under construction. Our investment policy will have a favorable effect on our long-term ability to generate revenue.

We have demonstrated the continued ability to maintain excellent relationships with our existing quality charterers, such as Cargill, BHP Billiton, J. Aron, NYK, Corus and Louis Dreyfus. And we have established new relationships with other strong charterers during the year, including Minmetals Logistics Group, Sinochart and Resource Marine.

As I mentioned on last quarter's call, he created a major relationship with the Export-Import Bank of China as a result of the acquisition financing that they provided for our Newcastle-max newbuildings. Given the role of China Ex-Im Bank as a leading provider of funding for the shipping sector, our close working relationship represents an additional source of financial flexibility.

In financial terms, 2010 was a year of profitable growth for Diana Shipping despite the difficult conditions in the market. Among the achievements of the last year, net income increased to $32.3 million for the fourth quarter of 2010 and reached $128.8 million for the full year. Voyage and time charter revenues totaled $73 million for the fourth quarter of 2010 and $275.4 million for the full year.

We view conditions in the dry bulk market for the year ahead as extremely challenging, particularly in terms of the supply/demand imbalance. Now more than ever, it is important to emphasize the strength and resiliency of the Diana Shipping business model. We have managed our fleet for consistency and stability. With the exception of only two of our vessels, the vast majority of the fleet is chartered for periods ranging from the late 2011 to 2016.

We have maintained our focus on preserving a healthy balance sheet. This is reflected in our record cash position of $345.4 million as of December 31, 2010. And we continue to operate with minimal leverage. Long-term debt, including recurrent portion, was $383.6 million at the end of 2010, compared with shareholders' equity of nearly $1.2 billion.

Going forward, we will continue to operate with a prudent capital structure, a balanced chartering strategy and a focus on the top-quality charterers to provide stability in a volatile business environment. Through this strategy, we look forward to delivering enhanced shareholder value over time.

With that, I will now turn the call over to our President, Stacey Margaronis, for a perspective on industry conditions. We will then be followed by our Chief Financial Officer, Andreas Michalopoulos, who will provide a financial overview. Thank you.

Thank you, Simeon. Let us hope that our audience will be patient and understanding as regards what we will present over the next few minutes and will not draw the wrong long-term conclusions from an example of the cyclicality of the dry bulk shipping industry.

During the last quarter of 2010, some pretty dramatic developments took place in dry bulk shipping. The Baltic Dry Index started the latest quarter of 2010 at 2,452, and on January 4, 2011 stood at only 1,693. The Baltic Cape Index was at 3,419 on October 1, 2010, and ended at 2,285 on January 4, 2011. The equivalent figures for the Baltic Panamax Index were 2,412 and 1,789, respectively.

These were pretty dramatic moves, even for a volatile industry such as shipping. Here, we will try and explain the reasons behind this volatility and offer some pointers as to what might be the future course of the dry bulk market over the next few quarters. Of course, dry bulk shipping is very volatile and no one can predict its future.

The rebound from the economic crisis led the global industrial production to grow around 10% in 2010. The higher-than-usual growth rates in regions like Japan, the United States and the European Union would be attributed, according to most brokers, to the low levels to which industrial production fell in 2009. Consequently, and in line with the expected slower GDP growth, global industrial production growth is expected to slow down in 2011 to about 5%.

At the same time, however, the International Monetary Fund has raised its target for global economic growth this year to 4.4% from 4.2%, which was the estimate given out last October. This revision was the result of stronger-than-expected US output based on tax cap extensions. The US economy is now expected to grow 3% this year. The forecast for China and India were up 9.8% and 8.4%, respectively.

By comparison, according to the median estimate of 18 economies surveyed by Bloomberg during 2011, gross domestic product is expected to grow by 9.1% in China, 3.1% in the US and 1.5% in the euro regions during 2011.

Chinese macroeconomic data released at the end of January this year showed that in 2010, GDP growth stood at 10.3%, the highest figure in three years. As for 2011, we agree with the forecast offered by Deutsche Bank according to which a less expansionary fiscal policy will be adhered to. During the second half of the year, this inflation trend should reflect the following factors.

First, the monetary, that is credit deceleration, interest-rate and bank reserve ratio increases, as well as property tightening measures, should start restraining inflation and inflation expectations by the middle of the year.

Secondly, the real economy should begin to decelerate on a sequential basis from the second half of 2011. This will likely be driven by the fading of inflation-led demand growth and a slowdown in export growth. A deceleration of the real economy should also help cool down demand and thus prices.

The conclusion we can draw from all the above macroeconomic considerations is that the macro environment remains supportive for shipping. Outlooks have improved over the last quarter for the US and Europe, though high inflation in China has surfaced as a concern. Naturally, all this does not take account of the supply side, something we will be doing later on in this short presentation.

In past presentations, we had looked separately at each of the major commodities shipped in bulk. We feel that this time, it might be more constructive to concentrate on the supply side and less so on commodity shipments, which are more broadly publicized and agreed on by players involved in the dry bulk shipping industry.

Shipments of iron ore, thermal coal, coking coal, known as metallurgical coal, are expected, according to Clarkson Research Services, to grow between 5% and 13% this year, with an average increase in bulk shipments of about 7%. This takes into account the 1% anticipated increase in the shipments of grain cargoes. This will translate into a total of about 390 million tons of additional bulk cargos anticipated to be shipped during 2011.

A major positive factor on the demand side is the often-neglected Chinese coastal trade. According to shipping analysts RS Platou, port statistics show that Chinese coastal trade rose by about 25% last year. This was to a large extent caused by more coal moving from the producing regions in the north to the consuming areas in the southeast. Rough calculations indicate that this increase in coastal trade created a nearly 2% additional rise in global tonnage demand in 2010. We are confident that the -- very few shipping analysts and investors had realized already the importance of this niche trade.

Before we move on to supply considerations, we ought to mention that according to Gibson's, during 2010, world steel production rose by about 7.8%, with the largest percentage increases happening in South Korea and the European Union, which saw 24.3% and 8.4% increases, respectively. At the same time, Chinese steel stockpiles continued to rise. Figures provided by Commodore Research show these stockpiles now stand at 14 million metric tonnes.

Looking at the stockpiles of the main raw materials used in the production of steel, the stockpiles of iron ore in China reached an all-time high of 78 million tonnes at the end of last year, while coking coal stockpiles dropped slightly. The latter trend will probably intensify as Chinese coking coal producers had expected to export material to Japan and Taiwan, which, according to Clarkson's, are likely to be more seriously affected by the lack of Australian coal due to the recent flooding in Queensland and other extreme weather phenomena which followed.

Let's look at congestion now. We cross over from demand to supply, and we consider port congestion as being a hybrid statistic, as analysts use it either as a demand or supply factor affecting bulk shipping freight rates. According to Clarkson's, port congestion in Australian coal ports stands at 78 vessels, with an average delay of about 23 days. This congestion has decreased over the past few weeks as the rail capacity and operations in Queensland are steadily improving following the flooding and the passing of Cyclone Yasi.

The number of vessels at anchorage in China's ore ports has returned to normal levels after spiking earlier this year. The average waiting time has increased slightly to about six days due to the Chinese New Year.

Overall, world congestion as of February 14 stood at about 288 vessels, with a total of 3348 ship day delays, which was down about 15.5% compared to the earlier week.

Scrapping now. During 2010, only 2.6 million tonnes deadweight of Capes were scrapped, and just 700,000 tonnes deadweight of Panamax vessels. However, due to the weak rate market so far in 2011, 1.2 million tonnes deadweight worth of Capes and 500,000 tonnes deadweight of Panamax vessels have been sold for scrap. At this rate, we could expect about 8 million tonnes of Capes and 4 million tonnes of Panamax tonnage to be scrapped this year, unless of course the freight market improves from its present depressed levels.

Now we have to perform the inevitable and rather unpleasant task of looking at the newbuilding order book. According to Clarkson Research, at this point in time, there are 638 Capes on order of 124.3 million tonnes deadweight, representing 58.5% of the total fleet. The Panamax order book stands at 955 vessels of 77.4 million tonnes, representing 56.7% of the existing fleet.

Scheduled deliveries stand at about 58 million tonnes of Capes for this year and 45 million tonnes for 2012. For Panamaxes, deliveries are more evenly spread, at around 33 million tonnes deadweight for 2011 and 2012, respectively. From 2013 onward, the numbers drop, but at the same time there are plenty of berths available for new orders.

Turning to the famous by now slippage figures, according to Worldyards, 66% of scheduled dry bulk deliveries were actually delivered during 2010. According to Pareto Securities, slippage and cancellations together are estimated at 35% in 2011 and about 15% in 2012. If these assumptions are realized, dry bulk supply growth would be 12.9% in 2011 and 11.5% in 2012.

Including ton-mile demand, Pareto Securities estimate that overall, bulk carrier demand will increase by 10.1% in 2011 and 7.4% in 2012. This compares to 13.1% we saw in 2010.

According to these figures, there may be a negative supply/demand balance of minus 1.6% in 2011 and minus 3.5% in 2012, assuming scrappings at the numbers we have seen thus far this year. Even if the freight rates remain at current levels, there should be, according to Pareto Securities, further pressure on ship values as more and more vessels are being circulated in the market for sale.

With these statistics in mind, it is rather hard to explain the strong newbuilding ordering activity we witnessed during 2010. Again according to RS Platou, part of the reason for all these new orders may be that newbuilding prices for bulk areas were 40% lower in 2010 than during their peak two years earlier.

Another reason could be the ability of shipowners to charter out the new tonnage on [long-chart] contracts at levels that justified these new lower prices. The third reason is that a number of Chinese owners ordered new vessels for the fast-expanding domestic coastal trade.

Looking now at the near- and medium-term freight market developments, we need to favor the view offered by Gibson's. They believe that, firstly, the Queensland trade will have returned to near normal levels by the end of March this year. Secondly, dredging and other maintenance work at the major Brazilian iron ore loading port of Tubarao will have finished by the end of this month, allowing shipments to increase significantly. Thirdly, that rising bunker prices will lead a number of older and less efficient -- fuel-efficient Capesize vessels to be sold for scrap, as they will find it difficult to secure profitable employment.

And fourthly, with the low freight market, several owners will negotiate with the yards for later delivery of their newbuilding vessels. This slippage, together with an increased number of ships heading for demolition, will make the net growth of the fleet less onerous than the basic raw figure of newbuildings for delivery in 2011 would indicate. It is these slippage-adjusted numbers that we have presented earlier on.

Therefore, Gibson's believe that the freight market will improve in March and during the second quarter, but do not expect the rest of the year to show any great excitement on the upside. China looks set for a relatively flat year, considering the country's past shipment growth rates.

A major unknown factor is what will happen politically in Egypt and the Middle East over the next few months. If the political turmoil dies down, Gibson's expect a pretty flat year. However, there is a possibility that serious tensions in that part of the world bring positive repercussions for world shipping, something we have witnessed in the past when there was political turmoil at some part of the world.

So once again, we are faced with an uncertain future as regards dry bulk area freight rates. As we have stressed on several occasions and conference calls in the past, it is for exactly this reason that at Diana Shipping, we try to implement ship acquisition and chartering strategies which do not take into consideration any specific forecasts for future freight market developments. They aim at increasing our earnings per share and increase free cash flow from our operations. Our strong balance sheet enables us to implement this ship acquisition policy with conservative debt and virtually no concerns about the short- or medium-term future of the freight markets, which no one can accurately predict.

I will now pass the call to our CFO and Treasurer, Mr. Andreas Michalopoulos, who will present to you Diana's fourth-quarter 2010 and 12-month financial results.

Thank you, Stacey, 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, 2010. Fourth quarter of 2010. Net income for Diana Shipping Inc. for the fourth quarter of 2010 amounted to $32.3 million, and the earnings per share of Diana Shipping amounted to $0.40.

Voyage and time charter revenues increased to $73 million compared to $58.6 million in 2009. The increase is attributable to increased revenues due to the addition in our fleet of the vessels, Melite in January, New York in March and Alcmene in November 2010, and the Company's participation in Diana Containerships Inc.

Ownership days were 2251 for the fourth quarter of 2010 compared to 1813 in the same period of 2009. Fleet utilization was 99.5% in the fourth quarter of 2010 and 98.9% in 2009. The daily time charter equivalent rate for the fourth quarter of 2010 was $31,602 compared to $31,003 for 2009. Voyage expenses were $3.5 million for the quarter.

Operating expenses amounted to $14.9 million, and increased by 32%. The increase is attributable to the 24% increase in ownership days resulting from the delivery of vessels Melite, New York, Alcmene and the container vessels Sagitta and Centaurus. Operating expenses also increased due to increased repairs and maintenance costs of the vessels. This increase was partly set off by decreased crew costs and insurance costs.

Daily operating expenses were $6,631 for the fourth quarter of 2010 compared to $6,238 in 2009, representing an increase of 6%. Depreciation and amortization of deferred charges amounted to $14.3 million for the fourth quarter of 2010. General and administrative expenses increased by $2.3 million or 48% for the fourth quarter of 2010 to $7.1 million compared to $4.8 million in 2009. The increase was mainly attributable to increasing salaries, compensation costs and restricted stocks, legal fees, actions relating to the acquisition of the land and building by the Company and expenses relating to Diana Containerships Inc.

Interest and finance costs increased by $0.6 million to $1.5 million for the quarter compared to $0.9 million in 2009. This increase was attributable to increased average debt during the fourth quarter of 2010 compared to 2009 and increased average interest rates.

Net income for Diana Shipping Inc. now for the year ended December 31, 2010 amounted to $128.8 million. The basic earnings per share of Diana Shipping for the year amounted to $1.60. Net income for the year has been increased with losses attributed to minority interests amounting to $2.9 million.

Voyage and time charter revenues for 2010 increased to $275.4 million, compared to $239.3 million in 2009. The increase is attributable to the addition in our fleet of the vessels Houston in October 2009, Melite, New York and Alcmene in 2010 and our participation in Diana Containerships Inc., and was partly offset by decreased average hire rates during 2010 compared to 2009.

Ownership days were 8348 for 2010 compared to 7000 in 2009. Fleet utilization was 99.7% in 2010 and 98.9% in 2009. The daily time charter equivalent rate for 2010 was $32,049 compared to $32,811 for 2009.

Voyage expenses were $12.4 million for 2010. Operating expenses amounted to $52.6 million and increased by 27%. The increase is attributable to the 19% increase in ownership days resulting from the delivery of our vessels, Houston, Melite, New York, Alcmene and the container ships Sagitta and Centaurus. The increase was also due to an increase in stores, spares and repairs. Daily operating expenses were $6,299 for 2010 compared to $5,910 in 2009, representing a 7% increase.

Depreciation and amortization of deferred charges amounted to $53.1 million for 2010. General and administrative expenses increased by $7.8 million or 45% for 2010 to $25.3 million compared to $17.5 million in 2009. The increase was mainly attributable to increases in salaries, compensation costs on restricted stocks, office rent, one-off taxes and expenses, and expenses relating to Diana Containerships Inc.

Interest and finance costs increased by $1.9 million to $5.2 million for 2010 compared to $3.3 million in 2009. This increase was attributable to increased average debt during 2010 compared to 2009 and increased average interest rates.

That summarizes the financial section. Thank you for your attention. We would now 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) Urs Dur, Lazard Capital Markets.

Good morning, guys -- or good afternoon. The presentation was extremely detailed, so that's great. I was interested if Stacey maybe can give a little bit of color on the reduction in congestion of late. It looks like your things are getting loaded -- and you've mentioned this -- in Australia. Do you expect this momentum to increase? And then with more being able to exit Australia of late, demand for ships to get in line for loadings to improve and see some improvement in the spot rates in the nearer term from these very low levels?

There are too many unknowns here. First of all, we are not entirely certain how many ships have been redirected to load the cargoes that they couldn't get from Australia to places like the United States and Canada. So there, we have one question mark, because these ships are going to be tied up for at least another 40 to 60 days, carrying the cargo that they were supposed to be carrying from Australia to the Far East. So that is the one unknown.

But there is no doubt that as far as that is concerned, given time, the ships will return to load from ports in Queensland in Australia, and logically, congestion should gradually increase after dropping, though, further for the next few weeks. So we expect as far as that part of the world is concerned to see a further drop in congestion, and then a gradual increase.

Now we have to look to China for the iron ore discharging ports. The situation there is that the Chinese usually deal with congestion more efficiently than anybody else. And even though we expect increased shipments between now and half year, the middle of the year, we think that there will be no significant change in congestion for the Chinese iron ore discharging ports, which leaves us basically with the iron ore loading ports in South America.

Now there, if everything goes as smoothly, which it very rarely does in South America, there should be no significant increase in congestion, especially after the work in Tubarao has been completed, as I mentioned earlier during the small presentation.

So in total, if you gather South America, Australia and China, we don't really expect congestion to increase at all the lack of tonnage as regards these 36 basic raw commodities, leading to significant support in freight rates.

So you expect it to stay relatively weak throughout the remainder of the year, in your view?

No, as we mentioned earlier, we agree with the analysts' view that we are going to have a gradual maybe improvement between now and the middle of the year, and then it will be pretty uninspiring to weak, the freight market. Except, of course, excepting the effects of major political events in the Middle East or elsewhere in the world, which might of course distort this picture, usually in favor of the freight market on the bulk side.

No, I hear that. Very good and generally agree with that. You have a very nice warchest of cash, guys. It is like $4.00 plus per share. Is there any -- and it does look like you are trading probably below your net asset value, despite weaker asset values of late.

What is your view of asset values and what can we do with this cash? Buy back shares or buy more ships? I guess this is a rhetorical question, but more to highlight maybe what you think you might be able to do with it.

As regards to what you said about the net asset value, you know that we never comment on that. But the card that we have on the side is for buying new vessels. And things are coming our way, and you will see Diana chipping in, buying vessels for the next year or so.

You would think it is better to be buying assets now with this cash than, say, buying back stock or giving a dividend?

For certain, it is much better than paying a dividend at this part of the cycle. And as regards to buying back stock, you need a big discount to the net asset value to do so.

Yes, I suppose. Okay. Thank you for your time, gentlemen. Appreciate it.

Gregory Lewis, Credit Suisse.

Thank you, and good afternoon. Stacey, first, I guess, could you touch on the comments you made about the older Capesize vessels being less efficient? And you made that comment about using bunker. Roughly speaking, how much less efficient are those older Capes?

I think it depends what year you are talking about, and from which ship-building country you are talking about. Now, the Capes which are built in Japan are lighter in weight; thus, they have a better consumption than the vessels which are built in China overall. Now, the older type, I would say is approximately 4 to 5 tonnes per day. More -- the young ships are more efficient than the old ones at about 4 to 5 tons, which of course is a big differential pricewise because the price of oil is very high today. So you are talking about $2000 to $3000 daily.

Okay, great. And I guess thinking about -- you were successful in spinning out the Diana Containerships Inc. At this point, given maybe potential opportunities in the container ship space, is there any thought or discussion about Diana Shipping Inc. making further investments in Diana Containership Inc.?

Greg, this is something that the Board of Directors of Diana Shipping Inc. will decide in the future. The fact that we have still another 11% in Diana Containerships Inc. shows that we still have an interest in containers as Diana Shipping Inc. And it remains to be seen, based on the situation of Diana Containerships Inc. and the projects they are going to represent.

Okay, great. And then just really quick, one last question. Clearly, you are in the markets every day looking at ships to acquire on the dry bulk side. When you think about where newbuilding prices are and you sort of match that up with where modern secondhand vessels are, do you think the opportunities are relatively even at this point, or do you think there is more opportunity in either the newbuilding market or the secondhand market?

I think it is going to be evenly spread. We are looking for resales. We are looking for older ships, two or three years old, and we are looking for newbuildings also, but not as much as the resales. We are focusing more on the resales.

Okay, great. Thank you very much for the time.

Natasha Boyden, Cantor Fitzgerald.

Thank you, operator. Good morning, gentlemen. I wanted to ask you what you are seeing in terms of longer-term charters in this market. Are you seeing charterers willing or are interested to put ships away for longer than a year? And if so, what kind of discounts are you seeing to go beyond two or three years?

The spot rates today for the -- let's take the Capes -- the spot is about $6,000. For the year, you are talking today between $17,000 and $18,000 for a good Cape. So there is a difference.

Okay. But I mean, are you seeing interest from charterers to put ships away longer, or are they still just looking at sort of shorter-term charters?

There are some charterers who will be looking for 10-year period, which does not attract us. I think the maximum we will be going is about five years.

Okay, great. All right. Thank you. Talking about rates -- I'm sorry -- rates coming down and asset values coming down, there is also a big concern that some companies could be in violation of their loan covenants.

Given the banks appear to be healthier than a few years ago, what do you anticipate that banks are going to do in terms of potentially foreclosing on vessels? Do you think we will see more of that or do you think the banks will still be willing to negotiate with companies?

We had a lull on the containers for approximately two years, and there we have seen no foresales. Now, I think it will be different for the dry cargo, and maybe we are going to have foresales, yes.

What you think the difference is there?

The difference is that the containers are in the hands of very few people, and the banks have supported them, plus the fact that the interest rates are very low. So the banks are happy, provided you obtain the interest rate.

But it is not the same thing with the dry cargo, so we may be having foresales in the dry cargo.

Okay, great. Then just lastly, a housekeeping question. Can you provide us some guidance on your anticipated dry docking in 2011 and '12, and did you have any dry docking in the fourth quarter?

Yes, Natasha, we had actually three vessels that went into dry docking the fourth quarter. These were m/v Triton in November, m/v Coronis in November and m/v Danae in November as well. So that is (technical difficulty).

In 2011, we have scheduled dry docks for quite a few vessels, actually -- for m/v Alcyon, Nirefs, and Thetis, Protefs and Erato. So that is for 2011 (multiple speakers).

Yes. No, that's fine. Okay, thank you very much. That's very helpful.

Fotis Giannakoulis, Morgan Stanley.

Hello there. I'm mostly covered. The only thing I want to ask is about the big spread that we see right now in coal prices between the domestic Chinese coal prices and regional prices. Do you think that this is going to have an impact on the Chinese imports for coal, and consequently, for Panamax vessels?

Logically it should, but the picture becomes slightly more complex due to what I mentioned earlier regarding coking coal exports, that they will find profitable to make to other countries in the Far East because of this Australia replacement move that we are going to be seeing.

So generally, we believe that coal is going to be actively traded in China one way or another, regardless of price differentials. It is going to be coastal trade moving coal, increasingly so, as we have seen during 2010. And there are going to be both imports and exports of different types of coal. So we are very confident that coal overall, thermal and coking coal, is going to be the highlight as far as growth is concerned in volumes of commodity going in and out of China.

Is this something that you are talking in general about 2011 or also for the next couple of months?

Well, we can't pinpoint exactly when. Possibly the next couple of months all the way through the year. But the next couple of months we will see basically the coking coal moving to Taiwan, Japan and other far Eastern countries definitely, because the contracts are there for that to happen. And also, later on during the year, we are going to have movements of thermal and coking coal in and out of China and along the Chinese coast in larger and larger quantities.

Thank you very much.

Scott Malat, Goldman Sachs.

Thanks. My question is on vessel operating expenses. Can you just help us think through the puts and the takes here over the next year? I guess I was thinking more about higher insurance costs, but you guys highlighted that insurance costs might have been down year-over-year. Help us think through that. Thanks.

Actually, our operating expenses, if you compare them to last year in the quarter, they were up 6%, and during the entire year they were up 7%. The main reason here was definitely not insurance costs, that are actually pretty much steady. We don't have big variations on those.

What is making the variations and especially quarter-on-quarter is mainly the different works that we do when a vessel goes into dry dock. To give you a very simple example, the main increase in the operating expenses for the fourth quarter are due to [different] things.

The first is the three vessels that went into dry dock, Triton, Coronis and Danae, that we take the opportunity when a vessel goes into dry dock to do some extra works in terms of repairs on deck and in the engine room, et cetera. And the other example here which made the operating expenses spike was the fact that we had the initial supplies for the two containership vessels that were for the fourth quarter fully consolidated with Diana Shipping Inc. results.

Now going forward, to help you, we foresee an average operating expense per day for 2011 at [$6450]. That is what I would put -- that is what we put into our models and this is the budget that we have made for 2011.

Thanks. That's very helpful. Just within that number, is there a way, just qualitatively, to think about insurance costs and crew costs? Do they come up from here? You've already given us the dry docking schedule, but what is the [breakdown] there?

Basically, I will give you real figures for the -- let's say entire year 2010. The breakup of the operating expenses was 54% came from crew costs. So 54% of the operating expenses are crew costs; 8% are insurances; 24.1% were stores and spares; 11.9% were repairs and maintenance; 1.4% was some miscellaneous; and 0.6% were various taxes. And that is 100% of the OpEx for 2010.

So more or less, you have this breakdown. The major part of the cost of operating expenses are crew costs, and yet insurances come out from the operating expenses.

All right. That's helpful. Thanks. Lastly, you had mentioned a little bit the Middle East. Can you expand on any of that? Have there been any disruptions that you've seen in the Middle East? And then what kind of things we should be looking out for and impacts that you kind -- or risks and potential benefits that you can kind of get from that. Thanks.

As long as the Suez Canal remains open, the disruptions have been mainly incurred with the container ship vessels calling in Egypt, where we have had some delays and cancellation of port calls. And I assume now in Benghazi, Libya, we're going to have similar phenomenon developing. We haven't seen anything else which is more dramatic in terms of affecting the schedule of bulk areas calling that part of the world.

So the key question here is the Suez Canal, which it does not look as if we're going to have any serious disruption in transit through the canal, up and down. So with that secure, let's call it, we don't see any significant effect, because the rest of the countries have relatively low volumes of trade in bulk commodities compared to the world figures as a total.

Thanks.

Doug Garber, FBR Capital Markets.

Good afternoon, guys. My first question is in terms of your due diligence for vessel acquisitions, how many vessels are you currently looking at on the dry bulk and, if you would, the container side, too? How many have you visited and where do you stand on that process?

On the dry side, we are looking at approximately 25 ships. We are inspecting some of them. We have already inspected some of them and --. But because most of them are resales, we know exactly where we are because we have the specification of each one. So some of them we're inspecting physically and some of them we have them on paper.

Okay, that's helpful. And in terms of the amount of -- you know, you have a lot of liquidity. How much further do asset prices need to fall before you would get very aggressive starting to purchase those 25 ships that you are doing due diligence on?

It is not how much the prices will fall as much as the freight rates will fall. And we strongly believe that the freight rates are low when they are exactly the same as the running expenses of the ship. Then of course, the freight rate is at these levels, and it will proportionally affect the price of the ships.

Now at the moment, the freight rates for the bulk areas are approximately 3 times or 2.5 times more -- it is a multiple to the running expenses. So they have a lot of room to go.

Okay, that's helpful. And in terms of the amount of liquidity you have, would you guys consider putting leverage on your unencumbered vessels currently to maximize the amount of cash available for acquisitions?

In theory, the next up should [see it] with 50% leverage. That is in theory. So we have plenty of money aside to grow, of course.

All right. I think that's all my questions. I will turn it back. Thank you.

Sal Vitale, Sterne Agee.

Good morning, gentlemen. I just have a first quick question on the expense side. Looking at G&A expense, it came in at about $7.1 million this quarter. Can you just tell me whether there is any impact from the Diana Containerships there, or how do we think about that going forward? Is that a decent run rate to use in our model going forward?

Yes, Sal, actually there was an impact from Diana Containerships. And the impact for the year was of about $3.5 million.

So I would, going forward -- since after the spinoff, Diana Containerships Inc. will not be consolidated anymore with Diana Shipping Inc -- therefore, as per the first quarter of 2011, I would use as a run rate for your G&As in the vicinity -- I mean, around $21.6 million. So -- for the year, of course. So that is what I would use. And therefore, taking out the DCI chunk of it.

Okay. That's helpful. Then I think it was Ioannis, your comments earlier regarding where you would need to see freight rates be before you dive in and make a significant acquisition of secondhand vessels. And you said about where the running expenses are.

So that seems that you still have a pretty cautious stance on the market. Given that, what should we expect, or what are your plans in terms of fixed charter coverage for 2011 and for 2012? Because I think for 2011 currently, you are at -- about 85% of your days are fixed.

90%.

90%. Okay. Right, closer to 90%. And for 2012, I have you at about 50%, more or less.

Correct.

Should we think of any significant increase in that 50%?

No, you shouldn't expect anything different as regard to chartering strategy. What we will do is charter the vessels that are opening and try to place them in such a manner that they will fit the portfolio, the entire portfolio approach that we have to the chartering of the Company.

We have a very strong feeling about what is going to happen in 2011. However, we do not know what is going to happen in 2012. And this is exactly the reason why we are not entitled to commit the vessels -- all of our vessels for a longer period. We will continue our hedging strategy the way we have said, and exactly the same is going to happen with the purchase of the vessels.

As our Chairman said earlier, we -- the lowest point is where the freights are close to the operating expenses. But nevertheless, we have to keep buying vessels in a staggered manner and not wait for that to happen, although we believe that we may see that.

Is it your view -- and I know it's really hard to say; there is no crystal ball -- but is it your view that that decline in rates in the BDI, that occurs sooner rather than later -- it's a first-half 2011 event?

As our President, Mr. Margaronis, said, this is most probably a second-half of 2011 event to happen.

Okay, thanks. That's really helpful.

[Lambros Papaiconomou, NYFIX Asset Management].

Good afternoon. I would like to ask a question about your long-term debt. I saw that it increased by about $40 million during the fourth quarter. And I was wondering if that was used to finance the purchase of Alcmene, and whether you tapped the Royal Bank of Scotland facility or you used a new one. Thank you.

Thank you. Yes, this was indeed used for m/v Alcmene, and yes, indeed, we used the funds available from Royal Bank of Scotland, that now we have drawn down from the $300 million credit facility that we have with RBS $290.7 million. So nearly the entire facility.

So to your question, yes, we have used the $40 million that you see increased debt for the dry bulk vessels to finance motor vessel Alcmene.

Thank you very much.

Thank you. At this time, I would like to hand the floor back over to management for any closing comments.

Thank you again for your interest in and support of Diana Shipping. We look forward to speaking with you in the months ahead. Thanks.

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