Diana Shipping Inc (DSX) 2012 Q4 法說會逐字稿

Greetings. And welcome to the Diana Shipping Fourth Quarter 2012 Conference Call and Webcast. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ed Nebb, Investor Relations for Diana Shipping. Thank you, Mr. Nebb. You may begin.

Thank you, Kevin, and thanks to all of you who have joined us today for the Diana Shipping Inc. 2012 fourth quarter and yearend 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. 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 management begins their remarks, let me briefly summarize the safe harbor notice. Certain statements made during this conference call which are not statements of historical fact are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. Such forward-looking statements are based on assumptions, expectations, projections, 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 the 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.

Good morning, and thank you for joining us.

In 2012, Diana Shipping continued to pursue a strategic course designed to produce stable operational, and financial performance despite the current challenging industry cycle while also strongly positioning the Company for future opportunities as conditions in dry bulk shipping marketplace gradually improve.

A key accomplishment during the year was the significant expansion and diversification of our fleet. This was made possible by our solid balance sheet and ample financial capacity. At the same time, we maintained our balanced and prudent approach to chartering and continued to do business with well established and high-quality charterers.

I would like to expand on the progress we have made thus far in expanding our fleet both in numbers and types of large bulk carriers. Between January 2012 and February 2013, Diana Shipping has acquired or announced contracts for ten vessels. That represents a dramatic increase from the 24 vessels in our fleet as of yearend 2011. These new additions included two Panamax vessels, two Post-Panamax vessels, two Newcastlemax vessels, two Kamsarmax vessels, and two ice class Panamax vessels currently under construction and scheduled for delivery in the 2013 fourth quarter.

Through these actions, we have positioned the Company with a young, diversified fleet which now consists of 32 dry bulk carriers. The delivery of the two ice class Panamax vessels later this year will bring the size of our fleet to 34 vessels. We'll continue to manage the fleet in a prudent manner that promotes a balance of time charter maturities and produces a predictable revenue stream.

Currently, our fixed revenue days are 92% for 2013. The majority of our vessels are chartered for periods ranging from 2013 through 2015 and beyond.

Our balance sheet remains one of the strongest in our industry. The Company's cash position at December 31, 2012 was nearly $447 million, or about $30 million higher than the yearend 2011. We continue to operate with a very manageable degree of leverage. Long-term debt, including current portion, was $460.9 million of principal balance outstanding, compared to shareholders equity of nearly $1.3 billion.

Now let me review some of the key aspects of our financial results for the fourth quarter and full year 2012.

Net income to Diana Shipping Inc. was $5 million for the fourth quarter of 2012 and reached $54.6 million for the full year. Time charter revenues totaled $49.4 million for the fourth quarter of 2012 and $220.8 million for the full year. Time charter rates averaged $17,681 for the 2012 fourth quarter, or approximately two and a half times daily vessel operating expenses.

In summary, Diana Shipping is continuing to pursue the strategies that have maintained our stability and financial flexibility in a volatile industry environment while investing in the assets that will generate long-term growth. We will continue our program of selectively and gradually adding to our fleet as market conditions permit us to acquire vessels at attractive prices. We will operate our fleet according to balanced and prudent chartering policies and promote a predictable revenue stream and enable us to sustain profitable operations. And we will continue to manage our balance sheet to provide financial flexibility, provide the capacity to support growth, and maintain an acceptable degree of leverage.

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

Apologies in advance to those participating in this conference call who may have expected us to be more optimistic about the medium-term portions of the bulk carrier market. This is, after all, one of the most cyclical industries. Things improve as unexpectedly as they go down.

Starting, as we usually do, from the Baltic Dry Index, we'd like to remind ourselves that we were at 777 points at the beginning of the fourth quarter in 2012, and, by yesterday, the Index had moved to 875. The Baltic Panamax Index started the fourth quarter in 2012 at a dismal 439 points and, yesterday, closed at 1,138. As for the Baltic Cape Index, we started the fourth quarter at 1,650 only to move to 1,314 yesterday, March 13.

The IMF revised the global growth forecast for 2013 downward. Global economic growth is now forecast to be 3.6% in 2013. Advanced economies are expected to grow by 1.5% in 2013, while forecasts for emerging economies in 2013 were cut by 0.2 percentage points to 5.6%. According to a report issued by the OECD, the main reason for the weaker outlook is a drop in confidence due to fiscal consolidation, weaker global trade growth, and rising unemployment.

The euro area recession deepened in fourth quarter of 2012 as the gross domestic product fell 0.6% quarter on quarter. This is the largest drop since the first quarter of 2009. Year on year, the eurozone GDP shrank 0.5% in 2012, while the German economy expanded by an anemic 0.7% during that year after growing by 3% in 2011.

In the United States, the manufacturing sector expanded January this year for the second consecutive month. The PMI increased from 50.2 in December to 53.2 in January. During last month, unemployment remained steady at 7.9%, down from 8.3% a year ago.

(Inaudible) shipping research reports that Chinese authorities are using state-controlled media to convey the message that economic growth this year will be about 8.2%, up from 7.7% last year. A stimulus package reported to be CNY1.8 trillion would prop up fixed asset investment by 20% in 2013 according to Chinese media. China's manufacturing continued to expand in January but at a slower pace than in December. The China Federation of Logistics and Purchasing Managers Index was at 50.4 in January, down from 50.6 in December.

Let's turn to the earnings developments now for dry bulkers. Last year was, according to the Baltic Dry Index, the weakest year for the dry bulk market in some 26 years with an average Baltic Dry Index value of 920 points, down 41% year on year and 67% lower than the 2010 average as oversupply continued to negatively affect rates across the bulk carrier sectors.

Clarkson reminds us that, while there was a short-lived improvement in Capesize rigs during the fourth quarter of last year, overall, 2012 was still the worst year for Capesize owners since 2002. Four consecutive years of double-digit fleet growth have caused the Capesize fleet to double since the start of 2009.

The growth in the iron ore trade is expected to reach 6% in 2013. Fleet growth is predicted at 7%. The gap between Capesize supply and demand growth in 2013 is likely to be the smallest for several years. Clarkson continued by saying that, once deliveries have slowed down, it becomes possible for existing oversupply to be gradually absorbed rather than added on a monthly basis.

However, shipping analysts RS Platou foresee market conditions to remain difficult in 2013 for all segments of the bulk market. However, they expressed the hope that, with shipping retaining its cyclicality through this difficult period, it will be able to benefit from many improvements in the world economies relatively quickly.

We agree with this prediction, provided, however, scrapping continues at the present pace and newbuilding orders do not once more pick up and strangle any effort by the market to absorb surplus capacity through increased demand.

Let's look at steel now. According to Howe Robinson, world steel production in 2012 was 1.5 billion tons, up 1.2% from 2011. This is a record number with growth coming mainly from Asia and North America, while the European Union and South America decreased their respective production in 2012 compared to 2011. Annual production of crude steel in Asia was 12.7 million tons, an increase of 2.6% compared to 2011. As far as Chinese steel production is concerned, a forecast released last November by the China Metallurgical Industry Planning and Research Institute predicted that both demand and output in the sector would see growth rates below 4.5% in 2013. Demand is expected to grow by 4.1% to 656 million tons, and production may exceed 746 million tons, which is far in excess of demand.

Iron ore now. According to Clarkson, in 2013, global seaborne iron ore trade is expected to expand by 6% year on year and reach about 1,179 million metric tons with Chinese imports expected to increase by 8%. Clarkson goes on to say that, assuming that Brazilian exports don't expand notably in 2013, much of China demand growth is expected to be met by greater Australian exports. This is not particularly good news for Capes as regards the ton-mile demand for transporting iron ore.

According to shipping analysts banchero costa, China produced 1.2 billion tons of iron ore during the first eleven months of 2012, which was up only 1% compared to 2011, when production increased by 27% compared to 2010. According to Commodore Research, in China, (inaudible) iron ore stockpiles have dropped approximately 67.8 million tons in January this year. These have declined steadily since the end of September 2012 and are now at their lowest levels since April 2010. However, in the middle of last month, iron ore stockpiles increased to 69.4 million tons, or about 3%, in just one week. Even so, stockpiles are currently at their lowest levels since November 2010.

Let's turn to coking coal. According to Clarkson, total exports of coking coal are projected to grow by 3% in 2013, reaching 258 million metric tons. It has also been suggested that China may import more coking coal if they succeed in exporting more of their own products on advantageous terms to countries such as Japan and South Korea. However, if such imports are sourced from Mongolia, the benefit to seaborne trade volumes would be limited.

Thermal coal now. Clarkson predicts that total world exports of thermal coal during this year may increase by 5% to reach a total volume of 841 million metric tons. Chinese imports are projected to grow by 11% this year. However, this projection is still subject to considerable uncertainty, as much will depend on price arbitrage opportunities throughout the year.

A major target for Chinese authorities, according to banchero costa, is to increase energy efficiency. During the twelfth five-year plan covering the period 2011 to 2015, the country's energy consumption will be capped at 4 billion tons of standard coal, and power use will be below 6.15 trillion kilowatt hours by 2015. Energy consumption per unit of GDP will be cut by 16% compared with 2010 levels, while energy efficiency will be raised by 38%. Even though this is excellent news for the environment, it is not very encouraging as regards future coking coals.

Australia and Indonesia are expected to remain the main suppliers of coal to China for the foreseeable future. Additional volumes would have to come from Mongolia, Russia, South Africa, and the United States. As we said earlier on, we have to carefully monitor future exports from Mongolia, as they're all land-driven and reduce rates of increase of seaborne coal transportation. In 2012, Mongolian exports failed to expand as much as expected, given some logistical and financial constraints. These constraints will eventually be resolved; hence, our above comment.

Let's turn to grain. According to Commodore Research, only 285.8 million tons of grains are expected to be exported worldwide during the current 2012/2013 marketing year. If this materializes, it will be approximately 57 million metric tons less than was exported in the 2011/2012 crop year, a drop of 17%. This significant decline in global grain exports, which has occurred in large part due to drought-related production decreases in the United States and the former Soviet Union, continues to negatively affect Panamax, as well as smaller-sized bulkers. The Clarkson projection is less pessimistic. By estimating that the drop in worldwide grain exports will be about 6% during this grain season compared to the last one.

Let's turn to the supply of ships. The newbuilding order book has 48.1 million deadweight tons of Capes on order, from which nearly 33 million deadweight tons are scheduled for delivery in 2013. The total order book represents about 17.1% of the existing fleet. As for Panamaxes, there are 49 million deadweight tons on order, representing about 27.4% of the existing fleet. It is important to note that, out of this total, 34.8 million deadweight tons are scheduled for delivery in 2013.

According to Fairlane's Research, in 2012, the dry bulk carrier fleet increased by about 11%, while, in 2013, the overall increase is expected to drop to 6.4%. There will be large variations among different size ranges however. The Capesize fleet, which grew by about 7% in 2012, is expected to grow by around 21% in 2013. However, the picture becomes slightly complicated by the fact that (inaudible) expected to grow by 20% in 2013 after increasing by 29% in 2012.

Things look more worrying in the Panamax fleet projection. There, the fleet increased by about 13% in 2012. It's likely to increase by a further 10% in 2013. A staggering 413 Panamaxes with 2.369 million tons deadweight are scheduled for delivery this year alone. Even with a large percentage of slippage, this would be a record delivery year for the Panamax fleet.

Let's look at congestion. According to Commodore Research, in the middle of February, approximately 190 vessels were waiting to load grain cargos. In comparison, about 90 vessels were waiting for the same purpose about a year ago. Overall, heavy congestion (technical difficulties). It could take a fair amount of time before this type of congestion returns to more normal levels. Commodore Research continued by saying that 175 vessels congested at major Australian and Brazilian coal and iron ore ports. Approximately 115 of them are Capesize.

Let's turn to scrap. According to Howe Robinson, last year, 610 dry bulk carriers representing approximate 36 million deadweight tons headed for the scrap yard. Out of this total, 12.873 million tons were Capesize bulkers, while 133 vessels of 9.1 million deadweight were Panamaxes. It is worth noting that the average age of bulk carriers scrapped during 2012 came down to 27 years from 30 years in 2011. So far this year, the pace has eased due to seasonal factors. About 1.8 million deadweight tons of Capes have been scrapped and a rather disappointing 0.8 million tons deadweight of Panamax of tonnage have headed for the scrap yard.

The age of the large bulk carrier fleet is a concern as regards to future scrapping. For example, according to Maersk Broker, only 11% of the Panamax fleet is 20 years or older, while a mere 6% of the Capesize fleet is over 20 years old.

As regards prices offered by scrap yard, not surprisingly, they have been drifting down steadily for a while now. In February, they were between $400 and $450 per light displacement ton.

What is the outlook now for the industry? We agree with the view expressed by shipping analyst Gibson Shipping and Energy that, with shipbuilding deliveries gradually reducing in number, 2014 should see bulk carrier earnings improve. The problem with the sector, however, is that, even though a decent level of demolition is expected this year, after 2013, there just aren't enough vessels over 20 years old left to make serious inroads, at least into the Capesize fleet.

Furthermore, things look worse for Panamaxes. With the amount of new capacity coming on stream in the year, it's difficult to see how demand for these ships and scrapping (technical difficulties) to absorb the extra capacity. Based on projected statistics, Panamaxes will suffer from overcapacity for a while longer.

However, on a more positive note, Pareto Shipping research predicts that, in the course of 2013, the stimulus-driven Chinese demand reported above should exceed supply growth of vessels. This may (technical difficulties) and offers confidence to both the market and the investor base, especially during the second half of the year.

Yet again, the risk from such a development, if it comes to pass, is that newbuilding contracting could once again take off and push back any recovery in earnings and asset values. According to Howe Robinson, shipyards are hungry for work and are offering ships at the lowest prices for a decade. There is no realistic prospect for the rise in demand outpacing shipyard capacity for a long time according to Howe Robinson. They predict that this fact alone will preclude a protracted return to the rate levels seen on the peak the last five years. In fact, Clarkson anticipates, after 2013, we (inaudible) like a return to the long-term levels of earnings.

Approximately two years ago, we had, unfortunately foreseen and publicly expressed the negative developments we have been witnessing for the last 18 months or so. Admittedly, we were a bit early in our (technical difficulties). However, we have always mentioned during conference calls and presentations that it is impossible to predict the exact timing of a freight market downturn or, for that matter, upturn.

It is exactly for this reason that we have (technical difficulties) steady schedule of acquisitions through the down cycle at progressively more competitive prices. We continue to believe that the strategy of financing new acquisitions with cash and conservative borrowing will ensure the steady growth of our bulk carrier fleet without jeopardizing the financial strength and integrity of our balance sheet. Sooner or later, the recession in shipping will end.

That moment will find Diana Shipping with a modern, high-quality bulk carrier fleet, excellent prospects to generate cash, and support a dividend for our shareholders, the payment of which we interrupted just a few years ago to beef up our balance sheet so as to support the acquisition strategy referred to above. And values will eventually also increase, and we'll ensure that we take advantage of this through select sales of assets.

I will now pass you to our CFO, Andreas Michalopoulos, who will provide us with the financial highlights of the fourth quarter 2012 and the whole year 2012. Thanks.

Good morning. I'm pleased to be discussing today with you Diana's operational results for the fourth quarter of 2012 and yearend ended December 31, 2012.

Fourth quarter 2012. Net income for Diana Shipping Inc. for the fourth quarter 2012 amounted to $5 million, and the EPS was $0.06.

Time charter revenues decreased to $49.4 million, compared to $57.4 million in 2011. The decrease is attributable to decreased average time charter rates that we achieved for our vessels during the fourth quarter compared with the same quarter of 2011. This decrease was partly offset by revenues derived from the vessels Leto, delivered in January 2012; Los Angeles, delivered in February 2012; Philadelphia and Melia, delivered in May 2012; Amphitrite, delivered in August 2012; and Polymnia, delivered in November 2012.

Ownership days were 2,710 for the fourth quarter of 2012, compared to 2,208 in the same period of 2011.

Fleet utilization was 96.3% in the fourth quarter of 2012, compared to 99.2% in 2011.

The daily time charter equivalent rate for the fourth quarter of 2012 was $17,681, compared to $25,714 in 2011.

Other revenues for the fourth quarter of 2012 amounted to $0.6 million.

Voyage expenses were $2.1 million for the quarter.

Vessel operating expenses amounted to $19.3 million, compared to $14.9 million in 2011. The increase was due to the enlargement of the fleet, with six vessels during 2012, and also due to increased crew costs. The increase in operating expenses was partly offset by decreased insurance, spares, repairs, and maintenance costs.

Daily operating expenses were $7,128 for the fourth quarter of 2012, compared to $6,734 in 2011, representing an increase of 6%.

Depreciation and amortization of deferred charges amounted to $16.1 million.

General and administrative expenses decreased to $6 million, compared to $6.3 million in 2011.

Interest and finance costs were $0.1 million for the quarter, compared to (inaudible) dollars in 2011. This increase is attributable to increased average interest rates and average debt the fourth quarter 2012 compared to the same quarter in 2011.

Loss on derivative instruments amounted to $3,000 for the quarter, compared to a gain of $0.2 million in 2011, and includes both realized and non-realized (inaudible) costs relating to our $100 million (inaudible) amount zero collar swap agreement terminating in May 2014.

Income from investment in Diana Containerships Inc. amounted to $45,400 for the quarter.

The year ended December 31, 2012 now.

Net income for Diana Shipping Inc. in 2012 amounted to $54.6 million, and the EPS was $0.67.

Time charter revenues in 2012 decreased to $220.8 million, compared to $255.7 million in 2011. The decrease is attributable to decreased average hire rates during 2012 compared to 2011 and was partly offset by revenues derived from one vessel delivered in July 2011 and six vessels delivered in 2012.

Ownership days were 10,119 in 2012, compared to 8,609 in 2011.

(Technical difficulties) in 2012 and 99.3% in 2011, and the daily time charter equivalent rate was $21,255, compared to $28,920 in 2011.

Other revenues amounted to $2.4 million.

Voyage expenses were $8.3 million in 2012.

Vessel operating expenses amounted to $66.3 million and increased by 20%. The increase is attributable to the 18% increase in ownership days resulting from the delivery of six vessels in 2012 and one vessel in 2011. The increase was due to increased (technical difficulties) and was partly offset by decreased insurance and repairs and maintenance. Daily operating expenses were $6,551 in 2012, compared to $6,432 in 2011.

Depreciation and amortization of deferred charges amounted to $62 million in 2012.

General and administrative expenses amounted to $24.9 million, compared to $25.1 million in 2011.

Interest and finance costs increased by $2.7 million to $7.6 million, compared to $4.9 million in 2011. This increase was attributable to increased average interest rates and increased average debt during 2012 compared to 2011.

Loss from derivative instruments was $5 million, compared to $0.7 million in 2011 and includes both realized and unrealized interest [swaps].

Loss from investment in Diana Containerships Inc. amounted to $1.8 million and was due to the decrease of our ownership in the (technical difficulties) after a follow-on offering of Diana Containership in 2012.

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

(Operator Instructions). Michael Webber, Wells Fargo Advisors.

The first question is just kind of on the market. And, Stacy, as always, you gave a very thorough and solid overview of the market. But I just want to kind of boil it down a bit more simply. And we've certainly seen a run of recent optimism in the space. So maybe just kind of on a very high-level basis, do you think rates, on average, will be materially better this year than last? And do you think this kind of recent round of optimism is more of a head fake or the start of a real recovery?

You may have guessed from my quoting of various analyst reports we try to avoid doing this.

We wouldn't be surprised if we had, on average, better rates this year than last, but we would not consider that as meaning that the difference would be material in the sense that we're going to have huge, double-digit increases.

Having said that, when you start from a very low base, to have a double-digit percentage increase in the rate is not very difficult. But, yet, it might not be meaningful in the sense that people (inaudible) difference in the ability of an owner to pay debt in the sense of principal and interest on their loan. So, in that respect, we don't think anything will change materially. But, yes, we might have, on average, better rates this year than we saw last year across the size ranges, with a small question mark on Panamaxes.

Got you. That's helpful. And, clearly, from your remarks, it seems like you think the trough is going to persist to some degree over the intermediate term.

As you look at that kind of a landscape, and you guys have obviously been pretty active in acquiring assets, to what degree can you pick up your acquisition pace? And then, when you look out across the major asset categories, is there one specific category you think you're going to be more active in, be it Capes, Panas, or Kamsarmaxes?

We have stated in the past that our pace of purchases of assets will not change based on our strategy. Our strategy dictates the Company to buy assets for the next two-year period without being influenced by the short-term events that are happening around us. We are strongly believers of the hedging strategy not being amended based on what is happening around. Otherwise, the hedging strategy ceases to be a hedging strategy. So our pace of purchases is not supposed to change.

As regards to the preferable assets at the moment, based on what Stacy also told you, the fine tuning and nothing more than this, Capesize are preferable and the bigger vessels are preferable today than the Panamaxes.

Okay. No. That's helpful. And I know that's also -- that pace of acquisitions is also going to be a function of what's available to you in the market, and it's not always perfectly liquid. When you think about what's out there for you guys to do right now, is there more to do right now on the Cape side? Can you give a little color in terms of what that liquidity is like from and [S&P] perspective?

Regarding the second-hand tonnage, admittedly, there is not a lot in the market to choose and pick for the good-quality ships. Don't forget that you have the ability of ordering new tonnage also. So, in our spectrum, it's also not only the sales or second-hand tonnage, but we have the newbuildings also. So we are looking in all segments of the market.

That's helpful. Just one from me, and I'll turn it over.

Given the cash balance you guys are carrying, and you've got a sub that's going off a pretty significant yield, any thoughts around potentially increasing your stake in DCIX, especially as it looks to continue to grow and it's exhausted its liquidity?

We have no such plan. We have not discussed that with the board of directors.

Okay. That's helpful. I'll turn it over. Thanks, guys.

Chris Combe, JPMorgan.

Hey. This is actually Nish Mani on the phone for Chris. Just a couple of quick questions. I noticed that there are several vessels -- I think five -- coming open in the next six months, one in May and kind of the rest in the summer. I kind of wanted to get some thoughts on the chartering strategy. I know you guys have stated a hedging strategy where you have charters of various durations. But would you really consider going long at this low end of the market? Or is kind of the 12 to 24 months the sweet spot that we should be thinking about for these vessels?

Well, the governing factor is not how long we are going to charter the vessel, but the governing factor is when we have open ships. So we have to look on balance when the vessels expire -- the other vessels. So we are going to open the next ships we have to charter at a period that we have no other ship's time charters expiring, trying to have one particular ship every one month or one and a half months open at any time. That's the key issue here, not the duration. And we would like to go not more than two years.

Got it. Okay. And that's consistent with what you guys have done recently. I mean, I've noticed a lot at kind of between 18 and 24 months, and that makes sense.

In thinking about kind of, I guess, the coming months in terms of recovery -- I know you guys don't necessarily think there's going to be a meaningful recovery in 2013, but would there be any consideration of profit share agreements or anything of the sort for any of the charters?

We do not like this type of charters. We want to have as transparent as possible deals and easy to be understood from our shareholders. The profit sharing is for those people that they have only a few vessels, and they want to get the upside when that comes. We are getting our best (inaudible) differently. Physically, by having so many vessels, we can take the upside potential of the market by chartering another vessel higher. So we feel that the 50/50 arrangement is for the benefit more of the charterers than anybody else.

And, over and above, it is not very easy for you to calculate what our income will be and the circumstances. So clarity and transparency is of the utmost importance, and we would like to keep it for you to be easy to calculate what we are doing.

Yes. I completely understand. And, then, just finally, I guess, we noticed that OpEx this quarter kind of above $7,000 a day was higher than prior quarters, both on a quarter-by-quarter and year-over-year basis. I just wanted to get some thought as to if that's kind of the new normal, the $7,000 range, or if we're going to see a reversion back to kind of the $6,500 or $6,600 range we saw previously.

I think it's a seasonal fluctuation, if you can call it like this. And the best proof of that is that, if you look at the daily OpEx for the year, and I'm sure you saw, it's only 2% up. So the overall idea would be to keep it at the $6,500 to $6,700 level per day per vessel.

Okay. That's your kind of 2013 target on a daily basis?

Yes.

Got it. Okay. That's it for me. Thank you so much to the team.

Gregory Lewis, Credit Suisse.

I just have two questions for you. The first is more on the market. And then, really, when we think about ship owners in distress, and, clearly, there are a lot of them now the dry bulk market, are you seeing first-hand discrimination of vessels owned by distressed companies? And is it simply they're getting excluded from the spot market? In other words, is there a pool of vessels that are idle or having real difficulty getting work just simply because cargo -- movers of cargo are afraid those vessels are going to be getting [arrested]?

You are correct. This has been recently a very big concern of the charterers for two reasons. One is the one you mentioned as regards to potential arrest of such vessels. They don't want to end up at a place somewhere in the world with a vessel full of cargo being arrested by someone.

And the second reason also has to do with the fact that it is rather common for companies if they have financial difficulties not to maintain properly their vessels. And that has an effect with regards to the for-hire days and unforeseen repairs, et cetera, something that destroys, basically, and completely takes out of schedule those companies -- the chartering companies.

Okay. Great. And then I just had one other question. Clearly, rates are pretty low, and you kind of mentioned that, right now, we're in a period where we're not seeing much scrapping. Is there some seasonality in the demolition market just simply because, when you think about a special survey, it's something where, once the calendar year starts, you have a couple -- you have a window where you can watch the market before you make that decision to scrap? And I guess what I'm wondering is, if we see rates where they are today, is it sort of plausible to think that maybe we see a pickup in scrapping maybe in the middle and back half of the year?

Well, if you can consider seasonality, the period of typhoon season in India and that sort of area, that is the seasonality. But the seasonality comes from the supply and demand of the scrapping deals. And I think that the scrapping will have to increase for the next few months. And, of course, the rate of the scrap [volume] will decrease too.

Yes. And something else that I would like to briefly mention is that scrap buyers tend to (inaudible) at the beginning of each year, trying to, in a way, digest the deals that were booked the year before and try and also put pressure on prices, which they have partially succeeded in doing now, as we have seen.

So there is kind of a lull in January and February, more influenced by demand side for the ships to be scrapped rather than the supply.

Okay, guys. Hey, thank you very much for the time.

Fotis Giannakoulis, Morgan Stanley.

I have a couple of questions. The first is about your ability to operate additional vessels. You have a fleet of 34 or 35 ships right now. How many ships can you operate under your current establishment?

I think we are organized in a way where, at the moment, if we add a few headcount, we could without any major issue go up to 50 vessels operated by Diana Shipping services. So, you have seen that operating more vessels has kept, nevertheless, our G&A intact, which proves the fact that we get economies of scale from a bigger fleet. And, on the contrary, we have also diminished the G&A, for that matter. So that's your answer I guess.

Thank you. In addition to that, you have approximately $450 million cash on your balance sheet. This has been the case for the last 12 months. And, if I understand well, you expect that, at some point in 2014, we are going to see some improvement either smaller or greater. But there is going to be an improvement. Regardless the degree of improvement, your cash flow is pretty much fixed for the next 12 months. Is there a time that you might start considering introducing or reintroducing a dividend to the Company?

The dividend policy is going to be reintroduced when we feel comfortable that we have risked the upper part of our cycle and we are moving towards the next peak. We think that we are still far away from that point. You understand that a dividend introduction is going to happen at the middle of the cycle or moving upwards. Now, we are at the bottom.

And, Fotis, we are questioning whether we have as a matter of fact reached the absolute bottom because, at the moment, you are (inaudible) expenses. It was only a few days that we reached the (inaudible) expenses of the ships as time charters age. So I'm wondering whether the bottom has gone. So we have to be careful there.

Okay. Thank you. That was all I have.

Justin Yagerman, Deutsche Bank.

It's Joshua in for Justin. I just want to follow up on some of the acquisitions and potential vessel sizes. You mentioned the kind of newer age profile of some of the bigger ships, and there's a lot of older ships in the kind of Handysize segment. I guess, why not consider some of the Supramaxes or Handysize ships, just given the ability for scrapping rates to pick up in the segment and, I guess, maybe for rates to be a bit more stable, although maybe less upside in the segment? Why not branch out into the smaller sizes?

Well, there are various reasons. First of all, it's the quality of charters that you have to deal with when you deal with smaller ships, which is something that has always bothered us in the sense that they want to deal with the best charters in the industry, and you have huge difficulty in doing that when you're dealing with Handysize vessels. You have to have a pretty large number of operators and relatively unknown charters to charter your ships. Otherwise, you won't be able to have steady business flow.

Second is that, in the Handymax sector, we have a significant order book, and we are quite convinced that the way that the cascade effect has worked in the containership sector, it's easier for it to work down the size ranges in the bulk carrier sector. And a lot of the larger Handysizes are going to be displaced by the more modern and economical Handymaxes.

So the only real question that we have in our minds and have not managed to get a proper answer to it is -- why not invest in small Handysizes? I'm talking about ships between 20,000 tons and 30,000 tons. That's a different market altogether. And the trades that they do are really trades that (inaudible) specialize in and we really don't want that much to do with, mainly because of the volatility that the business attracts.

So that sector is being under built. There is no doubt about it. And we'd rather leave that sector to people who are more geared up in trading ships in that small size range than we are. Our operations are set in a way that we are best in operating larger bulk carriers.

Don't forget also that our model depends on the high volatility. The model that we have takes advantage of the high volatility on the charter rates and prices for the benefit of our shareholders. The bigger the vessel it is, the bigger the volatility in the cycle.

Got it. That's fair enough. Kind of moving up to the larger segments, I guess, when you look at acquisitions, how do you feel about more Post-Panamaxes? I saw you did the recent Kamsarmax -- but kind of the bigger, odd-sized segments versus the more traditional Panamax at 75,000 or 76,000 deadweight tons, and the Capes have 180,000 or so -- versus maybe going to Newcastlemaxes and to Post-Panamaxes?

Well, I think that you have to understand that, when the market is good, every ship is a good one, and, when the market is bad, every ship is a bad one.

But what we have to think and be careful is how much it costs to move one ton of cargo from A to B. And I feel that, today, with the increase of (inaudible) even in the Panama Canal and the efficiency of the shipyards, you can get a very good productivity of how much it will cost you to move one ton of cargo with the big ships. And I think that they have an edge, the Newcastlemaxes, for example, from the [180] Panamaxes -- 180,000-ton Capes. That's why I think we have to focus on large ships.

Got it. Then just maybe switching over to your balance sheet, you have a lot of cash. In the past, you've talked about funding acquisitions with kind of this 40% or 50% debt going forward. But, I guess, why not just fund new acquisitions with just all cash now and maybe reduce some of the interest expense going forward and then lever up maybe in a better part of the cycle and just start maybe draining some of that cash balance down?

It's part of the scattered strategy of buying vessels, basically. At the moment, easily, when we buy a vessel, we have a finance of 50% of that vessel. And we feel -- and we have cost-efficient finance. The risk is that you spend all the cash that you save. You save a little on interest. Okay. I'll grant you that one. But then, when you need to lever up because it's part of your strategy and it's at this time of the cycle that you lever up, when you need to do that nobody's there anymore to lend you money.

So this is the reason why. And we have proven that, and we will continue doing that way. As soon as we have an acquisition, we try to have a conservative leverage, as you mentioned, of 40% to 50% on the particular vessel and gradually build up the leverage and a bit less gradually, of course, spend the cash.

Well, I appreciate the time, guys. Thanks.

Herman Hildan, RS Platou Markets.

I just have a quick question on asset values. You have five-year-old Panamaxes and ten-year-old Panamaxes at history low levels versus newbuilds and newbuild prices at historically low levels as well. And you mentioned that -- call it the scarcity in the second-hand market for more than 12 months. You've actually seen recently quite high interest for buying second-hand. Can you shed some light on how you think about why you choose second-hand versus newbuild prices and, basically, how you conclude on that?

First of all, we have discussed in the past that we strongly believe that market prevails, and there is a reason why the newbuilding costs so much and the second-hand (inaudible) costs so much. And everything -- it is incorporated in the price. But that's trying to explain what we have just said. There are benefits and disadvantages to both. If you look at the optimal return that someone should expect from an investment today, a vessel in the -- a vessel being aged in the vicinity of five to ten years -- it is more likely that it will produce a better return on equity invested if the market turns after, let's say, two years.

On the other hand, the newbuildings, they have the attraction of waiting for two years without burning any cash. But, at the same time, they are adding to the existing supply of vessels.

And we believe that a prudent owner should do both carefully.

So, just to kind of -- one last question. If you're -- when you're talking about newbuilds, are you talking about adding to the order book, not buying existing orders?

No. Of course, you can buy the [re-sales]. But, usually, re-sales -- they do not go forward two or three years. They're prompt vessels.

Okay. That's all from me. Thank you.

Thank you. We have reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or 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. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. And have a wonderful day. We thank you for your participation today.