Diana Shipping Inc (DSX) 2015 Q1 法說會逐字稿

Greetings, and welcome to the Diana Shipping Inc., 2015 first quarter conference call. (Operator Instructions)

As a reminder, this conference is being recorded.

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

Thank you, Christine, and thanks to all of you for joining us on the Diana Shipping Inc., first quarter 2015 conference call. The members of the 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, Chief Operating Officer 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 under the Safe Harbor provisions of the Private Securities Litigation Reform Act.

The 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 from the forward-looking statements, please refer to the Company's filings with the SEC.

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

Thank you, Ed. Good morning and thank you for joining us today to discuss the results of Diana Shipping Inc., for the first quarter of 2015.

During the quarter, we pursued a number of strategic actions to position the Company well for the future. Specifically, we continued to expand our fleet, while enhancing our financial flexibility with new loan facilities. More recently, last week we announced a new fleet management joint venture which should provide an attractive opportunity to generate additional revenue over time.

To review our financial results, the Company reported a net loss of $10.8 million and a net loss attributed to common stockholders of $12.2 million for the first quarter of 2015. These compare with a net loss of $6 million and a net loss attributed to the common stockholders of $6.8 million for the first quarter of 2014.

Our time charter revenues were $42 million for the 2015 first quarter, compared to $41.1 million a year ago. The increase over the year-ago period was mainly due to the expansion of our fleet, partly offset by reduced time charter rates.

Diana Shipping continued to maintain a [fortress] balance sheet, reflecting cash and equivalents of more than $231 million. Long-term debt net of deferred financing costs, including the current portion, was $540 million, compared to stockholders' equity of $1.27 billion.

I am pleased to note that on May 8th, the Company announced the formation of a new 50/50 joint venture with Wilhelmsem Ship Management, a leading fleet manager. The joint venture, named Diana Wilhelmsen Management Limited, will begin operations later in the second quarter of this year and will initially provide management services to a limited number of vessels of Diana Shipping's fleet. Our goal for the future is to provide fleet management services to unaffiliated third-party vessel operators.

We are excited about the opportunity to monetize our world-class fleet management expertise by partnering with Wilhelmsen to create an additional potential revenue source.

As for our established strategy, we have continued to expand our fleet. We took delivery in January 2015 of the motor vessel Santa Barbara, a 179,426 deadweight new-building Capesize dry bulk vessel that we agreed to purchase late in 2014. Last month, we announced agreements to acquire a 2010-built Kamsarmax dry bulk vessel to be renamed [Medusa], with expected delivery in the 2015 second quarter, as well as a new-building Capesize dry bulk vessel to be named New Orleans, with expected delivery in August 2015.

Our fleet currently consists of 40 dry bulk vessels. In addition to the two vessels purchased that I have just mentioned, we have also two new-building Newcastlemax dry bulk vessels and one new-building Kamsarmax dry bulk vessel expected to be delivered in 2016.

We continue to finance 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 79% for 2015.

We continually seek to optimize our financial capacity and flexibility. In this regard, we signed a term loan facility in March with Nordea Bank AB, secured by eight vessels, and drew down $93.8 million (sic - "$93.08 million"). Also in March, we signed a term loan facility with ABN AMRO Bank NV, secured by three vessels, and drew down $50.16 million. And in April, we completed the draw-down of $30 million under a term loan facility with Danish Ship Finance A/C (sic - "A/S") in connection with our purchase of the motor vessel Santa Barbara.

We also continued to employ our financial strength to enhance shareholders' value, by repurchasing and retiring approximately 0.4 million shares during the first quarter of 2015, at an aggregate cost of approximately $2.7 million.

In summary, we continue to take deliberate actions to enhance shareholders' value, as shown by the continued growth of our fleet, our new fleet management joint venture, and our share repurchases.

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.

Thank you, Simeon, and good morning to all the participants in this quarterly conference call of Diana Shipping Inc.

Unfortunately, the poor market conditions present in the bulk carrier market since the beginning of the year have not changed much thus far. This can be easily seen by the levels of the Baltic freight indices and the amount of pessimism which has crept into the market steadily over the last couple of quarters.

On January 2nd this year, the Baltic Dry Index stood at 771, and closed today at 634. The Baltic Panamax Index started the year at 827 and closed a few hours ago at 584. As for the Baltic Cape Index, it fared rather better and started the year at 456, only to close today at 942. It is worth noting that nearly half this increase came over the last 24 hours.

According to Gibson Shipping Energy, the Capesize Baltic 5 Time Charter [route] on May 13, which is today, was $6,976 per day, and the Panamax Baltic 4 Time Charter rate was $4,661 per day.

Let's look first at macroeconomic development. The International Monetary Fund has kept its forecast of global growth in 2015 unchanged from its January estimate, at 3.5%. For 2015, the advanced economies are staging a comeback, as the IMF forecasts 2.4% growth in 2015, against 1.8% in 2014, whereas the emerging markets and developing economies are set to grow by 4.3% this year, against 4.6% last year.

The euro zone is expected to grow by 1.5% this year, and the US by 3.1%. As far as India is concerned, the IMF projects 7.5% growth in both 2015 and 2016. China is expected to grow by 6.8% this year and by 6.3%, next.

Looking at supply and demand in general, according to Clarksons, current projections indicate a 3.1% year-on-year rate of growth in overall seaborne dry bulk freight this year, to total 4,673 million metric tons. This rate of growth would be the lowest since 2009 and is largely due to a slowdown in Chinese coal imports.

Meanwhile, the iron ore trade is expected to grow 6% year on year, supported by the current ramp-up in Australian mining production and import demand from China.

According to Clarksons, the bulk carrier fleet is expected to grow 4.4% year on year in 2015, after growing 4% last year, 6% in 2013, and the massive 11% in 2012. The current rate of fleet growth is more in line with demand, but significant surplus capacity still exists. So, even though in the Cape market, iron ore trade growth is likely to continue outpacing Capesize fleet expansion this year, the extent of weakness in rates suggests that the pressure from past oversupply is likely to remain considerable.

The Panamax fleet is expected to grow by 6% this year, and the Capesize fleet by the same rate. At this level of growth, the oversupply in the bulk carrier fleet would certainly not ease any time soon. However, Clarksons points out that fleet growth may be impacted by the current surge in scrapping. Should demolition continue at current levels, it may help moderate the pace of fleet expansion in the short term. More about scrapping, later on.

Let's look at steel production. According to Commodore Research, Chinese steel output is expected to decline this year from the 2014 level. This would mark the first year-on-year decline since 1981. On the other hand, the World Steel Association forecast is for steel demand to grow marginally, by one-half a percentage point, to 1.544 billion tonnes in 2015, and increase by a further 1.4% in 2016.

Meanwhile, Chinese steel prices have already declined by 17% so far this year, whereas during all of last year they declined by only 14%. Stockpiles of this commodity are down by 3.8 million tonnes so far this year and are 21% down year on year.

On a worldwide basis, Gibsons reports that as of early May steel prices were relatively weak. In Europe and the United States, prices are under pressure due to low Chinese prices mentioned above and lower price expectations, going forward.

However, Gibsons believes that growth of steel production will be down over time and could possibly even contract. This, according to Commodore Research, would support prices, but will also put pressure on future seaborne iron ore trade.

Let's look now at iron ore. According to Clarksons, total seaborne iron ore trade is expected to grow by 6% this year compared to 2014, and reach 1.42 billion metric tons. Strangely enough, according to Clarksons, even though the Chinese government expects economic growth to drop to just under 7% this year, with a potential negative impact on steel production, this is unlikely to significantly affect iron ore imports, which are expected to grow 8% year on year in 2015, to reach 982.3 million metric tons.

Analysts believe that Chinese iron ore imports this year will largely be dictated by the volume of global iron ore miners want to keep producing. It goes without saying that this trend cannot continue for very much longer, as China will end up eventually drowning in mountains of iron ore stored in ports and steel plants, unless there is a radical change in demand for steel.

Chinese port iron ore stockpiles amounted to 94.5 million tonnes late last month, which is 6% down on a year-on-year basis. This is still, however, a large amount of iron ore, especially in the face of reduced steel production in that country.

Iron ore prices have been dropping steadily over the last few months and started moving a bit higher last month. According to Maersk Broker, iron ore has traded in March at around $50 per tonne, which was a new low. According to Commodore Research, the three big Australian iron ore producers will be ultimately forced to lower their robust iron ore expansion production targets, and the recent rise in iron ore prices has been the result of speculation on the price of this commodity.

Australian and Brazilian iron ore production is set to increase significantly during the second half of this year, as it has been doing for every year, and Commodore Research believes that iron ore prices may fall even below the low seen in March this year.

A look at coking coal now. According to Clarksons, coking coal seaborne trade is expected to grow by 2% this year and reach 267 million metric tons. Japan, China, and India are expected to be the largest importers of this commodity, in that order. In 2014, China's coking coal imports dropped by 21%, while Indian coking coal imports grew at the fastest rate among all major Asian importers last year, increasing by 24% year on year to total 47.4 million metric tons. The growth in imports was due to poor domestic production. Current projections suggest that India's coking coal imports will increase a further 9% year on year in 2015.

Thermal coal. Clarksons reports that global seaborne thermal coal trade is expected to reach 951 million metric tons this year, an increase of just 1% compared to 2014. In China, regulations were introduced in the first few months of 2015 which are designed to support the domestic mining industry, as well as improve the quality of air in urban centers.

For now, Chinese thermal coal imports are expected to drop 10% year on year, to reach 172.3 million metric tons in 2015. However, Chinese coal port stockpiles and power plant stockpiles have [low levels] this year, which makes Commodore Research hope that there is finally a chance to see a jump in Chinese thermal coal imports some time in 2016.

Increased imports this year by the US, the Philippines, and Morocco will help make up some of this lost Chinese seaborne trade in thermal coal. According to Commodore Research prospects of Indian coal imports this year as not as bullish as they were at the end of 2014, when Indian coal stockpiles were extremely low and Indian coal production was still under pressure.

However, Commodore Research remains very concerned for what the upcoming summer months will bring for thermal-coal-derived electricity production and coal imports once Chinese hydropower production kicks into full gear in June, July, August, and September. They believe that freight rates for Panamax and Supramax vessels might come under pressure due to this developing trend.

According to banchero costa, hydropower generation in China during the first quarter of this year was 18.7% higher than it was during the first quarter last year. The flattening of the thermal coal market in 2014 by Australia depressed international prices to the point that one-third of the Australian thermal coal industry is reportedly making a loss under current market conditions.

A look at the grain trade. According to Clarksons, in the 2014/2015 crop year, global combined wheat and coarse grain trade is projected to decrease by 1%, to total 304 million metric tons. The drop is expected to be driven by a 30% year-on-year drop in European grain imports, where attractive prices and the large harvest lifted consumption of the domestic product. Similarly, a strong recovery in Chinese domestic production is expected to contribute a projected 16% drop in imports during the current crop year by China.

Scrapping, now. According to Maersk Broker, a total of 131 vessels with a 10.4 million deadweight capacity were scrapped so far this year. This was equivalent to around 50% of total bulk carrier demolition during the entire 2014. Total bulk carrier scrapping this year is expected to reach 21.2 million deadweight tons, an increase of around 30% year on year.

However, if the current rate of scrapping continues throughout this year, then the total tonnage scrapped will exceed 35 million deadweight tons. If this materializes, it would have the beneficial effect of slowing the rate of growth of the bilk carrier fleet to around 2.5%, which would represent the slowest fleet growth rate in more than a decade.

As a result of heavy scrapping of Capes, Maersk Broker reported the Capesize fleet has shrunk by 1.7% during the first three months of this year. According to Clarksons, total Capesize demolition is currently projected to increase significantly this year compared to 2014, and reach around 9 million deadweight tons. However, they also point out that if the current rate of scrapping were to continue, this total would most likely increase substantially.

Even though only 7% of the Capesize fleet is over 21 years old, this does not necessarily mean that there will be fewer scrap candidates, going forward, if the market does not improve. There is 10% of the fleet which is between 16 and 20 years, and a further 13% between 11 and 15 years. Judging by past experience, ships in any of these age brackets could become scrapping candidates, given the appropriate circumstances.

The equivalent numbers in the Panamax sector are: 10%, over 21 years old; and 15%, between 16 and 20 years. That could become another pool of scrapping candidates if the present depressed rate persists much longer.

The average scrapping age so far this year dropped to 24.8, from 27.3 last year, which was in itself down from 28.1 years in 2013.

New building order book. According to Clarksons, at the end of February of this year the total bulk carrier order book came to 151.4 million deadweight tons, which represented 19.9% of the existing fleet. For Panamax bulk carriers, the order book was for 31.2 million deadweight tons, representing 16.1% of the trading fleet; while for Capes, the order book was made up of 61.9 million deadweight tons of vessels, which is representing 20.1% of the existing fleet.

In the bulk carrier world, the most [over-ordered] size range is the [Handymax] segment, where the 43.3 million deadweight tons on order represents a rather massive 26% of the existing fleet.

From the total order book, China is responsible for 61% of the dry bulk orders, with Japan, 31%, and Korea, only 4%; the remaining 4% accounted for by nations such as the Philippines and Vietnam, among others.

Deliveries, now. According to banchero costa, 65 million deadweight tons of [bulkers] will be delivered this year, which, if it materializes, will mean that slippage will be around 15%. According to Clarksons, the remainder of this year will see 10.2 million deadweight tons of Capesize vessels joining the fleet, and this number will reach 11.7 million in 2016. As for Panamaxes, the equivalent numbers are 4.5 million tons this year, and 4.3 million tons in 2016.

Contracting activity. According to Maersk Broker, during the first three months of this year only 1.9 million deadweight tons, or 21 vessels, have been ordered, which number is down 93% year on year. In 2014, new contracting has already dropped by 39% compared to 2013, with 113.2 million tons having been ordered.

Finally, let's turn to the outlook now for the industry. According to Maersk Broker, Cape and Panamax earnings are hurting from the absence of (inaudible) going into China, and this will keep the Pacific market low for the while. The Atlantic Panamax market will be positively influenced by the South American grain season, but they predict that rates will remain below those seen in previous years.

For Capes, Gibsons suggests that by the second half of 2016, the steady level of scrapping and the start of the phasing out of the [ore carrier, ex-the LCC conversions], could start to tip the balance in favor of Capes. However, for 2015 and the first half of next year, they also remain rather bearish.

BIMCO's chief shipping analyst reported that in his view China is becoming a relatively more closed economy, driven forward by domestic demand rather than foreign demand like, for example, in the United States. This translates into lower level of shipping demand, going forward, compared to what we have become accustomed to during the past decade.

According to the World Trade Organization, the [rough two-to-one] relationship that prevailed for many years between world trade growth and world GDP growth appears to have broken down. This is illustrated by the fact that the trade and outlook have grown at around the same rate for the last three years. This has made trade forecasting particularly difficult, and this will cloud the outlook for 2015 and 2016.

We agree with banchero costa in their assessment of the bulk carrier market, which is that the current situation remains difficult for ship owners. However, if strong demolition continues, fleet growth comes down, and there is very limited contracting, going forward -- as there has been so far this year -- we could see some light at the end of the tunnel.

In this not-so-promising environment, the management team at Diana Shipping will continue implementing the investment plan stated repeatedly in past conference calls and analyst/investor presentations. The supply of second-hand and resale new-building tonnage is increasing, due to the poor market conditions, and the prices are dropping steadily, reflecting poor earnings prospects. This creates opportunities for buyers not dependent on commercial banks or the capital markets to invest in competitively priced assets.

We are confident that when the recovery comes, which will surely happen, the Company will have a modern fleet ready to take advantage of improved earnings and increasing asset values. When we are close to the upper part of the shipping cycle, some older vessels will be sold and the Company will reintroduce its dividend.

[These sort of developments] have also been explained in the past, and nothing in that respect has changed for us thus far.

I will now pass the call to our CFO, Andreas Michalopoulos, who will provide you with the first quarter financial highlights. Thank you.

Thank you, Stacy, and good morning. I am pleased to be discussing today with you Diana's operational results for the three months ended March 31, 2015.

Net loss amounted to $10.8 million. Net loss attributed to common stockholders amounted to $12.2 million. And loss per common share was $0.15.

Time charter revenues increased to $42 million, compared to $41.1 million in the first quarter of 2014. The increase was attributable to revenues derived from the vessels: Crystalia, delivered in February 2014; Atalandi, delivered in May 2014; G. P. Zafirakis, delivered in August 2014; and Santa Barbara, delivered in January 2015.

This increase was partly offset by decreased revenues due to the decreased average time charter rates that we achieved for our vessels during the quarter, compared with the same quarter of 2014.

Ownership days were 3,588 for the first quarter of 2015, compared to 3,280 in the same quarter of 2014.

Fleet utilization was 99.1%, compared to 98.8% in the same quarter of 2014.

And the daily time charter equivalent rate was $10,532 (sic - see press release, "$10,535"), compared to $11,820 in the same quarter of 2014.

Voyage expenses were $4.9 million for the quarter, compared to $2.4 million for the same quarter of 2014. The increase in voyage expenses was due to bunkers resulting from the redelivery of vessels in the quarter.

Vessel operating expenses amounted to $21.8 million, compared to $20.7 million in the first quarter of 2014, and increased by 5%. The increase was attributable to the 9% increase in ownership days, resulting from the enlargement of the fleet.

Daily operating expenses decreased, mainly due to decreased crew costs, stores, spares, and taxes as a result of the decrease of the euro compared to the US dollar. This decrease was partly offset by increased insurances, repairs and maintenance costs, and environmental (inaudible) expenses.

Daily operating expenses were $6,073 for the first quarter of 2015, compared to $6,298 in the same quarter of 2014, representing a decrease of 4%.

Depreciation and amortization of deferred charges amounted to $18.4 million.

General and administrative expenses decreased to $5.7 million, compared to $6.2 million for the first quarter of 2014. This decrease was mainly attributable to the change in the exchange rate of the euro to US dollar.

Interest and finance costs were $2.5 million for the quarter, compared to $2 million for the same quarter of 2014. This increase was mainly attributable to increased average debt and average interest rates in the first quarter 2015 compared to the same quarter of 2014.

Interest and other income amounted to $0.9 million and was the same as in the first quarter of 2014.

Loss from investment in Diana Containerships Inc., amounted to $0.8 million and reflects the change based on the equity method valuation at the end of the quarter of our investment in Diana Containerships Inc.

Shares repurchase program. During the first quarter of 2015, we repurchased and retired 0.4 million shares, for an aggregate cost of about $2.7 million.

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 procedure for asking questions. Thank you.

(Operator Instructions) Amit Mehrotra, Deutsche Bank.

I joined a little late, as I was on another call. So, apologies if you covered this. But if I'm correct, I believe you have a very quantitative process in gauging the sentiment in the dry bulk market, which sort of compares the second-hand S&P activity to time charter rates over time. So, can you just tell us specifically how you look at that and what the data is currently telling you?

This is Ioannis Zafirakis speaking. We are still -- it's a bit difficult to answer your question, because today we saw again rates going to $12,000 for a two-year period for a Cape, [somewhere at that]. So, if you want to utilize this rate or the one-year time charter rate to [see] the sale and purchase activity and the sentiment of the market, we have to say that we are still, as regards the values of the vessels, on the high side based on the earning capacity of the vessels.

Certainly, we have ended up in a situation where people are more pessimistic than previously. But still, to [pass] the long story short, we think there is some way to go if we want to end up in the real values of the vessels based on their earning capacity and their future earning capacity.

So, you think over the next three to four months or six months, either the earnings capacity is going to go up or the asset values are going to come down?

Yes.

Okay. All right. Let me just have a follow-up. Stacy, I was little disappointed that there was no Shakespeare quote this quarter. But with respect to the light at the end of the tunnel, scrappage has clearly accelerated, but we've also obviously had unprecedented supply growth. So, could you just tell us where does net supply in your view need to go to at the end of the day to drive some supply-driven recovery?

And we've all obviously thought a lot -- hearing a lot about scrappage. But maybe, can you also give us some thoughts on how many vessels you think are currently laid up, either warm or cold lay-ups, in the current market? Just some information on what you think needs to happen on the supply side to drive a recovery?

As for Shakespeare or other classics, we have to wait for some inspiration to come, and then we will revert to that.

But on scrapping, which is a more mundane issue, we will say the following. Scrapping will continue for as long as ships are not basically trading at rates that cover their operating expenses. For Panamaxes, this still seems to be the case. For Capes, as of lately, it's not; or, let's say, it's marginal.

So, if scrapping continues at what we saw during the first three months, we will have a good chance of having supply of bulk carriers increase this year by just under 3%. Now, that might not bring a turnaround in the market overnight -- or over a quarter, even -- but it will be very encouraging if it is followed, as I said earlier, with a [fleet-controlled] ordering -- or hopefully, no ordering -- of further new buildings.

So, in answering your question, we need supply to grow at just under 3% for a couple of years, and hopefully scrapping to increase to over 30/35 million deadweight tons for a couple of years, especially now for the larger ships. Because up to now, we have been seeing smaller ships being scrapped. And now, we're beginning to run out of these old vessels, and we have to tap the older, large bulk carrier pool which is growing, age-wise.

So, I don't know if that answers three parts of your question. Maybe I'm, missing (inaudible).

It does. Just one clarification. The sub-3% growth, does that include the accelerated scrappage? Or, is that exclusive of the scrappage?

No, that is a net-net increase.

Okay. And then, the last -- and then, you didn't address the lay-ups. That was the last question. What you're seeing there?

On lay-ups, we haven't seen any official figures on cold lay-ups yet. There are some ships that are waiting for orders. I heard -- and it's probably correct -- that over 70 Panamaxes are heading for the [River Plate], to be there for the grain loading, which is not very encouraging. It means that they have nothing better to do than to ballast in South America.

So, this is not -- no lay-up, officially. But for all intents and purposes, these ships will have been without business until they load for between five and eight weeks.

So, yet, there are no official yet figures on cold lay-ups, but there are ships which are drifting and waiting for orders, whether in Singapore or heading for South America or elsewhere in the world, like east or west Africa.

Great. That's very clear.

Gregory Lewis, Credit Suisse.

Stacy, it seems like we don't go a week now without seeing at least -- hearing about one shipyard in China or elsewhere that seems to be in financial trouble or distress. Have you guys tried to quantify that at all, in terms of what that means for supply over the next couple of years and potentially how much of the order book are you seeing that's at risk?

It's going to be very difficult, because bear in mind that the reports from China are very limited. But overall, there is a slowdown process in building ships in China, and especially from yards that are not state-owned yards. The private yards have some difficulties in finding (inaudible).

So, this will create some problems in building. And maybe some of the vessels which are about to be completed, they will not be completed on time, and that will create a sort of problem. And the slippage, of course.

So, I think the psychology is that we are moving the forces on the right direction. But to give you a number will be very difficult, because it involves China.

Thank you, Mr. Palios. And just following up on that, given some of these shipyards' positions and Diana's position, have yards been approaching you to potentially take on some of these more riskier orders? And is that something that the Company is thinking about potentially doing?

Well, not really the yards, but there are some resales in the marketplace today that you can put your hands on, but not necessarily from the yards. From the present owners, yes, there are.

Okay. Great. And then, just one more for me. Clearly, you guys have a fair amount of cash on the balance sheet. But as the Company has built out its fleet, there's still a couple of new-builds. That's still at a very manageable level, but it has ticked up a little bit. Given the uncertainty out there, at a certain point does Diana go into an even more defensive mode and just really try to keep existing cash on the balance sheet and just manage the vessels that it's scheduled to take delivery of over the next, what, two years?

We have been very conservative with our modeling, and the most pessimistic number still gives us a leeway to continue with our investment strategy for the period that we have the [discussed] before. And certainly, at the same time, make sure that the Company will have no problems whatsoever meeting its obligations and surviving in case of a prolonged down market.

We do not intend to change the pace of purchases, and you should expect Diana to keep buying or investing $15 million to $20 million every two months, or so.

Don't forget, Greg, that we have also increased our liquidity in the last quarter, by making sure that we leverage the vessels that we had unmortgaged up until now, as Mr. Palios mentioned at the beginning of the call, with three new loans, one [expansion] of four vessels that were unmortgaged with Nordea, and the Santa Barbara with Danish Ship Finance, et cetera. And we intend to also leverage, as is our strategy, the new vessels acquired.

Okay. Perfect, guys.

Ben Nolan, Stifel.

My first question, just in listening to your commentary -- I don't know. Is it just me? You do sound, although very guarded, maybe a little bit more optimistic about, at least, the longer-term outlook for the market than maybe had been the case in the past. Are you starting to feel like maybe we are close to a bottom here? Or, is that just me sort of drawing too much in the way of conclusions?

Actually, what we are saying is that certainly when someone sees the scrapping that we saw recently, there is no doubt that he or we can say that this is a move towards the right direction. Nevertheless, the problems that we, all of us, have created throughout the years, it's much bigger than something that can change with half a year of good scrapping.

For example, the fact that you can still charter for $12,000 a Capesize for two years is not something that leads our way of thinking to be optimistic about the near term. As we have always said, the market at a point is going to turn, but we still have a long way to go. Especially, we need more scrapping; we need rates to go further down and vessel values to go further down; and people to get really pessimistic about the market. This is not the case yet.

Right. Okay. And then, you just mentioned the strategy is still to maybe acquire a new vessel maybe every two months, or so. I'm curious how you think of your capital availability to be able to do that? Given where the balance sheet is today, how much capital do you feel like is within range without overly stressing the balance sheet for you guys?

We still have a very low leverage, even with the increased finance that our CFO described earlier. Our net debt position is still very low. And if you are at the bottom of the market, the absolute bottom of the market, being at 70% or even 80% financed is something that we are not afraid of doing. We're still far away from there. And therefore, our liquidity, we feel, as we said earlier, is sufficient that we can keep our investment program intact.

Okay. But no rough number of you could spend "x" amount?

What we are saying is we think that we can spend another $150 million from our own equity easily, and still be left with some [cash aside] as a safety valve.

Okay. That's helpful.

So, $150 million equity means $300-plus million in new purchases.

Sure. Sure. Absolutely. And then, lastly, just along the same lines, you guys have, I believe, four new-buildings scheduled to come online in the next 12 months, or so. Do you have all of the financing in place for those? Or, where does that stand for those vessels?

We are in very good shape with the financing of those vessels, yes. But as soon as it will be fully in place, we will come up with an announcement as we do every time.

Okay. Very good. All right. That's it for me.

Donald McLee, Wells Fargo.

A couple of my questions have already been addressed, but I just want to touch on scrapping again. Based on your comments, accelerated scrapping and demolitions remain kind of the primary avenue to [firm up fundamentals within the] dry bulk market. And basically, companies are playing a waiting game at this point. I was just wondering what are some of the competitive advantages you think you have at DSX that enable you to play that waiting game longer than your peers?

I think what we've mentioned up to now regarding the balance sheet strength and the method we apply in acquiring tonnage means that, yes, we have -- or we feel we have, at least -- a better chance of succeeding in the waiting game that we have been engaged in over the last couple of years.

And of course, we don't have scrap candidates ourselves, but we feel that the market conditions, as they will be over the next (inaudible) of quarters, will dictate that certain owners faced with the uncertainty of spending considerable sums of money [passing fifth surveys], special surveys, and, on occasions, even [fourth], will consider the scrapping option, especially in view of the fact that prices have been holding up rather better than we had thought they would up to now. So, at around $200 per lightweight ship displacement, a Capesize fleet is worth quite a lot of money if sold in scrap.

Got it. That's helpful.

Fotis Giannakoulis, Morgan Stanley.

I want to point out some of the market remarks that Mr. Margaronis made earlier, and there seems to be some contradiction in the different research reports among analysts on flows of iron ore. On the one hand, we have this very high supply of [steel] supply from Australia and Brazil. On the other hand, we have seen that the iron ore demand in China is quite weak. It has declined -- it was declining at the beginning of the year. How do you think that this is going to balance?

Well, we don't have, unfortunately, a crystal ball which will enable us to see how the Chinese are going to handle their future iron ore imports, and that is why my remarks may appear a little bit fuzzy and sound like an oracle from the Delphi temples.

But unfortunately, what we have here is the desire, obviously, by iron ore traders in China to take advantage of low prices, which means that they are trading the commodity, and the stockpiles of this commodity that exist and will, I think, at least, personally, increase if large quantities of iron ore which are not used at the same pace from steel mills keep being imported in China. And this is what is worrying us a lot at this point in time.

So, unless we see steel production increasing and steel exports from China increasing, I don't think it is feasible to assume that China will continue importing the iron ore that we have seen it import over the last few quarters. And I also doubt whether we're going to see seaborne iron ore trade increase at 6%, the way Clarksons are predicting, for the whole of the year.

But as I said, there's too much here at play between speculation on the price of the commodity and actual demand; all this under the sphere of possible reduced steel output.

Thank you, Stacy. That was very helpful. I think that you mentioned about if we see a couple of years of declining fleet growth below 3% and this kind of scrapping that we have been seeing the last few months, then the market will balance. Is this assumption or this conclusion that you came to based on a growing steel production in China? Or, that would be sufficient to absorb the excess tonnage even in a scenario where Chinese steel production is not increasing?

Well, obviously, the slower China grows, the longer it will take to absorb the surplus tonnage. However, we have to keep an eye on Capesize earnings, primarily. Panamax earnings unfortunately remain dismal, as you saw from the 4TC rate.

If the Capesize earnings [blitz] that we seem to be witnessing over the last couple of days is taken as a sign of a better period for earnings, starting now and lasting for a couple of quarters, then, as you can imagine, fewer Capes will head for the scrapyard than our assumptions take into account.

So, we have to watch this very carefully. It's a very recent movement in rates. If we didn't have it up to now, we would feel much more confident that the balancing between supply and demand would start and be well on its way at the middle of this year and increased pace towards the end of this year and early 2016.

But let's watch now the Capesize earnings because, as you can imagine, if a 12-month or 18-month contract can bring in over $11,000 a day for an owner, he will naturally be reluctant to scrap a 15-year-old Cape, as we have been assuming might be the case.

Thank you. One last question. You mentioned that either prices, they might have to come further down, or rates, they have to move up. We tend to focus a lot on the sale of assets from the public companies, but the majority of the industry is still private. And I assume that you probably see every day a deal that is out there in the market. Have you seen an increase in these distressed sales or from owners that they are trying to get rid of their assets that they cannot support any more? And what is the view of the banks? How are they reacting to the fact that most of their borrowers, they have a trouble in servicing their debt?

Well, Fotis, if we go to the container market, you will see how nicely the banks have been nursing their fleets for the last four or five years. And the reason is that the interest rate is very low. So, we expect the interest rate to play a part in the dry bulk market, too. So, I think they will be nursing, but up to a point.

So, the psychology part will play a very big role also, and the forces will be in place. One way or another, will be in place. And the different equilibrium will definitely come. It may take a little bit longer because the interest rates are low, but it will come.

What I'm trying to understand is if the pressure that we have seen in asset values has reached a bottom? Or, do you think that there are still a lot of ship owners out there that they will have to sell their assets in order to deal with their obligations? Because on the public side, most of the public companies they have already reacted. They have done a lot of sales. But we do not have a very good picture of what is happening in the private world.

But the prices of the assets today are so low that you cannot solve your problem by selling your asset. You are worsening your problem by selling your asset, if you can understand what I mean. So, that's not the way out of it.

And Fotis, also, we don't entirely agree with your comment that we have seen most of the sales that are scheduled to come from publicly listed companies. As you know, some of them have rather large order books, and we don't know what they and their bankers and backers have in mind as regards the new-building [coming], that they're going to be taking delivery of over the next couple of quarters or three quarters. So, I don't think we have closed that chapter.

As regards private owners, again, there, the longer the weaker earnings last -- you know that as well as we do -- the greater the pressure on private owners and the more ships may have to come out, not by choice -- because as Mr. Palios said, the problem is not solved -- but by necessity. A sale might transpire. Out of five ships, maybe two have to be sold for short-term liquidity, but the problem will remain because of the low values.

Thank you very much for all your answers. It has been very, very helpful.

Spiro Dounis, UBS.

Just wanted to follow up on that last question and your comment. I guess just last night we saw a pretty big equity deal from a peer of yours with some private equity backing, which I know you've been critical of in the past in terms of private equity. But it looks like the pipeline to equity is still open, even after hitting 30-year lows in Capesize market. And I guess that comes as opposed to scrapping vessels or selling right out of the yard.

Does it make you nervous that, I guess, private equity is still sort of in the space in this way? And is that consistent with what you're seeing broadly, just outside of the public companies?

It is not 100% correct that private equity is still here, interested in the shipping industry. Last year, most of the private deals that you have seen the last six months, it is our understanding that they have come out of necessity, rather than as being an attractive deal for anyone.

At a point, all of the private -- or most of them, they will get really tired and they will really exit the shipping industry.

Certainly, those that are clever enough and they have the strength to stay alive by having done right choices in the past, they may produce a nice return, but we are still far away from that point.

Okay. Fair enough. And then, just quick follow-up on lay-ups. I was wondering if you could walk us through maybe some of the economics and maybe the true cost of laying up a vessel and how we'd get to that decision? You, as an owner -- not to say you're going to lay anything up -- but just, as you're thinking about rates, are you looking out at rates saying they're going to be bad for six months, a year, over a year? And then, does that drive your decision to lay up? Or, maybe just walk through some of the numbers?

The laying-up decision is not an easy one. It has to do with current rates, but also it has to do with the anticipation regarding the future.

You need to spend money to lay up the vessel, and you certainly need money to reactivate the vessel. So, you should not expect market to react quickly as regards laying up, even if rates are really, really bad. It takes some time, and it takes a lot of blood out in the streets for people to start laying up vessels.

Okay. So, I guess with that in mind, given where the market is and maybe the outlook maybe for the rest of the year not being that great, would you expect now that maybe some cash balances have been cut down we could see that acceleration soon, given that things haven't really improved all that much? Or, would you say that it's still too early?

Certainly, the $12,000 for a two-year period for a Capesize vessel today doesn't help at all. It will decelerate the procedure.

On the Panamax size, on the other hand, we might be seeing some lay-ups over the next few months, always depending on the sentiment and anticipated rates. This is the key factor. And you need also pessimism for the foreseeable future to prevail, not only low rates at present, low current rates, in order to take the decision.

As Ioannis said, not an easy decision to make. It depends a lot on the location of the lay-up, on the type of ship, and also on the type of lay-up that you want to place your ship on.

And if I may add, you have all noticed that we are wasting most of our time discussing the supply of excess scrapping and laying-up, and we keep forgetting the real dependency on the Chinese trade as regards the demand side in the equation. And this is going to play a very important role to what is going to happen in our industry. And it remains to be seen what demand is going to do.

Fair enough. I appreciate the color, guys.

Amit Mehrotra, Deutsche Bank.

Just a quick follow-up on the acquisition discussion in the earlier questions. At least up until now, your acquisition strategy has been very disciplined, at one --.

Sorry. Can you speak up a bit? Because we are not hearing you. We cannot hear you.

So, up until now, your acquisition strategy has been pretty disciplined, one at a time, incremental approach. But like you've said, your competitors do have pretty significant new-building commitments and that may give rise to potentially attractive [end-lot] sales.

And so, I'd love to get your perspective on, would you entertain a deal where you're acquiring a relatively large amount of ships -- whether it's four, five, six, seven -- with a staggered delivery schedule as a way to maybe lock in your growth profile for the next couple of years, and at the same time get a little bit of a more attractive price?

No, because that does solve our initial strategy. If we buy five ships today, we lock today's values for the five ships, and I think that's not our idea. Our idea is to buy every two months, one ship. Thus, you are buying at prices which are dictated at all this long time and you take a better average of the market.

The delivery dates is irrelevant, expect that is helpful logistically. The fact that you are going to -- in your example, we were going to be getting a staggered way of deliveries is irrelevant.

What we worry about is spending a lot of money as our (inaudible), at one point in the cycle. And what you describe involves exactly that. So, the answer from our boss was clear, no.

Okay. That's very clear.

We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

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

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.