Diana Shipping Inc (DSX) 2017 Q4 法說會逐字稿

Greetings, and welcome to the Diana Shipping 2017 Fourth Quarter and Year-End Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ed Nebb. Thank you. You may begin.

A very good day. And thanks so much, and thanks to all of you for joining us for the Diana Shipping Inc. Fourth Quarter and Year-End 2017 Conference Call. Members of the company's management team who are with us today include: Mr. Symeon Palios, Chairman and CEO; 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 remind you of the safe harbor notice, which you can see on our press release that certain statements made during the conference call, which are not historical fact, are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act.

With that, let me turn the call over to Mr. Symeon Palios, Chairman and CEO of Diana Shipping.

Thank you, Ed. Good morning, and thank you for joining us today to discuss the results of Diana Shipping Inc. for the fourth quarter and full year 2017. The company's performance during the recent quarter and year reflected our long-standing strategy of positioning our fleet to take advantage of an eventual rise in charter rates. Why does the dry bulk market remain challenging? We have seen an improvement in charter rates, and we are beginning to show the benefit of this strategy.

To review our financial results, the company reported a net loss of USD 436.9 million and net loss attributed to common stockholders of USD 438.4 million for the fourth quarter of 2017. These results included a USD 422.5 million impairment loss. Excluding this impairment loss, the net loss and net loss attributed to common stockholders for the fourth quarter of 2017 would have amounted to USD 14.5 million and USD 15.9 million, respectively. This represents an improvement from a net loss of USD 23.3 million and net loss attributed to common stockholders of USD 24.7 million for the fourth quarter of 2016.

For the full year 2017, the net loss and net loss attributed to common stockholders amounted to USD 511.7 million and USD 517.5 million, respectively.

For the full year 2016, net loss and net loss attributed to common stockholders amounted to USD 164.2 million and USD 170 million, respectively.

Time charter revenues rose sharply to USD 48.9 million for the fourth quarter of 2017 from USD 28 million for the same quarter of 2016, mainly due to increased average time charter and the enlargement of our fleet. Time charter revenues were USD 161.9 million for the full year of 2017 compared to USD 114.3 million for 2016.

During the balance sheet, cash -- equivalent restricted cash totaled USD 65.8 million on December 31, 2017. Long-term debt, net of deferred financing costs, including the current portion, was USD 601.4 million, and stockholders' equity was USD 624.8 million. We continue to manage our fleet of 50 vessels in a responsible manner that promotes a balance of time charter maturities and produces a predictable revenue stream. Currently, our fixed revenue days are 50% for 2018.

Let me conclude by saying that we remain committed to maintain our financial strength and to managing our fleet in a strategic manner that will enable the company to continue to benefit from improving positions in the dry bulk marketplace.

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

Thank you, Symeon, and welcome to the participants of this first conference call of Diana Shipping Inc. in 2018. As we have done in the past, we will start by looking at the Baltic industry at the beginning of this year and compare them with those of 1 year ago. This will provide us with a general idea of how much time charter rates have moved over the preceding 12-month period.

On 3rd January 2017, the Baltic Dry Index stood at 953. On 2nd January of this year, it closed at 1,230. The Baltic Panamax Index started 2017 at 811. And on the first rating day of this year, it closed at 1,340. The Baltic Cape Index started 2017 at 1,538 and closed at 2,281 on 2nd January this year. It appears that 2016 will certainly be remembered as possibly one of the worst years of the last decade, as we got income and earnings of the much discussed bulk carrier sector.

Let's look at macroeconomic developments now. In the United States, the ISM manufacturing PMI kept moving higher in December of last year reaching 50.7. The new order components of this index reached the highest levels in 2003. The Euro area manufacturing PMI rose to 60.6 in December, recording the best performance since these surveys began back in 1997. According to Clarksons, the German economy, bolstered by high levels of domestic consumption, grew by 2.2% in 2017, which was the fastest rate of growth since 2011. China's economy grew by 6.9% in 2017 on a target rate of 6.5%. Global growth forecast for 2018 have been revised by the IMF upward, 5.2% to 3.9%. Overall, trade growth in goods and services for 2018, as forecast by the IMF, is also expected to be strong at just above 4%.

Let us now consider the demand and supply forecast, which will evolve in -- which are the benign world economic environment.

Demand first. According to Clarksons, the global seaborne dry bulk trade is estimated to have grown 4% in terms of tons and 5% in terms of ton mile in 2017. For 2018, global dry bulk trade is expected to grow by about 3% in terms of ton and 4% in terms of ton mile. On the supply side, Clarksons report that in 2017, a total of 454 bulk carriers of a combined 38 million deadweight were delivered, while 215 vessels were sold for scrap, resulting in fleet growth of 2.9%.

According to banchero costa, these deliveries included 113 Panamaxes and post-Panamaxes.

For 2018, fleet growth is projected to slow down to around 2% due to a significantly slower pace of delivery, falling limited contracting activity in 2015 and 2016. Banchero costa estimates the growth of the Panamax, post-Panamax and baby Cape fleet to be 1% this year and 2% in 2019.

General fleet development. We can say that at the beginning of January this year, Clarksons report that the Capesize fleet stood at 1,692 vessels of a combined 323.7 million tons, representing a 7% increase in deadweight terms compared to the [Clarksons] 2017.

The equivalent figures. For the Panamax fleet, we're at 201.6 million deadweight at the beginning of this year, which represented a 2.7% increase in deadweight terms compared to a year earlier.

Let's look at scrapping. As mentioned earlier on, according to Clarksons, during 2017, a total of 215 bulk carriers were sold for scrap compared to 378 ships, amounting to 29.3 million deadweight scrap in 2016. Without doubt, the improved earnings of these ships played a leading role in this drop in numbers of demolished vessels compared to 2016.

According to Clarksons, during 2017, 33 Capes and 49 Panamaxes were scrapped.

Let's look at the new building order book. Clarksons report that a total of 76 million deadweights were in order as of the beginning of 2018, representing 9% of the global existing fleet. Those orders, 16.2 million, were Panamaxes representing 8% of the existing fleet and 43 million deadweight of Capes, representing 13% of the existing fleet of Capes. As for Valemaxes, a type of ship that often attracts some of this interest, Gibson Shipbrokers report that in 2018, 16 such ships are expected to be delivered; while in 2019, another 14 are expected to join the fleet. Some of these new vessels will replace tonnage currently performing for Vale, especially the elderly VLOC conversion tonnage owned by Polaris. Vale expects to increase its export volume over the next 2 years.

Turn to iron ore now. According to Clarksons, global seaborne iron ore trade is estimated to have grown by 4% to 1.477 billion metric tons in 2017, driven by a robust growth in China's iron ore imports, rolling reforms in the steel industry, which took place that year. Global seaborne iron ore trade is currently projected to expand 3% to around 1.524 billion tons in 2018.

As for the iron ore stockpiles in major ports, these reached 150 million at the end of last year. According to banchero costa, this iron ore could produce enough steel to build 107 million cars, more than 3x the company's annual motor sales, or enough to reach the moon if lined up nose to tail. Analysts are concerned that such a huge stockpile might pose a serious threat to crisis going forward.

In 2017, Chinese crude steel production grew by 6% year-on-year to reach 831.7 million tons according to NBS data. Braemar predict that in 2018, growth of steel production will be close to flat. The stock levels of iron ore remain at current level during 2018, but will be -- according to Braemar, we need to reduce iron ore imports by 37 million tons compared to 2017 just to remain and maintain the status quo. This is something that we need to watch as the year develops.

Turning to coking coal. According to Clarksons, global seaborne coking coal trade is estimated to have grown by 4% to around 255 million tons in 2017. This was the fastest pace of growth since 2013. Looking ahead, growth in global seaborne coking coal trade in 2018 is expected to be supported by growth in imports into a number of Asian countries, particularly India and Vietnam, where steel production is growing rapidly. Total exports are anticipated to grow by 3% in 2018.

Turning to thermal coal now. According to Clarksons, global seaborne thermal coal trade is currently estimated to have grown by around 6% to reach 948 million tons in 2017, the fastest pace of growth since 2012. Looking ahead, growth in the global steel coal trade is currently expected to moderate in 2018, with current projections indicating growth of around 1% to 958 million tons. On the supply side, Indonesia is expected to account for the majority of growth in seaborne exports in 2018, with a company well placed to meet growing demand of heat energy in emerging markets, such as Malaysia, Vietnam and the Philippines.

According to banchero costa, on an overall coal import basis, Indonesia and Australia dominate coal exports from China accounting for 41% and 29%, respectively, of China's import volume. Indonesia is the main source of lignite, while Australia is the main source of coking coal and steam coal.

Let's look at the grains rate. According to Clarksons, during the 2016 to '17 season, a total of 363 million tons of wheat and coarse grain cargoes were shipped, an increase of 4% compared to the previous season. For the 2017, 2018 season, a total of 366 million tons of such cargoes are estimated to be shipped, representing another 1% increase compared to the year-earlier volumes. The global soybean trade is expected, according to banchero costa, to increase by 4.2% during the 2017, '18 grain season, thus, reaching an impressive 150.4 million tons. The soybean trade continues to grow in prominence, when several years ago, it was a very small part of the total grain trade transportation statistics.

Furthermore, despite the projected 18% decline in exports from 2016, '17 season's record shipment, the United States is expected to remain the world's largest producer and exporter of wheat and coarse grains in 2017 to '18, exporting a total of 80 million tons.

Looking briefly at bulk carrier earnings. According to Clarksons, thus far in 2018, the average 1-year time charter rate stood at around $17,500 per day for Capes and $12,900 per day average for Panamax Kamsarmaxes. An average time charter rate has been taken for Atlantic and Pacific delivery areas in calculating the above figures.

Let's turn finally to the outlook of our trade. According to Gibsons, the last few months have shown the cargo volumes and tonnage supply probably more closely aligned than many have previously believed. With a limited forward order book and some slippage on rebuilding VLOCs in 2019, fleet growth should be comfortably absorbed in the market. The world economy is in a healthier position. And Gibson feels that this year, fleet gas market and dry cargo market, in general, will be significantly better than in the previous couple of years.

We, at Diana, generally agree with this assessment of the state of the bulk carrier market. It is finally possible to say with a reasonable degree of confidence that after a period of about 10 months, during which the bulk carrier market have shown steady earnings, a balanced state between supply and demand may have been reached. This is extremely helpful to both shipowners and shipping analysts in drawing meaningful conclusions about the future trend of earnings by looking at future supply and demand statistics. This is something that could not have been done credibly thus far, as it reflects magnitude of surplus tonnage in the bulk carrier market was unknown. Therefore, and as mentioned in our previous quarterly conference call, the management team at Diana Shipping remains cautiously optimistic about earnings over the short and medium term, and are reasonably confident that the already strong balance sheet of Diana Shipping will strengthen even further over that period.

On this note, I will pass the call to our CFO, Andreas Michalopoulos, who will provide us with the financial highlights of the last quarter of 2017 and the whole year. Thank you.

Thank you, Stasi, and good morning. I'm pleased to be discussing today with you Diana's operational results for the fourth quarter and year ended December 31, 2017.

For the fourth quarter of 2017, net loss and net loss attributed to common stockholders amounted to $436.9 million and $438.4 million, respectively, including a $422.5 million impairment loss. Loss per common share was $4.28. Net loss and net loss attributed to common stockholders adjusted for impairment amounted to $14.5 million and $15.9 million, respectively.

Loss per common share, adjusted for impairment, was $0.15.

Time charter revenues increased to $48.9 million compared to $28 million in the fourth quarter of 2016. The increase was due to the increased average time charter rates that we achieved through our vessels during the quarter, and revenues derived from the addition to our fleet of the vessels, San Francisco and Newport News, delivered in January 2017, and Astarte, Electra and Phaidra delivered in May 2017. This increase was partly offset mainly by a decrease in revenue due to the grounding of the Melite and her sail in October 2017. Ownership days were 4,624 in the fourth quarter of 2017 compared to 4,232 in the same quarter of 2016. Fleet utilization was 98.9% compared to 99.9% for the same quarter of 2016, and the daily time charter equivalent rate was $9,949 compared to $6,319 for the same quarter 2016. Voyage expenses were $3 million for the quarter compared to $1.4 million for the same quarter of 2016. The increase in voyage expenses was due to an increase in commissions, due to increased revenues and a $0.5 million loss from bunkers in the fourth quarter of 2017, which did not exist in 2016. Vessel operating expenses amounted to $24 million compared to $20.9 million for the fourth quarter of 2016, an increase by 16%, was mainly due to the 9% increase in ownership days, resulting from the enlargement of the fleet and increased repairs and maintenance costs. Daily operating expenses were $5,195 for the fourth quarter 2017 compared to $4,930 for the same quarter 2016, representing an increase of 5%. Depreciation and amortization of deferred charges amounted to $21.9 million. General and administrative expenses were $8.2 million compared to $6.8 million for the same quarter last year. The increase was mainly due to increased table costs.

Management fees to related party were $0.5 million compared to $0.4 million last year. The increase was due to the transfer of 2 additional vessels to Diana Wilhelmsen Management Limited in the fourth quarter of 2017. Insurance and finance costs amounted to $6.8 million compared to $5.6 million in the same quarter of 2016. This increase was attributable to increased average debt and average interest rates in the quarter compared to the same quarter of 2016.

Interest and other income amounted to $1.5 million compared to $0.8 million for the same quarter last year. The increase was due to the increase in the interest rate and the outstanding balance of the loan due from Diana Containerships following the new loan agreement on June 30, 2017.

For the year ended December 31, 2017 now, net loss amounted to $511.7 million, and net loss attributed to common stockholders amounted to $517.5 million. Loss per share was $5.41. Net loss and net loss attributed to common stockholders adjusted for impairment, including Melite, amounted to $80.3 million and $86.1 million, respectively. Loss per share adjusted for impairment, including Melite, was $0.90. Time charter revenues increased to $161.9 million compared to $114.3 million for 2016. The increase was attributable to increased average time charter rates that we achieved for our vessels during the year and the increase in ownership days due to the enlargement of our fleet. The increase was partly offset by decreased revenues due to increase of [hire] days in 2017 compared to last year.

Ownership days for the year ended December 31, 2017 were 18,119 compared to 16,542 last year. Fleet utilization was 98.2% compared to 99.4% for 2016, and the daily time charter equivalent rate was $8,568 compared to $6,106 for 2016. Voyage expenses were $8.6 million for the year ended December 31, 2017. Vessel operating expenses amounted to $90.4 million compared to $86 million for 2016. The increase in operating expenses was mainly due to the 10% increase in ownership days resulting from the enlargement of the fleet. On average, operating expenses for crew costs, insurances, stores, spares and environmental costs decreased. This decrease was partly offset by increase in repairs and maintenance costs. Daily operating expenses for the year ended December 31, 2017 were $4,987 compared to $5,196 for 2016, representing a 4% decrease. Depreciation and amortization of deferred charges amounted to $87 million for 2017.

General and administrative expenses increased to $26.3 million compared to $25.5 million in 2016, mainly due to increased payroll costs. This increase was partly offset by decreased legal costs and Board of Directors' expenses.

Management fees to related party were $1.9 million compared to $1.5 million in 2016. The increase was due to an increased average number of vessels managed by Diana Wilhelmsen Management Limited during 2017 compared to 2016. Interest and finance costs amounted to $26.6 million compared to $21.9 million in 2016. This increase was attributable to increased average debt and average interest rates compared to last year. Interest and other income amounted to $4.5 million compared to $2.4 million in 2016. This increase was mainly due to the increase in interest income from Diana Containerships Inc. under our loan agreement with them, which amounted to $3.9 million in 2017 compared to $1.7 million in 2016.

Loss from equity method investments amounted to $5.6 million compared to loss of $56.4 million last year, and was mainly due to loss in our investments in Diana Containerships Inc., which was sold in 2017.

The impairment loss. As of December 31, 2017, our test of operating cash flows showed that for 20 vessels in our fleet, the carrying value would not be recoverable, and this resulted to a noncash impairment of $422.5 million recorded in the fourth quarter. In addition to the $422.5 million noncash impairment, we had also recorded $19.8 million noncash impairment in the third quarter, resulting from the rounding of the Melite. We sold Melite in October 2017 for $2.5 million, and received an additional amount of $11.5 million by the Hull and Machinery insurers. Thank you for your attention. We will be pleased to respond to your questions now. And I will turn the call to the operator, who'll instruct you as to the procedure for asking questions.

(Operator Instructions) Our first question comes from the line of from Noah Parquette from JPMorgan.

First thing I wanted to ask you, about the environmental regulations coming up, if you guys have a sense on what the CapEx require would be for the ballast water treatment. And how much -- how many of your ships would need that? And also what your view is on compliance with the 2020 regulations, both for you and maybe for the dry bulk fleet as well.

So regarding the ballast water treatment system, it's a staggering amount, which will come in stages. So you need to -- within 3 years, we will go about and equip all our vessels, some of which are already equipped. And the cost of one such system, depending on the size of the vessel, et cetera, and the specification goes from $500,000 to $1 million, which will grow about -- in about 3 years' time in all our ships, the ones that are not equipped yet. Now the second question, can you repeat please the second one?

Yes. And I just wanted to get your sense on how you plan to comply with the 2020 emission regulations, and what do you think the dry bulk fleet will do over time.

Of course, the only thing we know is that these things those people that they act -- they try to be clever and not very quickly before we have the actual and the final agreement. They lose money. So we wait. We are in a fortunate position, but we can wait and see how we're going to be handling the situation.

Okay. And then I just had one other question on Diana Containerships. Just update us on what's the retainment profile of that loan? And was there any payments done during Q4?

There were no repayments during Q4. It's a non-amortizing loan that we have that needs to be repaid by the end of 2018. So we understand that there has been a sale of 3 vessels from Diana Containerships that were announced lately. So we do expect to get some repayments on that during the first quarter or latest during the second quarter. It's -- when Diana Containerships sells vessel, it is stipulated in the loan that Diana Shipping Inc. needs to be repaid.

Our next question comes from the line of Randy Giveans from Jefferies.

So just a few quick questions, one on your strategy. Obviously, one, and through your time charter rates are all up about 40% or so over the last year. So what is your strategy for kind of spot versus time charters in the quarters ahead as, obviously, the majority of your short-term contracts are going to be expiring in the next, I don't know, 6 months or so?

It's the same question that keeps coming up in every quarter during our conference call. We stay put to our hedging strategy. If you have a hedging strategy, you don't amend this based on what you think is going to happen in the short term. You don't amend it because if you start amending it, you don't have a hedging strategy. So basically, we will continue with the same strategy having a vessel to fix every 15, 20 days. And by doing that, we are certain 100% that we will get the average of the market, which we are very happy with. So we have a spot exposure by having a vessel to fix every 15 days, but we don't have it for a big part of our fleet at a particular period.

Okay. And then kind of looking at your fleet, you have 7 vessels older than 15 years of age. So wonder if your fleet growth or renewal plans -- and with that, do you expect your fleet to be larger or smaller, I guess, than it currently is over the next year?

We are one of the companies that we have explained clearly our strategy, and that is that we don't have to grow as regards the number of vessels that we have as we -- when we are at the upper part of the cycle. We think we are very close of getting to that part of the cycle. And therefore, you should not be expecting Diana to grow as a company as regards the number of vessels, and you should be expecting Diana to -- getting to sell the older tonnage of that part of the cycle. As we have said in the past, every vessel that we buy is an option to be sold again in a good part of the cycle. And we were very, very fortunate that we didn't have to sell any of our vessels at the lower part of the cycle.

Sure. All right. Two quick modeling questions. So actually, you talked about G&A exceeding $8 million, highest ever. I know you said the increase was due to increased payroll cost. Can you elaborate a little further on this? And then what should the run rate be for the rest of 2018?

I think this quarter has been a bit more destocked indeed due to some regulations and holidays that happened. You need to pay an extra salary for the management company here. Let me remind everybody that it's fully incorporated into the public vehicle, plus some other plans that are selling. I think the run rate, if you look at as per day per vessel number, it is lower than last year. When you take the yearly figure per day per vessel, you will see that it's lower than last year. So in absolute number, of course, the vessels have increased overall by 5 vessels this year, and it is a high number. But going forward, I think you should expect to have this run rate, but more evenly spread around the quarters. I think this time was a bit -- not very well set.

Got it, okay. Last question. So 3Q '17, you had, obviously, no net cash provided by investing activities. 4Q, you had about $13 million. Now I know you said that was partially the sale of the Melite. And then was the insurance proceeds that's basically the entire $13 million?

Yes, most of it. The sale of the Melite to the insurers, the amount was the gain on the contract termination for the quarterly amount was $10,979,000, as you can see from the income statement. Now you also had some -- yes, it's mainly the Melite.

Our next question comes from the line of Fotis Giannakoulis from Morgan Stanley.

I want to ask you, what do you think that we are in the cycle right now? And at what point will it make sense to either start selling your older vessels and renewing your fleet with a younger tonnage? And how do you plan to finance a renewal program like that?

Fotis, Ioannis again. And for us, to realize whether we are at which part of the cycle, the upper part of the cycle or not. But it's a thumb rule or -- but being in the shipping industry for so many years, we think we have the experience to identify whether we have entered that area. And we realized that we think that we have entered the area where the market is picking up, and we are at the upper part of the cycle. And when you see the company selling vessels and -- but renewing the fleet for us is not necessarily to happen by buying more and more new vessels. We pay more attention in the management of our capital structure than -- rather than the number of vessels that we have in the water. To try and explain that further, you have heard us talking about that before. You should be expecting Diana to be in a position to pay a very nice dividend at that time. And the most probably, you will see us buying some more vessels after an offering, which is going to be accretive to the dividend on a per share basis, something that we have done in the past. This is how it's going to happen, but it doesn't mean that having 50 vessels today of an average age of 8, 8.5, we are going to end up at the upper part of the cycle having another 50 at an average age of 8. We may have 30 with an average age of 5.

That's very helpful. Would it be fair to...

And then our previous balance sheet at that time and a much better earnings per share at that time.

Without putting words in your mouth, would it be fair to say that, at this point, you would be favoring having a very strong balance sheet and utilizing your capacity to return dividends to shareholders rather than to expand your fleet?

Certainly, we have said that in the past that we were very fortunate to invest a lot of money at the lower part of the cycle, and we are waiting to get the results of that. And by that, I mean, the market will move a little bit further up, where we will start rewarding our shareholders again. We are not interested in buying anything more today as we speak.

Regarding the newbuilding prices and the new building activity, it seems that versus the previous time that the market was at the current levels when we had $19,000 or $20,000 1-year rates, newbuilding prices and vessel values overall are still at lower levels than 3 years ago. Where do you attribute that? And do you see this -- the fact that the prices compare favorably compared with a previous cycle that this can trigger additional newbuilding orders and more order book going forward?

You know very well that except supply and demand factors, which you referred to, there is another very important factor, which is the sentiment. The reason why the prices have not moved up the way you described has to do with the sentiment and the perception of people that this option is not going to be sustainable. They have to be persuaded that this is sustainable for the asset values to move. And we don't say that is going to happen, but we certainly cannot say that this is not going to happen.

Fortis, this is -- I just wanted to add at this point that we are in the situation where there isn't great appetite for tanker ordering, nor for any more containership ordering apart from the very large ships that have been ordered. So there is also here the situation where yards are not in a position to demand for much higher prices for newbuildings because of this lack of interest for newbuildings in other sectors. So that's -- but the main thing is the sentiment, because if people are very bullish, they find a way to board the ships and push prices up.

Stasi, would you mind sharing your view and your agreement or disagreement with this overall sentiment about the sustainability of the strength or the recovery of the dry bulk market?

So as I mentioned towards the end of my little presentation, yes, we do share the specimen for the short to medium term, but we admit, as always, that we cannot see much further than that for the simple reason that we cannot see what will happen with the supply and demand further than about 18 months from now. But we do see supply and demand for the foreseeable future, which is short to medium term, nothing further, being favorable towards higher earnings, yes.

Fortis, we have to say once again that in our sector, forces generally work under the carpet, and from the moment there is a very big and important issue in our industry. If the threat and the fear of people thinking that this is not going to be sustainable, is stronger than the actual facts of demand and supply, then this is going to become sustainable. So when we talk about the extra factor of sentiment, it's not a theoretical problem, it's an actual problem that has a similar effect to supply and demand. If the people believe that this is not sustainable, then the supply number goes down. And this is why the market keeps going up. So this is something that we should pay a lot of attention to. And nobody is in a position to wait this force properly. If you are in a room of people with -- a room with 100 hundred people, 100 shipowners, well known shipowners, and you ask them, "Do you think that the next chapter in the dry bulk is going to be short-lived?" All of them, 99% of them, they're going to tell you, "It's going to be short-lived." And then you're going ask them, "Why is it going to be short-lived?" And they're going to tell you, "Because everyone is going to rush and order vessels." But if 99% of the shipowners know that, who is going to order? And then the market keeps going up.

Our next question comes from the line of Ben Nolan from Stifel.

So I have a handful, but one relates to you, I guess, your chartering, really not strategy, but just the shape of the market. Obviously, you guys have always been doing time charters. And as of late, they've been 1 year to 1.5 years. And it seems like that's almost everything that's being done in the market as less than 1.5 years. I'm curious in this -- and as the market is evolving here, are there longer-term, time-charter contracts than that developing, that are actually at levels that make sense so far as you guys are concerned?

Well, as we grow bigger in size, in a number of ships, and we want to have every month a vessel to reach, that means that you have to spread the vessels, some of them longer than 2 years. Otherwise, you will have 2 or 3 ships the same month. So we're spreading, and we are hedging the chartering in that manner. But whatever we are saying, we said it back in March 2005. Nothing has changed since then. And we keep on track, and we are very well on track today. We haven't changed one single iota on what we said then. And we will keep on doing the same thing because it works. And don't forget that, today, we have completed the cycle on the ups, on the downs. And the period shows that it has been completed. So it works.

Let me say something else as well in addition to words our chairman's just said. We don't have to take the position to say whether this rate is attractive or not. That's the essence of our strategy. We take what the rate is, and we don't have to take the position that this is attractive to us. So let's fix 5 of our vessels. We don't do that because attractive doesn't mean anything. I have to remind you that $50,000 for a Cape in 2006 was a fantastic number, a very, very attractive number. But comparing to $100,000 later on, it was -- or $150,000, it was not attractive at all.

Right. I guess, I'm really asking a little bit more about the shape of the curve. Are there discussions -- or is there even sort of the potential to do longer-term time charters that generate rates that are above what you might be able to get on a 1-year or 18-month contract?

Yes, there may be, but please don't take it for granted that they know something that you and I and ourselves we do not know. It doesn't mean anything if there is an interest of the charters for longer period. It doesn't mean that they are afraid that the market is going to keep going up, and this is why they want to fix now. Remember that charterers, they are also hedging their expenses. And that, of course -- and they are playing with a paper market as well, and they couldn't care less what happens after that. From the moment they have -- they can find paper to play together with the actual fixing of the vessel, it doesn't matter for them.

Okay. Switching gears a little bit. Could you maybe help me out, Andreas, on what is the debt repayment profile or how much debt is coming due in over the next several years?

We have said in the past for 2019 is the loan amortization that comes apart from the DCI loan, as we said before, is up -- but for us to pay our lenders $1,955 million. And in which, of course, our loan amortization, this could be refinanced, do you understand that? And in 2020, it's another $60 million in loan amortizations.

Okay, perfect. And then lastly, just along those same lines. Looking at your balance sheet and as well as your -- the cash that you have available to you at the moment, is it possible to maybe quantify how much capacity you have to go out and acquire ships to the extent that that's something that you would do currently without any...

Well, it's not -- as we said just now, and this was -- what I've told you was the loan maturing, by the way, in '19 and '20 because this profile is different. But we're keeping our '20 very well depicted. Now in terms of acquiring vessels, we are not in the favor of acquiring vessels. I think Ioannis Zafirakis was very clear about that. So there's no -- we don't need our cash in order to acquire vessels at the moment. So we're not going to do that.

Our next question comes from the line of Jon Chappell from Evercore ISI.

Just one left for me. We really don't focus too much on impairments usually because it's noncash and nonrecurring, but this one kind of stands out for 2 reasons. One, the size is 40% of the book value as of the end of the third quarter. And two, the timing. Asset values have been improving for much of the last 18 months. So why was it decided in this last quarter to take such a massive impairment? Was it something that the banks insisted on? And why wasn't that done kind of in the trough of the market in early '16?

That's a very good point, Jonathan. No, neither the banks. Nobody was obliged, and it wasn't really a decision that was made from the management. This is basically based on our policy of taking as an assumption the 10-year average time charter rates and taking away the 3-year peaks. If you do that type of cash flows, that is you get requirements to do every quarter, and we've been doing that since the beginning of our listing. You see that those vessels, and these are a lot for us to -- those 20 vessels, they [hit], protective cash flows are needed to be impairment in this particular quarter. So you're right. For us, too, it was not really a surprise because we were seeing it coming being inside the company. But the fact that they all hit together is a bit of a coincidence indeed. So in other words, it's neither a will from any banks. I want to remind everybody that we are completely current on our covenants. We have not restructured, and we have absolutely no issues with our lenders and never had. And it's just a matter of calculation and with assumptions that are standard in the industry.

Was the 10-year average rate substantially lower in the fourth quarter maybe because we've anniversaried the last boom period? I'm just -- if you did the same thing in, say, March of '16...

It was lower. We, as a company, assessed the policy. And we had to take out the peak, which were the 3 years of the peak markets, 2008, '09 and '10.

(Operator Instructions) Our next question comes from the line of Gregory Lewis from Crédit Suisse.

I apologize. I hopped on a little bit late, but I just kind of had some questions. As I think about the impairment, and sort of as Jonathan alluded to the stabilization and asset prices, should we be thinking about Diana potentially looking to maybe sell some of these older assets over the next 1 to 2 years as the market stabilizes?

Yes. As we explained, certainly, we said earlier that, for us, every vessel that we buy is an option to be sold in a good market again after we have utilized the vessel for as many years as possible. So we think that the timing now is going to be set. But we think the next year or so, we will have the opportunity to sell some of our vessels.

Okay. And then just as -- and so as we -- as the cycle improves and we move higher, the company -- it sounds like the company is comfortable with a smaller footprint. So in other words, we don't need to keep going if maybe we could shrink into a rising market, and then reload at the -- okay.

Certainly, yes. Yes, certainly an improving balance sheet. We are also in the business of shipping, but at the same time managing our capital structure.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the call back over to management for closing remarks.

Thank you, again, for your interest in and support of Diana Shipping Inc. We look forward to speaking with you in the future. Thank you.

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