Genco Shipping & Trading Ltd (GNK) 2012 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited third-quarter 2012 earnings conference call and presentation.

Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from Genco's website at www.GencoShipping.com.

To inform everyone, today's conference is being recorded and is now being webcast at the Company's website, www.GencoShipping.com. We will conduct a question-and-answer session after the opening remarks, and instructions will follow at that time.

A replay of today's conference will be accessible at any time during the next two weeks, by dialing 888-203-1112, or 719-457-0820, and entering today's passcode of 404-4657.

Now I will turn the conference over to the Company. Please go ahead.

Good morning.

Before we begin our presentation, I note that in this conference call we will be making certain forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements use words such as anticipate, budget, estimate, project, expect, intend, plan, believe, and other words and terms of similar meaning in connection with the discussion of future -- of potential future events, circumstances, or future operating and financial performance.

These forward-looking statements are based on management's current expectations and observations. For a discussion of factors that could cause results to differ, please see the Company's press release that was issued yesterday, the materials relating to this call posted on the Company's website, and the Company's filings with the Securities and Exchange Commission -- including, without limitation, the Company's Annual Report on Form 10-K for the year ended December 31, 2011, and the Company's subsequent forms filed with the SEC.

At this time I would like to introduce Gerry Buchanan, the President of Genco Shipping & Trading.

Good morning, and welcome to Genco's third-quarter 2012 conference call. With me today is Peter Georgiopoulos, our Chairman; and John Wobensmith, our Chief Financial Officer.

I will begin today's call by discussing our third-quarter highlights as outlined in slide 3 of the presentation. I will then turn the call over to John to review our financial results for the three-month period ended September 30, 2012. Following this, I will discuss the industry's current fundamentals.

John, Peter and I will then be happy to take your questions.

During the third quarter Genco increased its financial flexibility while maintaining an opportunistic time charter approach in a challenging drybulk market.

Turning to slide 5, Genco recorded a net loss of $38.4 million or $0.90 basic and diluted loss per share for the three months ended September 30, 2012.

Genco's cash position excluding Baltic Trading Limited was $94.7 million, which reflects the cash flows generated by our large, high-quality fleet.

During the third quarter we drew upon our strong banking relationships and increased our financial flexibility by amending each of our three credit facilities, which John will discuss in more detail later in the call. We also maintained our focus on signing vessels to short-term contracts with multinational companies while preserving the ability to take advantage of future rate increases.

Consistent with this objective we employed several vessels on the spot market-related contracts that provide Genco with an option to convert to fixed-rate time charters when market conditions improve.

Moving to slide 6, we provide a summary of our fleet. Genco's diversified approach of operating a modern fleet across the entire drybulk sector strengthens the Company's ability to deliver first-rate service to leading international charters, and take advantage of the long-term demand for essential commodities in China, India and other developing countries.

Excluding Baltic Trading's fleet, we currently own a fleet of 53 drybulk vessels, consisting of 9 Capesize, 8 Panamax, 17 Supramax, 6 Handymax, and 13 Handysize vessels, with a total carrying capacity of approximately 3,810,000 deadweight tons. Importantly, the average age of our fleet is 7.5 years, well below the industry average of approximately 10 years.

I'll now turn the call over to John.

Thank you, Gerry.

Turning to slide 8, I will begin by providing an overview of our financial results for the third quarter and nine months ended September 30, 2012. Please note that we are reporting our financials on a consolidated basis as a result of our 25.09% equity ownership in Baltic Trading Limited.

For the three-month and nine-month period ended September 30, 2012, we recorded total revenues of $54.4 million and $177.2 million, respectively. This compares to revenues for the third quarter of 2011 and nine months ended September 30, 2011, of $94.3 million and $295.1 million, respectively.

The decrease in total revenues for the third quarter of 2012 compared to the prior-year period is primarily due to lower charter rates achieved by the majority of our vessels as well as a higher number of days that our vessels are on plan off-hire to complete drydockings during the third quarter of 2012 compared to the same period in the prior year. This was partially offset by the slight increase in the size of our fleet.

The operating loss for the third quarter and nine-month period ended September 30, 2012, was $20.2 million and $43.1 million, respectively. This compares with operating income for the third quarter and nine-month period ended September 30, 2011, of $23.3 million and $88.7 million, respectively.

The operating loss for the three-month and nine-month periods ended September 30, 2012 is attributable to higher expenses associated with the operation of a larger fleet, and lower rates achieved for our fleet compared to the corresponding year-earlier period.

Interest expense for the third quarter of 2012 was $21.5 million, $65.2 million for the nine-month period ended September 30, 2012. This compares to interest expense of $21.8 million for the third quarter of 2011 and $64.7 million for the nine-month period ended September 30, 2011.

The Company recorded a net loss for the third quarter of 2012 of $38.4 million or $0.90 basic and diluted loss per share. The net loss attributable to Genco for the nine months ended September 30, 2012 was $99.3 million or $2.40 per basic and diluted loss per share. This compares to net income attributable to Genco of $1.6 million or $0.04 basic and diluted earnings per share for the third quarter of 2011, and net income attributable to Genco of $25.1 million or $0.71 basic and diluted earnings per share for the nine-month period ended September 30, 2011.

For the three-month and nine-month period ended September 30, 2012, Genco also recorded income tax expense of $303,000 and $918,000, respectively. This compares to income tax expense in the third quarter and nine-month period ended September 30, 2011, of $328,000 and $1 million, respectively.

This income-tax expense includes federal, state and local income taxes on net income earned by Genco Management USA Ltd., one of our wholly-owned subsidiaries, and relates to income generated from the technical and commercial management of vessels for Baltic Trading Limited, sale and purchase fees payable to us by Baltic Trading Limited, if any, and service revenue from the technical management of vessels owned by Maritime Equity Partners.

Next, on slide 9, you'll see the income statement effects of Baltic Trading's consolidation with Genco Shipping & Trading Limited. This will provide you with a more detailed breakdown of the financial performance of the two separate companies.

Key consolidated balance sheet and other items as presented in slide 10 include the following -- our cash position including restricted cash was $97.9 million as of September 30, 2012, enhancing our ability to operate in this soft rate environment. Excluding the consolidation of Baltic Trading, Genco's cash position was $94.7 million.

Our total assets as of September 30, 2012, or $2.9 million (sic) -- $2.9 billion], consisting primarily of our current fleet, cash and cash equivalents.

Our EBITDA for the three months ended September 30, 2012, was $18.4 million.

Moving to slide 11, our utilization rate was 99.2% for the third quarter of 2012 compared to 99.3% in the year-earlier period. Our time charter equivalent for the third quarter of 2012 was $9119 per day. This compares to $16,447 per day recorded in the third quarter of 2011. The decrease in TCE rates resulted from lower charter rates achieved in the third quarter of 2012 versus the same period last year for the majority of the vessels in our fleet.

For the third quarter of 2012 our daily vessel operating expenses were $4956 per vessel, per day versus $4673 per vessel, per day for the third quarter of 2011. Daily vessel operating expenses for the nine months ended September 30, 2012, were $5040 per vessel, per day versus $4706 per vessel, per day for the nine months ended September 30, 2011.

The increase in daily vessel operating expenses for the third quarter of 2012 compared to the prior-year period is primarily due to higher expenses related to crewing and maintenance.

We note that our third quarter of 2012 daily vessel operating expenses is below our budget set forth at the beginning of the year.

As we have stated in the past, we believe daily vessel operating expenses are best measured for comparative purposes over a 12-month period, in order to take into account all the expenses that each vessel in our fleet will incur over a full year of operation. Based on estimates provided by our technical managers and management's expectations, our daily vessel operating expense budget for the fourth quarter of 2012 is $5200 per vessel, per day on an average weighted basis for the 53 vessels in our fleet, excluding vessels owned by Baltic Trading Limited.

As previously announced, during the third quarter we entered into agreements to amend our 2007 credit facility, our $253 million term loan facility and our $100 million term loan facility. Specifically, Genco's scheduled amortization payments have been eliminated through and including the quarter ended December 31, 2013. As a result, the Company's next scheduled amortization payments under its three credit facilities will be due in the first quarter of 2014.

On slide 12 we present our anticipated expense levels for the fourth quarter of 2012. We expect our daily vessel operating expenses for the fourth quarter of 2012 to be $5200 per vessel, per day; our daily free cash flow expense rate to be $10,504; and our daily net income expense rate for Genco consolidated to be $16,960.

I will now turn the call back to Gerry.

Thank you, John. I will now take this opportunity to spend a few moments discussing the industry fundamentals. I'll start with slide 14, which points to the drybulk in business.

Represented on this slide is the overall Baltic Dry Index. During the third quarter of 2012 the BDI showed relative weakness, driven by increased vessel supply as well as negative sentiment on the rate of growth in emerging economies. The Index reached a quarterly low of 661 on September 12, but has since rebounded to 1026, primarily due to the iron ore restocking in China, and a considerably reduced rate of vessel deliveries in the second half of the year.

On slide 15 we summarized recent developments in the drybulk freight market beginning with the supply side of the equation. As a result of continued low rates, and in an attempt to combat excess tonnage, scrapping has been at a record pace, increasing by 31% for the nine months to September 2012 as compared to the same period of last year.

Although the majority of the vessels scrapped have been Handysize and Supramax -- due to the older age of those fleets -- we have also observed younger vessel demolitions, especially in the Capesize sector. We highlight that 27 of the 64 Capesize vessels scrapped year-to-date were built from 1990 to 1995. We believe this trend to prove crucial to a quicker recovery in the Capesize sector, as 16% of the Capesize fleet was built in 1995 or earlier.

The depressed rate environment has also kept new vessel orders to a minimum, pushing the order book to its lowest level in eight years -- currently at 22% of the fleet. Existing order deliveries peaked in June of this year and have since considerably slowed down, resulting in marginal net additions to the tune of less than 2% for the first for the third quarter.

On the demand side Chinese iron ore imports continue to grow, registering an 8.6% increase for the nine months to September. Iron ore imports may continue at healthy levels for the remainder of the year as stockpiles have decreased to the lowest point since July 2011, and the Chinese government continues to stimulate the domestic economy, evidenced by their recent approval of 60 infrastructure projects totaling over $150 billion in September.

Chinese steel makers are now reentering the market, leading to increased iron ore fixtures and a level of support for the Capesize sector. The displacement of Chinese ore by imported ore continues to positively affect the drybulk market as evidenced by a September rebound in iron ore exports from Brazil, augmenting ton miles. This trend may continue going forward as iron ore prices have been trading in the $100 to $120 per ton range, making it harder for domestic suppliers to compete.

The Metallurgical Mines Association of China estimates that 42% of Chinese ore production is unprofitable at prices less than $100 per ton, and reported that 40% of the iron ore mines suspended operations in September due to their inability to remain profitable at lower observed prices.

On the coal front, Chinese imports of the commodity were hampered by an increase in hydropower production in the third quarter, as there were several tropical storms that occurred during that period. Chinese coal futures have, however, picked up again in October as stockpiles at China's largest coal port, Qinhuangdao, have come under pressure due to the scheduled maintenance of the Daqin Railway.

Turning to the slide 16, we believe that a number of short- and long-term catalysts will improve the drybulk market. China's 12th five-year plan remains a long-term catalyst due to its related infrastructure programs as well as the organization and development of the central and western regions. With the upcoming change in government leadership in November, it remains to be seen whether additional stimulus measures will be instituted.

Seaborne trade may also be positively affect affected by planned volume expansion, as iron ore miners plan to increase production and invest in some higher-capacity port facilities over the next few years. Higher imported volumes could further induce a price arbitrage between domestic and imported iron ore prices, thereby enhancing ton miles in the long run.

On the supply side, as volatility in charter rates continues and scrap steel prices remain at high levels, we expect to continue to see increased scrapping of vessels. The year-to-date period has already registered a record 28.4 million tons scrapped.

On slide 17 we talk more about the demand side fundamentals. Chinese steel production decreased approximately 2% during the first nine months of the year as compared to 2011, while urban fixed asset investment rose by 20.5%. As China's urban population continues to expand in the years to come, steel consumption is expected to be even greater as a Chinese urban household has a 10 to 15 times higher steel intensity than a rural household.

In line with urbanization, China's Ministry of Railways increased 2012 planned infrastructure spending to CNY516 billion, or $83 billion, from CNY 496 billion in October, while the Ministry of Transportation is working towards expanding its network of high-speed railways to total over 11,000 miles by 2015, from just over 4000 miles at the start of this year.

In regard to housing, China's Ministry of Land and Resources plans to build 36 million units of affordable housing by the end of 2015. This year's affordable housing construction target has been increased by 2 million units, to 7 million units, which is expected to [meet as] 4.8 million units have been completed through September.

India's growth potential going forward bodes well for the drybulk market also. Steel production in India has grown 5.6% year to date and is expected to grow an additional 5% in 2013, according to the World Steel Association. A growing steel demand and limited iron ore export availability from India is also forcing Chinese steel mills to source imported ore from longer ton mile origins.

Moving to slide 18, on the left of the page we show the expansion plans of key iron ore producers as recently revised by the respective companies.

The combined iron ore expansion plans through 2016 accumulate to 426 million tons per annum or 41% of the 2011 seaborne iron ore trade. Iron ore production from the world's four largest mining companies -- Vale, Rio Tinto, BHP Billiton, and Fortescue -- increased 5% through the first nine months of 2012 compared to the same period of the prior year. Production from Australian miner Fortescue increased [35%] over that same time frame, as ports and mine expansion plans begin to ramp up.

In Brazil, third-quarter operations recovered from earlier weather-related disruptions, as exports increased 5% in quarter III as compared to the prior quarter. Overall, Brazilian iron ore exports are down 3% for the year, but have picked up of late, leading to tighter availability of Capesize vessels in the Atlantic.

Going forward, exports from both Australia and Brazil may increase as miners bring greater amounts of iron ore to market. According to Australia's Bureau of Resources and Energy Economics, the country's exports are forecast to grow by 10% in 2012 and 9% in 2013, reaching 483 million tons and 528 million tons, respectively.

The main destination of these exports is China, in which iron ore shipment set another monthly record in September. Chinese iron ore imports from Australia increased 19% in September, year on year, amounting to 34.5 million tons. All international iron ore prices, together with the export limitations in India, continued to make Australian ore as well as Brazilian and South African ore much more attractive to buyers.

On the coal side, demand may increase in the medium term as a result of both higher steel production and power consumption. Domestic coal supply continues to fall short of demand in India, leading to coal imports rising 18% from April to September of this year when compared to the same period of last year. The domestic coal supply and demand gap is expected to be close to 200 million tons in the year ending March 2013, and could expand to as much as 250 million tons by 2017.

On slide 19 we discuss the supply fundamentals, which remain uncertain. Although we expect the order book to be less cumbersome in 2013 and beyond, it still remains at approximately 22% of the existing world fleet. New building orders have, however, decreased by 52% through the first nine months of 2012 and only through only 2 Capesize new building vessels have been contracted since the end of March of this year.

Declining new building activity along with stronger steel prices have put pressure on shipyard margins, increasing the potential of bankruptcies by some of these less established Chinese shipyards. We believe scrapping continues to play a significant role through 2012 and into 2013, especially if volatility in the freight rate environment persists, as 18% of the world fleet is 20 years or older.

As illustrated on the graph at the bottom right of the page, 2011 and 2012 to date have been record years for scrapping, with 23.1 million deadweight and 24.8 million deadweight scrap, respectively.

Notably, the Handysize fleet year-to-date has had 6.5 million of deadweight scrap versus 8.6 million deadweight delivered. This represents a scrap-to-delivery percentage of 76%, which is by far the highest of any vessel class in the drybulk sector. Additionally, in the third quarter of this year the Handysize fleet had a net subtraction of 6 vessels.

Lastly, we note that the Capesize order book now stands at 53.9 million deadweight, which represents a 49% decrease, year on year, and the lowest volume on order since mid-2007.

This concludes our presentation, and we are now happy to take your questions.

Thank you. Ladies and gentlemen, the question-and-answer session is conducted electronically. (Operator Instructions). Doug Mavrinac, Jefferies.

Thank you, operator; good morning, guys. I just had a few follow-up questions to your comments.

The first one -- you know, obviously charter rates during Q3 were very weak. But as we've seen and as we've mentioned, we saw fairly significant snap-back in Capesize rates since mid-September, about a fivefold increase. My question is, what is your take on that fivefold increase as far as what it tells you about the underlying supply/demand balance within the drybulk market -- ahead of a period where demand seems to be accelerating and fleet growth seems to be decelerating?

Yes, Doug, this is John.

Yes, I mean, the first thing is, the demand side, as we've been saying all along, remains intact. And yes, while we saw a slowdown in Chinese imports during the third quarter, that was more of -- that's more of a natural process, because they went in the market [versus spec] and bought big. You know, we've seen this time and time again over the last seven or eight years.

So the demand side, we continue to believe is intact. Obviously, the supply side remains an issue, but we fortunately have seen a real, dramatic slowdown in deliveries and that is -- definitely helps boost freight rates. (multiple speakers)

Right.

But, look, the main thing to take away from this is, we are still seeing 6% to 7% demand growth on an annual basis.

Right, right. So, for those fears in the marketplace that, given all the supply growth over the last few years and that the market would be perpetually oversupplied, does it make sense that that would be true if rates increase fivefold? Or is it just basically saying -- look, underlying supply/demand balance is actually much better than people are probably thinking?

Look, I think you can say it's better than people are thinking, but I still think we have a little ways to go to work with the supply and let demand catch up. And like I said, the important thing for dry bulk shipping is that you do have a growing demand in the mid to high single digits.

Right. Got you, got you.

And then kind of looking at the fleet itself -- and maybe using your fleet as a proxy for the industry -- at $16,000 a day are you guys still slow-steaming some of your Capes? And are there any idle ships out there that you are aware of?

Yes, we are still slow steaming the Capes; I mean, we are slow steaming the majority of our vessels under charter instructions, of course, Doug.

Vessels, I don't know. Again, I think we've got four big managers managing fast fleets and none of them will get any vessels that are idle.

Got you, got you. And then finally, John, you talked about the supply side of the equation, and then Gerry's comments, you talked about how we've seen a fairly significant slowdown in the number of deliveries over the last few months. My question is, is that trend likely to continue, in your view, based on the order book?

And then secondly, looking at the order book, you know, we still see a lot of questionable potential deliveries. I mean, last year at this time there were 50 million deadweight tons supposed to be delivered through the end of 2011; that never happened. Right now there are 50 million deadweight tons supposed to be delivered through the end of 2012; that's unlikely to happen.

So my question is -- the second part -- is there still about a third of the order book that seems very questionable in your view?

(multiple speakers) I think it's closer to 40 (multiple speakers) -- I think -- oh, sorry.

No, go ahead, Peter.

Go ahead, John.

No, I was just going to say, you know, the slippage numbers continue. I mean yes, I would say it's 35% to 40%. And so yes, I think there is definitely a question mark as to what gets delivered.

I think overall, Doug, just going to the first part of your question, I would say the trend on deliveries is a downward trend. We may see a little bit of a pickup in the first quarter, which I think is natural as people try to get a 2013 delivery date, but what looks promising is that as early as, say, August and definitely September, we saw quite a large slowdown in deliveries. And I do think that trend will continue throughout next year.

Yes. And Peter, it sounded like -- because I was trying to use a conservative number, saving 30%-some-odd. But it really looks like it's probably closer to 40%, if not closer to maybe even 45%, that if you look at what the broker reports have been suggesting, they've just been pushing forward this 40 million-plus tons of dead weight of delivery that just doesn't seem to be coming.

I mean, is that about right in terms of how you're seeing the world?

Exactly, that's exactly correct. It's just been pushed forward and eventually it's going to disappear.

Right, right. All right, perfect. That is all I had. Thank you, guys.

I think you know -- I think the other story is the scrapping. If you go back prior to last year, the biggest year for scrapping dry cargo was about 5 million tons or so. Last year was about 25 million tons, and this year, year to date -- and we're not done yet -- is close to 30 million tons.

Right, right. Which is about 5% of the fleet, right?

Yes -- huge numbers. And the age that they are scrapping is much younger.

Right.

So we think -- you know, we think it's going to take time, but we think that supply/demand balance will come back.

Got you. Perfect, great. Thank you very much for the time, guys.

Justin Yagerman with Deutsche Bank.

Good morning, it's Josh Katzeff on for Justin.

I just wanted to follow up on one of the previous questions. With that slippage figure about 40%, do you guys have any estimate on what's actually slippage and just what's never going to be delivered from that 40%?

No. It doesn't (multiple speakers) -- they just don't report it. It just -- eventually as I said earlier, it just eventually disappears.

Right.

Got it. So (multiple speakers) --

We think that -- we think that that's really -- those ships are really not going to be built. We don't think that it's slippage. We think it's just they are not going to be built, because if you think about it, if you ordered a ship in 2008 and you had a bunch of options, those options get reported as ships being built. But you're not going to declare an option at the 2008 prices. And so (multiple speakers) outlying ships are option ships that will never be delivered.

Got it. And you guys don't think that any of those Chinese yards are going to start building any of these ships on spec (multiple speakers) --

Impossible. No way. That I can guarantee you.

Okay. And I guess just shifting over to employment strategy, just some of the new charters, it looks like some of the Supramaxes were chartered on short-term charters, six months or it maybe went a little bit longer. But I guess maybe can you talk about the strategy of chartering between the different sectors, with I guess some fixed-rate charters on the Supramaxes but not really on the Panamax or smaller ships?

Yes, I mean the only fixed-rate charters that we have done are very short-term. They usually have been short trips or maybe as long as three months. We still have the same strategy of putting things away on their [stop market] fleet time charters. That has not changed.

I guess is there any difference between trip charters in the Supramax sector or Handysize sector, and Panamax? Or -- I mean, I'm just kind of curious why they were all done in the Supramax sector. Is there any sort of dynamic going on?

No, I wouldn't say there's any dynamic going on. You know, when we have ships that are open, we obviously try to stay ahead of the curve. But we deal with the market at the time and who needs ships, from our chartering pool.

Got it. And I guess just more broadly on the near-term outlook, I understand you went over some of the more longer-term fundamentals, but we've seen Cape rates rally up to $16,000 or $18,000 a day so far. And though the weak rate season has kind of mitigated some of the smaller ships' rally, is there anything that gets these Panamax rates and Supramax rates higher in Q4, or are you expecting them to come to kind of be flat in the near term?

I mean, I think we could see a little bit of a pickup, still, in fourth quarter. I mean, you still have pretty low coal inventories in China, and so I expect to see increased fixtures there.

I do expect to see the grain season come back in the first quarter as we change hemispheres. But you know, look -- iron ore is driving this right now. But you do get to a point where the ratio between Capes and some of the smaller vessel classes get a little out of whack and so you see the smaller vessel classes catch up.

And I guess how much of this has been an impact from Indonesian exports, or have those started to pick up yet?

I don't think we've seen too much of that yet.

Got it. Well, I appreciate the time today. Thank you.

(Operator Instructions) Michael Webber with Wells Fargo.

Hey, a couple questions. I guess I will take kick off for Peter; this is kind of a higher-level, kind of long-term picture. But just under the assumption that the market finds some sort of equilibrium -- and there are certainly systemic floors in place, like the scrapping you talked about -- that will lead us there at some point, from our perspective the key to this sector kind of catching institutional bid is going to be the notion that the supply curve is not going to happen again. And the biggest function there is going to be the restriction on lending.

So I guess, Peter, from your perspective as a principal, I guess how do you think about just the long-term dynamics in this business, and really kind of the key notion that we're going to have kind of a steady state, solid demand environment and a rate environment in positive territory, while lending is going to be restricted in this space? I guess longer-term and conceptually, how do you think about that just as someone that's going to be putting money to work here.

I mean, that's the position we want to get to, and that's the position we believe within the next couple of years we will get to. We think that -- you know, I'm not going to say people have learned their lessons, because people never learn lessons. But I think that the banks -- I don't care how much better things get -- will definitely not be there, lending money the way they were to speculative new building orders the way they were four or five years back.

I mean, I remember back in 2006, 2007, just a little history. You know, 20 years ago if you ordered two options, two ships, that was a big order; three options, three ships.

Yes.

You know, 2006, 2007, people were ordering 10, option 10 -- guys you'd never heard of. I'm not talking about companies like TK or Frontline or big companies. People you'd never heard of.

Right.

That's not going to happen again. It's just not going to happen again. So -- well, we would have to have such a crazy situation for that to happen.

So I think what you'll see is, with this scrapping -- and you've seen a lot of discipline on scrapping; that's what I think is impressive by owners. You know, scrapping ships built in the '90s shows a lot of discipline -- also, no ordering. So I think that's supply side, as that works off from no new orders, the orders that we think are there are not showing up, and scrapping. And then the demand will just -- you know, we know that that demand is going to continue to grow.

I'm a big believer in China, and I just believe that it will continue to grow at the pace that John and Gerry have been talking about, and I think we will get to some kind of equilibrium. I think it will have a decent market.

You know, do I think the market is going to go to $200,000 a day? Probably not, but you know, we could make a lot of money at less than $200,000 a day.

Got you. No, no, that's helpful.

I guess John, Gerry, you guys mentioned -- I mean, you've been pretty forthright about your chartering strategy here, which makes a fair amount of sense. But assuming -- you know, we are getting closer to kind of that persistent and longer-term term when we think we would see kind of an uptick in interest on longer-term charters, kind of like we are seeing in the product tanker sector right now.

Are you guys seeing an uptick in people and your customers approaching you looking for a longer-term-deal, looking to lock up Capes and Panamaxes at distressed levels for three and five years? And maybe if you can -- I don't know if you can quantify it, but maybe this quarter over last, or this quarter over a year ago, maybe just kind of what you're hearing from your customers and what makes you think we might be closer to kind of a sustainable recovery?

No, we definitely are starting to see charters come in and looking for ships. We think the rates are still a little bit lower than we'd like to lock things up long-term for, and that's because we believe that as the quarter continues and as things get a little bit better, we think we can capture some higher rates. I don't know -- John, Gerry, do you want to add anything in?

Yes, I mean, I would tell you, there's been definitely a change over the last 3, 4 weeks from the third quarter. I mean, the third quarter was pretty quiet, not a lot of liquidity. And now we're seeing from of a larger iron ore guys in particular looking to lock up ships for longer periods of time.

Got you. And John, when they are coming into the market, are they looking for a year or are they looking for 2 to 3 years? I mean, what sort of purview do you think they are coming in with?

I would say it's more of the one to two years --

Okay.

-- right now.

Got you, that's helpful. And I think -- you guys get asked this a lot based on your current strategy, but if we say we just boil it down to Capes, I mean what kind of level would you guys need to see that would make you comfortable locking them up for a year to two?

Yes, we get asked that question a lot (laughter).

Yes, look, I mean we obviously have -- you know, we have our ideas; not something we really want to share at this point, but we watch it daily. I mean, the three of us have conversations about it all the time. So, when we get there, obviously we will let people know.

Fair enough. One more and I'll turn it over -- and something else you guys have been asked about a lot, and you've got some leeway now, but around your bank deal and your covenants. You guys have got until the end of next year, so you've got five quarters here. But certainly absent a market recovery, you guys are going to need to negotiate again.

At what point should we realistically expect the banks to come back to the table and for you guys to start those conversations again? Obviously, it's very early now, but is that summer next year at the earliest in terms of the timeframe? How should we think about that?

I mean, it's -- that would be the earliest, I would think, to that point.

I mean, the one thing I'll say is, look, we maintain weekly contact, almost, with our banks.

Yes. That was (multiple speakers)

(multiple speakers) It's not like things just go quiet, you know?

I was just going to add that in. I mean, John and I just went on a trip where we met with our major banks last week. I mean, it's just something we believe in keeping in front of these guys, telling them what we're doing.

You know, I think they view us as really the top dry cargo Company out there, and so for us we are on top of it all the time. And if there's any change, we'll let you know. But again, as John says, I think next summer's the earliest these conversations would begin. But they are ongoing.

Got you. Okay. No, that's helpful. I appreciate the time, guys; thanks.

Ladies and gentlemen, this concludes today's conference. We thank you for joining the Genco Shipping & Trading Limited third-quarter earnings. Have a great rest of your day.