Navios Maritime Partners LP (NMM) 2014 Q1 法說會逐字稿

Thank you for joining us for this morning's Navios Maritime Partners first-quarter 2014 earnings conference call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; EVP of Business Development, Mr. George Achniotis; and Chief Financial Officer, Mr. Stratios Desypris.

As a reminder this conference call is also be webcast. To access the webcast please go to the Investors section of Navios Maritime Partners website, www.navios-mlp.com. You'll see the webcast link in the middle of the page. A copy of the presentation referenced in today's earnings conference call will also be found there.

Now let's review the Safe Harbor statement. The conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners management and is subject to risks and uncertainties which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. Thank you.

The agenda for today's conference call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will review Navios Partners financial results. Next Mr. Achniotis will provide an operational update and an industry overview. And lastly we'll open the call to take your questions. I'd now like to turn the call over to Navios Partners Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

Thank you, Laura, and good morning to all of you joining us on today's call. I'm pleased with the results of this quarter. In addition to strengthening our balance sheet through our recent capital market activities, I'm happy to announce that we received $59 million of EBITDA and net income of $18.4 million. We announced a quarterly distribution of $0.4425, representing an annualized distribution of $1.77 per unit. Navios Partners is committed to this distribution through 2015. This annual distribution provides a current yield of about 9.4%. We believe that MLP investors will be attracted to Navios Partners as our current yield exceeds the [millennium] MLP index yield by about 70%, and there is further upside if the market improves in the medium term.

As you can see from slide 2, Navios Holdings owns 20% of Navios Partners and assists Navios Partners in becoming a key player in the dry bulk industry.

Today Navios Partners has a market capitalization of about $1.5 billion and an enterprise value of about $1.8 billion. Navios Partners' conservative business philosophy facilitated its continued accessing of capital markets and provided the ability to grow fleet and cash flow. In fact, since Navios Partners went public in November 2007, we have increased our fleet more than fourfold. Today, we control passive assets representing over 3 million deadweight tons. The average charter utilization of our fleet is about 3.2 years with almost 89% of our contracted revenue coming from charters longer than three years.

Slide 3 highlights there is an agreement to resolve the credit default insurance from the first-party insurers. You may recall that we were approached by the insurance company in 2012 when it made the decision to exit this segment of the market. Since then, we have been in [an off] mode with no additional insurance purchase. I note here that the insurance of Navios Holdings remains in place as this termination agreement is only with a third-party insurance company. I would also note that we continue to investigate for appropriate alternatives.

As a result of our termination agreement, Navios Partners will receive cash payments totaling $50 million, including $31 million payment from our insurance company for the defaulted charter and $90 million from the sale to a third-party of our claims against the defaulting charters. We paid this claim as a part of the termination agreement with the insurance company.

The upfront cash payments reflect a significant present value benefit because issuers would have otherwise been paid over the course of the defaulted charter until 2019.

We also received a substantial benefit from eliminating a mitigation obligation. Under the applicable insurance policy, one of the insurance companies pays for a defaulting charter and until the related vessel during the course of the regional charter must be credited to the insurance company. However, as a result of the termination agreement, we have no obligation to credit any amount earned on the related vessel to the insurance company. So any earnings on the vessel is enjoyed only by Navios Partners.

For the Capesize vessel, we have [committed] the maximum nominal benefit from eliminating this litigation obligation to be $45.1 million.

In the table at the bottom of the slide, we've quantified the termination benefits. To the $50 million upfront cash payment received, we add the $9.6 million NPV benefit and $45.1 million benefit from eliminating the mitigation obligation. As a result we estimate the maximum benefit from terminating the current default insurance at $104.7 million. We think this settlement is very good for Navios Partners.

Slide 4 highlights the opportunistic benefit of terminating our insurance policies. As you can see from the chart on the top, we achieved an estimated $21 million net additional benefit. This is the difference between the maximum nominal benefit of $104.7 million previously highlighted and $83.7 million in maximum insurance payments that would have been available under the now terminated policy.

Moreover, when we reviewed the credit quality of the counterparties, we will agree that we were previously covered by the insurance problem you can see that these are likely that any of these partners would default during the course on the insurance coverage. Thus pending terminating the insurance at this point with a benefit received was a relatively easy decision for Navios Partners.

Slide 5 shows our liquidity. At the end of the first quarter, we had a total pro forma cash of $191.7 million and a total debt of $532 million. Our cash balance includes $50 million of the insurance settlement. We have a low net debt to [Group] capitalization of 25.2% and no significant debt maturities until 2018.

Slide 6, you can see the chartering status of our vessels that are coming open in 2014. We have positioned NMM to take advantage of an improving market. While having minimal downside risk, currently, we have 1,624 days open in 2014. That is representing 15% of our total [open days]. The weighted average contracted rate of the vessels coming open in 2014 is $12,945 per day. Even if we recover all vessels at today's rate we will generate approximately $3 million more of what the vessels are currently earning.

But, there is also significant upside. If we were to recharter our vessels at the $20,000 over 10-year averages, then we would be able to generate $11.3 million or $24.8 million, respectively, compared to our current earnings.

Now let's turn to slide 7, which shows the multiple ways we have been able to grow our fleet and distribution. Since our IPO we have grown distributions by 26.4% and our fleet capacity by almost 400%. We have now showed with a system of our sponsor that values are down. We have also advertised both these options on our capital investors. More recently, we have been active in the sales and purchase market, and we will continue to use these markets to improve our fleet as opportunities arise.

And at this point I would like to turn the call over to Mr. Efstratios Desypris, Navios Partner and CFO. Stratios?

Thank you, Angeliki, and good morning, all. I will briefly review our financial results for the first quarter ended March 31, 2014. The financial information is included in the press release and summarized in the slide presentation of the Company's website.

As a result of our actions in 2013 and so far this year, we have solidified our balance sheet and cash flow generation. We continue to have strong financial performance and this allowed us to commit to a minimum line distribution of $1.77 per common unit for 2014 and 2015.

Moving to the financial results, as shown on slide 7, our revenue for the first quarter 2014 increased by 44.4% to $57.5 million compared to $50.3 million for the respective quarter of last year. The increase is mainly due to the increase in available days by 41.2% and was partially mitigated by the 21% decrease in times equivalent achieved in the quarter of $20,785 per day compared to $26,244 per day for the same quarter of 2013.

As Angeliki discussed earlier, during the first quarter of 2014 we terminated our third-party (inaudible) insurance. As a result EBITDA and net income for the quarter have been positively affected by $29.8 million accounting effect of the insurance cost implement.

Also, as a result of the upfront cash payment, net income has been negatively affected by the $22 million non-cash write-off of the impending lawsuit associated with the contract of a defaulted counterparty, which was part of the insurance settlement. However, please be reminded that we still have a five-year-old Capesize vessel with a significant value.

EBITDA for the first quarter of 2014 increased by $31.9 million, mainly due to the accounting effect of the insurance settlement discussed above, as well as the increase in revenues. This increase was partially mitigated by $3.5 million increase in management fees due to the addition of nine vessels into our fleet compared to the same quarter of last year.

Net income for the quarter was $18.4 million, $2.1 million higher than the same period of last year. The increase in net income is mainly due to the increase in EBITDA discussed above, which was mitigated by the non-cash write-off of intangible assets, as well as the increase in interest expense of $4.6 million.

Operating surplus for the first quarter of 2014 amounted to $56.8 million. The replacement and maintenance CapEx reserve was $5.9 million.

Our fleet continues its excellent operational performance. Vessel utilization for the quarter was 99.9%.

Turning to slide 8, I will briefly discuss some key balance sheet data as of March 31, 2014. Cash and cash equivalents, including restricted cash, was $141.7 million. This cash balance does not include the $50 million cash proceeds from the settlement of our credit quality insurance. Total assets will be over $1.3 billion, reflecting the increase of our fleet.

Long-term debt, including the current portion, decreased by $1.3 million, reflecting the repayments of the quarter. Based on the current facilities, the debt amortization for 2014 amounted to $6.4 million. Net debt to asset value on a charter adjusted basis at the end of the quarter decreased to 35.4%.

As shown on slide 9, we declared distribution for the first quarter of $0.4425 per common unit. Our current annual distribution of $1.77 provides for an effective yield on that of 9.4% based on yesterday's closing price.

The record date for distribution is May 9, and the payment date is May 13, 2014. Total distributions for the quarter amounted to $55.5 million. Our common unit coverage for the quarter is 1.66 times.

Our consistent strong financial performance since the coverage ratio and accretive acquisitions enables us to secure our distributions, and we remain committed to a minimum annualized distribution of $1.77 per common unit through 2015.

I would like to remind you that for US tax purpose, a portion of the distribution is treated as a return on capital. Also, we reported the cumulative annual distributions to common unit holders on Form-1099.

Slide 10 demonstrates our strong relationships with the key participants in our industry. (inaudible) have an average remaining contract utilization of 3.2 years. (inaudible) among a diverse group of counterparties.

On slide 11 you can see the list of our fleet with the contracted rates and their respective expiration dates per vessel. Our fleet consists of 30 vessels -- eight Capesizes, 14 Panamaxes, three Ultra-Handymax and five container vessels. We have available a young fleet with a combined average of seven years, well below the respective industry averages.

Currently, we have fixed 85.1% of our available days for 2014 and 51.8% for 2015. We do not have satellite exposure to the container sector as our vessels are fixed for an average period of 10 years. On the dry bulk vessels, as Angeliki explained earlier, we feel that we have positioned the Company well to take advantage of the improving market.

The expiration dates are staggered, and the traffic durations extended 2023 the latest. I now pass the call to George Achniotis, our Executive Vice President of Business Development to discuss the investor section. George?

Thank you, Stratios, and good morning, all.

Please turn to slide 13. World GDP continues to be driven by developing economies, which now continues the higher percentage of total world growth from the developing economies, representing only half of the global consumption of most commodities.

The IMF projects world growth for 2014 of 3.6% compared to 3% in 2015. Developing economies are projected to grow at 4.9%. Chinese economic growth is projected at 7.5%. Another significant GDP movement is the shift of Europe from a negative 100% in 2013 to a positive 1.2% projected for 2014. This is a movement of about 2% within a short period in an economy the size of the US.

Turning to the next slide, the primary engines of trade growth continue to be China and India. Dry bulk freight has expanded by an average of 5.5% per year in the 12 years since China joined the WTO. Last year's growth rate was over 6.5% and forecasts for 2014 indicate a growth rate of approximately 6% and (inaudible) growth of about 7%. Net fleet growth is expected to be about 5%, leading to favorable supply demand dynamics for the first time in five years.

Moving to slide 15, iron ore from the major mines outside of China continues to be the lowest-cost highest-quality source of this commodity. With iron ore prices focused to decline to the $100 per ton range over the next several years, Chinese domestic production represented by the red boxes in the lower right graph, would become uneconomic. The currently planned expansions of global iron ore mines will add significantly to seaborne pipe commodity movements in 2014 with further significant growth in the following years. While the majority of these expansions are in Australia, more than 35% will come from the Atlantic basin, adding ton miles.

Moving to the next slide, the continued development and urbanization of China will continue significantly to steel consumption for the remainder of 2014 and beyond. Infrastructure, housing construction and consumer spending growth underpin future development. Note that Chinese fixed asset investments continue to grow at over 17% through Q1 2014.

Through March 2014 crude steel production in China was up 5% year on year. Chinese iron ore imports in Q1 were up 19% year on year, including the all-time highest and second-highest monthly imports in January and March of 87 million tons and 74 million tons, respectively.

Domestic iron ore production increased 6% year on year, but quality seems to be deteriorating, as effective FE content hovers in the 15% to 20% rate compared to 63% of imported coal. Based on these data it seems that the substitution of low-quality domestic iron ore was imported (inaudible). It is expected that this trend will continue and will increase the tons carried and ton miles.

Please turn to slide 17. Over the past few years there has been a significant change in the coal trade. And China fell from being a net exporter of coal in 2009, only five years ago, to being the world's largest importer today. As the charts indicate, both India and China seaborne coal imports have grown at, at least, 20% CAGR since 2009. With the increase in steel production and with a number of planned new coal fire power generators, coal imports in both countries are forecast to grow over the next several years. Just those two countries account for over 35% of all seaborne coal movements worldwide.

Turn to slide 18. China grain imports are expected to double from 2012 to 2022 as the country's per capital income rises, eating an improved diet and increased consumption of poultry and meat. As noted in the bottom of the slide it takes about 8 tons of grain to produce 1 ton of beef. Grain shipments, while small, relative to iron ore and coal, account for a large portion of vessel demand as measured in net vessel days and grain is an inefficient cargo to load in this charge.

Moving to slide 19, 2015 newbuilding deliveries totaled about 62 million deadweight tons, down by almost 40% from 2012's record.

The non-delivery rate through March was 43%. Once again this year about 58% of the order book is scheduled to deliver in the first half of the year. Net fleet additions this year expected to be lower than last year and net fleet growth is expected to be lower than demand growth, resulting in an improved rate environment. The order book declined dramatically this year and for each of the next three years.

Then to slide 20. No freight rates for most of 2015, expensive fuel and high spot prices led to continual high scrapping levels and strength (inaudible) 2 million deadweight tons were scrapped in 2013. Scrapping rates for all the less fuel-efficient vessels have continued at the start of this year. Through April 17 about 3.5 million deadweight tons of scrap. The current rate environment and current scrapping of all the vessels, about 11% of the fleet is over 20 years old, providing about 77 million deadweight tons of scrapping potential.

As demolition prices appear to depend on overall steel prices and not on supply of vessels they are expected to remain high. We believe we will continue to see the scrapping of older, less efficient vessels. Of note is that the average age of the fleet stopped declining and currently stands at 9.3 years.

Moving to the next slide, the chart provided a perspective on the rate environment and considers the impact of supply/demand equilibrium on rate recovery for 2014. As we all know for any rate recovery to be meaningful and lasting, these growth rates must fall below trade growth rates. As mentioned earlier, demand for dry bulk cargos is expected to increase for the full-year 2014 by about 6% at rates higher than we expect the net fleet growth for the year. However, the rate of change suggests that demand for dry bulk vessels will increase in 2014 and beyond as newbuilding deliveries continue to decelerate and scrapping remains at high levels. In sum, we note that for the first time in five years based on expectation that cargo demand growth will exceed net supply growth.

Please turn to the next slide. The DD&A recorded its highest Q1 average since 2010 at 1,371 despite the volatility in the quarter. These were 72% higher than Q1 2013. Earnings for the quarter were unevenly distributed by asset class as both the Supramaxes and Handysizes outperformed Panamaxes. In the case Panamax earnings ratios hit its widest margin since 2010 at 2.5 times. The market was buoyed early in the quarter by record Chinese iron ore imports and China starting out with nickel ore and bauxite in advance of the Indonesian ore export restriction. Since then, disruptions in cargo availability and also from weather-related (inaudible) in Brazil and governmental decrease in Colombia and Indonesia.

Negative Chinese (inaudible) cash margins credit exchange issues and bird flu have delayed grain exports from South America. Most of these reductions are temporary except for Indonesia's export restrictions. [Cape] rigs experienced a sharp fall from the combination of the above disruptions and normal seasonality against the current $16,000 per day spot average through mid-April is almost 3 times last year's average of $6000 per day.

A slowing trend in fleet growth for the remainder of this year along with significant additional iron ore export capacity in both Brazil and Australia should support earnings, especially in the Capesize sector. Both the Panamax and Supramax sectors should receive support over the medium to long term by Chinese coal and grain imports as the South American grain season finally gets underway.

This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Thank you. This completes the presentation and we'll open the call to questions.

(Operator Instructions). Michael Webber, Wells Fargo.

Angeliki, I wanted to touch first on the third-party credit insurance that you guys have terminated and I know this is the second such I guess step towards exiting that insurance policy. Can you talk a little bit about how that came about? It certainly seemed like the insurer was looking to kind of exit the space, and then your plans with the cash. I mean it certainly takes your coverage ratios well north of your target. You had raised cash previously so just maybe how you think about deploying that capital.

I think it's no secret that back from end of 2012 the insurance company was looking to exit the maritime sector. And I mean remember we did not renew any of the insurance coverage from that point on. In essence this has been extremely beneficial for the Company. We see $50 million cash on the -- which is on an NPV evaluation is $9 million, almost $10 million benefit. Of course, this money would've been received over a duration until 2019.

We gave the entire mitigation for ourselves, which is another up to $45 million cash. And in essence so your overall benefit hasn't quite substantial to the actual full payout. You really have nothing that you -- risk (inaudible) worth in it.

So, with this cash you can either deploy it in a very attractive point. We have now $190 million to redeploy. So, we can be quite creative on our balance sheet and we can [donate] quite substantial cash flows. So, we thought that overall on looking on a balanced way, this really made sense now because the benefit was quite significant.

I mean it makes sense. I'm just curious with -- you mentioned I guess the biggest figure possibly, the $190 million. But specifically, how are you guys thinking about allocating that relative to the first distribution increase, I think it would be since 2010. How do you think about deploying that capital, specifically within different markets?

I think we continue to see opportunities, both in the container market, and especially I mean on the larger vessels we see opportunities that can be quite accretive -- will be creating long cash flows and that will give us our ability to increase distribution.

And also by doing a larger transaction, as we have seen the capital markets, they have a [indigestion] about certain deals, I think you may be able to attract deals that make sense to you. As we have seen that you know a lot of people are not able as quickly to exit on capital markets.

Got you. Is there a thought process to take some of that -- I guess some of the incremental cash benefit from that policy and moving your reserves higher after they've been a bit trim for the past couple years?

Yes, we are looking on taking that cash and deploying it in additional vessels, if that's the question, yes.

Okay. I can follow up off-line.

And then finally, you already had touched on the container market and the dry bulk market, but actually from an accounting perspective, maybe this is bit for Stratios too, so you recognized $29.8 million this quarter. Does the remainder of that fall in the second quarter, I would imagine?

Yes.

Yes. That's correct, Mike. The remaining to be received in the second quarter, I didn't believe we recognized in Q2.

Okay.

By [emphasis], we have a non-cash write-off of about $22 million. So, we have to realize how profitable this deal has been because in essence we have $50 million cash that we got when the write-off -- the intangible -- the people write-off is only $22 million. So, yes, from the perspective of the actual value, we have a value creation from that original transaction.

No, it makes sense. You weren't particularly getting credit for it, so to be able to monetize it like that, it certainly seems like you're coming out ahead. Okay, that's all I've got. I appreciate the time, guys. Thank you.

Jon Chappell, Evercore Partners.

Angeliki, I wanted to talk about the distribution. You did a great job kind of playing defense during the poor part of the cycle with the container ships and kind of restructuring the capital structure to put you in a position to commit to the distribution through 2015, but you talked about a lot of your contracts rolling off at low rates. If you believe what George talked about on the cycle, it seems like now might be the time to shift to offense.

So if you think about the increasing of the distribution, is it going to be strictly a function of the market improving and being able to recharter your vessels at a much better rate environment before you could see any increase in the distribution? Or will you really need to kind of expand the fleet through growth like you've done in the past?

Actually, it is a good question. What we show you is that more or less you are encountering risk, meaning your market exposure is limited. So, basically, you're not really so market exposed. So even if you do it in acquisition, depending -- it's a combination of market exposure and acquisition. As our market exposure is not really significant, I think with an attractive acquisition, we can modestly start increasing, also, distribution, of course depending on the transaction and the characteristics.

Okay. And then if we go to kind of a second derivative of that on the acquisition front, obviously, the containers have been able to give you kind of a longer-term transparency. At this point in the cycle you probably don't want to lock in very long-term contracts on the dry bulk market. However, the dry bulk market as you laid out does have pretty improving fundamentals I would say relative to the container ship side. So how do you kind of balance the two of those; one, the cycle, versus, two, the duration of contracts and transparencies in containers?

As you have seen John, everything of our transactions we see it as a portfolio. So we try to create the containers will provide us the longest durations that can always if you feel we even in today's coverage about 90% of our contracted revenue comes from vessels that are fixed over five years. So the reality is that's where your bulk -- so you do a calculation of how much you want to be exposed to the spot market and a full portfolio of your durations. It's a portfolio approach to be honest. And, you need the long durations to have the luxury of being able to maximize your redeployment on the spot vessels.

Understood. Stratios, quick one for you. The depreciation amortization obviously included a big amount of the amortization of the Capesize. Is that done and over with now in the first quarter? Will there be some carry-through of that amortization?

No, John. This is correct. This is done on the first quarter. We have written off the full intangible amount that relates to that vessel. So going forward, second quarter will return to our normalized amounts.

And then one last thing. Can you just remind us how many of the ships -- of the charters are insured by Navios Holdings with that $20 million of potential cash?

It has around five vessels.

Okay. And how are the counterparties on those vessels? Would you consider those some of your top counterparties, or is there some risk involved with those?

No, we believe -- the majority of those are investment grade.

Okay. All right. Thanks very much, Angeliki. Thanks, Stratios.

Taylor Mulherin, Deutsche Bank.

So you've obviously got a few restarting opportunities coming up on the dry bulk side over the next 12 months or so, and actually there's some even closer than that kind of right now. And I was just trying to give a sense of, given that we are in a little bit of a soft patch here, obviously still up quite a bit from where we have been. But has there been any discussion to basically just rechartering some or a percentage of those vessels on a shorter than normal time period for you guys, just to kind of bring up that exposure again later on, so maybe like a 6- or 9- or 12-month charter versus something a little longer?

You know, we are looking very much -- today you can recharter for a short period, around six months, at approximately a little bit higher to where you are on the rate or you can go for one here where you come at a premium of about 15% on the weighted average of what your rate is at. So, I don't think we have something imminent right now. But, in the next month we may have to recharter. We can selectively -- a shorter duration that will give us an exposure somewhere in Q4.

Right, yes, I was just talking about the four that are coming up in May. Then I just wanted to jump over to just kind of the market color that you guys have given. Specifically in the Panamax sector since you guys had a little bit as a group have a little bit of a unique insight into what kind of goes on in the South American grain market. I was just curious what sort of insight you had there. And it sounds like there's been a little bit of kind of a holding back of cargoes from what I've read in the market. Is that sort of what you're seeing? And do you think when that gets released, the market is going to improve very rapidly or if it's more of a sort of slow trickle?

You are very correct, there is a delay on the South American -- even though the volumes are there there's a little bit of delay in the start up of the season. So I think it will be really become a little bit later than expected on the grains. We have seen that from our port. We have seen that volumes you know are starting to -- there was a delay on the grain season as usual, but volumes start coming up.

Right. And then my last one, just on any vessels that are a little bit older coming up for recharter over the next 12 months or so, I wanted to get a sense of how you're thinking about those. You mentioned in the past that you think those vessels are in sort of better condition than anybody might think given the age. And so, any thought to using the stronger market for secondhand vessels right now to sell them or do you think it's better just to continue trading them?

We -- actually as the vessels are coming you always evaluate if it makes sense to replace or keep it for employment. The vessels have an excellent condition, so you can choose either way, but I think this will be mostly a decision as they come closer to that position. So, I mean I wouldn't like to make a comment today. You have to see the market at a time when the vessel is opened.

Great. Appreciate the time.

Nish Mani, JPMorgan.

I wanted to ask a couple of quick questions about the container shipping segment and how you guys see potential growth opportunities there. Right now you are able to acquire vessels kind of in a 6,000 to 7,000 TEU space with long-term charters. Do you guys have any flexibility or willingness to try either larger or smaller vessels and perhaps acquire vessels without charters attached?

Well, not in that kind of market condition of the container, we'll not go without charters. And preference will be on the -- will not be attractive to us to be honest in the MLP. And on vessel side we'll actually look on what we bought and larger.

You are only going to look at larger, you said?

Yes.

Okay. So will there be any willingness to expand into the kinds of 10,000-plus TEU space?

We do not exclude that. I mean we have -- we think that depending on the charter and the duration and the counterparty that may be an attractive possibility.

Okay, great.

And then switching gears for one second to the dry bulk space, I know that people have been kind of asking questions about the BDI and where it stands today and kind of precipitous drops at the year-end. I wanted to get a sense from you just broadly how much you attribute this to seasonality and how much you think is fundamental slowdown in demand from a perspective of both Chinese iron ore as well as the slower grains trades coming out of Latin America.

I mean grain has definitely affected, number one, we said what seems to be a delay in the season. And secondly I think generally also a credit squeeze that is happening in China that may be on the medium term is also positive because it will take certain speculative traders out of the market, and that is in line with Chinese government directed to have a stronger counterparties concentrate on profitable business and take some of the nonprofitable and not commercially economically viable means out. That will also create better conditions on the longer term.

Okay. That's pretty clear. Thanks so much for your time there.

Matthias Detjen, Morgan Stanley.

I just have one quick follow-up regarding China as well. With the large iron ore stockpiles to what extent do you think that will affect chartering? And do you think it will draw out chartering much further than we'd seen it before, like for example last year when chartering picked up? Do you think there will be more delays this year in seasonality? Or do you think there will be sort of similar as we saw that pattern last year?

I think most probably we'll have something similar to the last year's pattern where you had the stronger second half. This seems to be how the overall pattern on the iron ore.

Okay, well that was it for me. Thank you very much.

There are no further questions at this time. I will now return the call to Angeliki Frangou for any additional or closing remarks.

Thank you. This completes our first-quarter results. Thank you.

Thank you for participating in today's conference call. You may now disconnect.