Navios Maritime Partners LP (NMM) 2023 Q2 法說會逐字稿

Thank you for joining us for Navios Maritime Partners Second Quarter 2023 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou; Chief Operating Officer, Mr. Efstratios Desypris; Chief Financial Officer, Ms. Erifili Tsironi; and Vice Chairman, Mr. Ted Petrone. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors Section of Navios Partners' website at www.navios-mlp.com. You will see the webcast link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call will also be found there.

Now I will review the safe harbor statement. This 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 facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are 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.

The agenda for today's call is as follows: first, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners' segment data. Next, Ms. Tsironi will give an overview of Navios Partners' financial results. Then Mr. Petrone will provide an industry overview. And lastly, we'll open the call to take questions.

Now I turn the call over to Navios Partners Chairwoman and CEO; Ms. Angeliki Frangou. Angeliki?

Good morning to all of you who joined us on today's call. I am pleased with the results for the second quarter of 2023 in which we reported revenue of $346.9 million and net income of $112.3 million. We are pleased to report a net earnings per common unit of $3.65 for the quarter.

Navios Partners is a leading public listed shipping company, diversified in 15 asset classes in 3 sectors, with an average vessel age of about 9.8 years. We have 175 vessels split roughly equally into 3 sectors based on a charter-adjusted value. The macro environment is challenging. Trade patterns continue to be impacted by the war in Ukraine. China has experienced [anemic] economic growth since it exited the pandemic and currently appears to be addressing potential deflation. The West was relatively healthy, is doing with inflation while fearing recession. Whether dry container or tanker base, a great deal of uncertainty about future prospects. We continue to focus on things that we can control, such as reducing our leverage rate. Our stated goal is to reduce leverage so that our net LTV force within the range of 20% to 25%. This past quarter, net LTV picked up slightly because of some deterioration is still valid. However, our accumulated cash offset most of this decline. I mentioned this prominently so that you can understand how important we view this single metric.

Please turn to Slide 7. As you can see, we have $270 million of cash on our balance sheet, an increase of approximately $57 million per last quarter. We are investing our net cash through our treasury function and earning about 5% on an annualized basis in the second quarter of 2023. We secured $350 million of new financing in the second quarter of 2023. About $288 million was used to refinance 36 vessels at an average margin of 2.4%. The remaining $62 million was due to finance to additional MR2 newbuilding vessels at an implied fixed interest rate of 7%.

Overall, our current weighted average interest rate is 7%. This consists of 5.6% on average interest on our fixed rate debt, representing 36% of our debt and 7.8% average interest on floating rate debt representing 64% of our debt. As announced in the fourth quarter of 2022, we purchased two MR2 vessels for a total of $80 million. We expect to take delivery of these vessels in the second half of 2025 and the first half of 2026. We recently chartered these vessels out for 5-year period at a net rate of $22,959 a day per vessel.

The overall economics of the purchase and CapEx can be summed up as follows: At the end of the 5 years, we expect to have an aggregate EBITDA of $52.3 million while having only 20% residual value exposure with 20 years of remaining useful life. During the charter, we will enjoy a 13% annual yield.

Fleet update in 2023 year-to-date, we saw 13 vessels generating an aggregate sales process of $242 million. We offset those sales with purchase of 3 vessels, including 2 additional MR2 newbuilding vessels for $80.4 million, the 2 vessels are expected to be delivered in 2026 and 2027. Our operating cash flow is strong. For the remaining 6 months of 2023, our contracted revenue is expected to exceed total cash expense by $64.8 million. We have 8,146 open/index days, so we have expect to generate significant additional cash in the second half of 2023.

Please turn to Slide 8. since our transformation in 2020, our financial performance has been strong. Our second quarter 2023 adjusted EBITDA is 17% higher than the second quarter of 2022, and 112% higher than the second quarter of 2021. Looking backwards, 2022 was 57% higher than 2021 and almost 570% higher than 2020. We believe that our diversified business model can continue to perform in difficult markets.

I'll now turn the presentation over to Mr. Efstratios Desypris, Navios Partners' Chief Operating Officer. Efstratios?

Thank you, Angeliki, and good morning, all.

Please turn to Slide 9, which details our strong operating free cash flow for the second half of 2023. We fixed 71% of available days at an average rate of $25,459 net per day. Our contracted revenue exceeds expected total cash expense for the remaining 6 months of 2023 by about $65 million. We have 8,146 open/index link days that will provide additional profitability.

Slide 10 demonstrates our diversified platform in action. We aim to benefit from counter cyclicality by redeploying cash flows from well-performing segments into assets in other performing segments. We believe a diversified asset base moves volatility on our financial statements. You can see this dynamic playing itself out in our asset base. As of the second quarter of 2023, container values dropped by 4% and dry bulk and tanker values decreased by 1%, respectively, compared to the fourth quarter values.

In sum, the net same-store fleet values have decreased approximately 2%. Multiple segments also allow us to optimize chartering. In segments with attractive returns, we can enter into period charters. In other segments, we can be patient. Our containerships are 100% fixed at $38,200 net per day. Our tankers are 89% fixed at $26,088 net per day and our dry bulk fleet to 66% fixed are $14,620 per day. As you can see from the chart on the bottom, overall, we fixed 80% of our 13,779 total available days for the third quarter of 2023 at a net average rate of $24,543 net per day.

Please turn to Slide 11. We are always renewing the fleet so that we maintain a young profile, benefiting from newer technologies and more carbon efficient vessels. We have $1.4 billion remaining investment in 22 newbuilding vessels delivering to our fleet through 2027.

In container ships, we acquired 12 vessels for a total of $860 million, which we hedged by entering to long-term creditworthy charters, generating about $1.1 billion in contracted revenue for about 6.5 years average duration of the related charters. In the target space, we entered the LR2/Aframax subsector by ordering 6 vessels for a total price of approximately $380 million. These vessels have been chartered out for 5 years at an average net rate of $26,580 per day, generating revenues of approximately $290 million.

We also order 4 high-spec MR2 vessels for about $160 million. Two of the vessels have been chartered out for 5 years at an average net daily rate of $22,959, generating revenues of approximately $85 million. The dry bulk newbuilding program of 8 vessels was completed in June 2023 with a delivery of a Capesize vessel. We have also been active and opportunistically selling all their vessels based on segment fundamentals. Year-to-date, we have sold 15 vessels with an average age of approximately 14.5 years for $242.2 million. We sold 7 tankers, 7 tanker vessels for about $160 million, taking advantage of strong tanker market. Also, we sold 6 dry bulk vessels for a total price of $82.4 million.

Moving to Slide 12. We continue to secure long-term employment for our fleet. As Angeliki mentioned earlier, in the second quarter, we have created over $130 million additional contracted revenue. Approximately $85 million relates to 5-year charters of $22,959 net per day on 2 newbuilding MR2s, and about $47 million relates to 3 existing tanker vessels. Our total contracted revenue amounts to $3.3 billion, of which $0.9 billion relates to our tanker fleet, $0.3 billion relates to our dry bulk fleet and $2.1 billion relates to our containerships. Charters are extending through [2037] with the diverse group of quality counterparts. About 55% of our contracted revenue will be in the next 2.5 years.

I will now pass the call to Erifili Tsironi, our CFO, who will take you through the financial highlights. Eri?

Thank you, Stratos, and good morning, all. I will briefly review our unaudited financial results for the second quarter and first half year ended June 30, 2023. The financial information is included in the press release and is summarized in the slide presentation available on the company's website.

Moving to the earnings highlights on Slide 13. Total revenue for the second quarter of 2023 increased by 24% to $346.9 million compared to $280.7 million for the same period in 2022. Time charter revenue for the period is understated by $7.5 million because U.S. GAAP rules required the recognition of revenue for our charters with deescalating as on a straight-line basis. Available days increased by 20.4% to 13,572 compared to 11,269 for the same quarter last year. Our average time charter equivalent rate was $23,900 per day, in line with Q2 2022 levels.

In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. TCE rates for our tankers increased by 89% to $30,947 million and for our containers by 12% to $35,466 per day. In contracts, our dry bulk TCE rate was 36% lower compared to the same period last year and $15,715 per day.

EBITDA for 2023 increased by 23% to $201.6 million compared to $163.5 million for the same period last year. Our EBITDA includes a $10.2 million gain related to the sale of 4 vessels. Net income for Q2 2020 decreased by 5% to $112.3 million compared to $118.2 million in Q2 2022, mainly as a result of a $16.3 million increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from [4.27%] in Q2 2022 to 7.44% in Q2 2023. In addition, net income has been negatively affected by a $15.4 million increase in depreciation and amortization expense and a $12.3 million reduction in the positive impact of the amortization of our favorable leases. Earnings per common unit for Q2 2023 were $3.65.

Total revenue for the first half of 2023 increased by 27% to $656.5 million compared to $517.3 million for the same period in 2022. Time charter revenue for the period is understated by $20.5 million because U.S. GAAP rules required a recognition of revenue for our charters with deescalating rate on a straight-line basis. The increase in revenue was a result of a 22% increase in our available days to 27,480 compared to 22,497 for the same period in 2022. Our fleet time charter equivalent rates showed a slight improvement to $22,337 per day. In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. TCE rates for our tankers increased by 87% to $29,664 and for our containers by 20% to $35,226 per day.

In contrast, our dry bulk TCE rate was 40% lower compared to the same period last year at $13,346 per day. EBITDA for the first half of 2023 increased by 35% to $390.4 million compared to $289.6 million for the same period in 2022. Our EBITDA includes a $43.6 million gain related to the sale of 12 vessels.

Net income for the first half of 2023 increased by 4% to $211.5 million compared to $203.8 million for the same period last year. Our net income was negatively affected by a $37.1 million increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from 3.98% in the first half of 2022 to 7.2% in the first half of '23. In addition, net income has been negatively affected by $29.5 million increase in depreciation and amortization expense and a $26.5 million reduction in the positive impact of the amortization of unfavorable leases. Earnings per common unit for the first half of 2023 were $6.87.

Turning to Slide 14, I will briefly discuss some key balance sheet data. As of June 30, 2023, cash and cash equivalents were $270.1 million. In the first half of '23, we paid $113.6 million of predelivery installments and other capitalized expenses under our newbuilding program and $70.6 million for vessel acquisitions and improvements. We sold 12 vessels for $215.8 million net adding $137 million cash after the repayment of their respective debt. Our other current assets decreased mainly due to the decrease in accounts receivable from charterers, which were certainly post year-end, while our other current liabilities decreased mainly following the payments made in accordance with the management agreement. Long-term borrowings, including the current portion, net of deferred fees, slightly reduced to $1.92 billion. Net debt to book capitalization decreased to 37%.

Slide 15 highlights our debt profile. We continue to diversify our funding sources between bank debt and lease structures, while 36% of our debt has fixed interest at an average rate of 5.6%. We also try to mitigate part of the increased interest rate cost, having reduced the average margin for our floating rate debt by approximately 30 basis points to 2.4% from 2.7% compared to 2022 year-end. Our maturity profile is target with no significant values due in any single year.

Slide 16 gives an update of the Q2 2023 debt developments. In terms of our newbuilding program, approximately 95% of our new building financings already concluded or in documentation phase at an average margin of 1.8%. We have used the opportunity to expand our financing resources, adding new banks and lessors, while also concluded our first export credit base back facilities in China and South Korea. During the quarter, we have arranged a total of $350.2 million of new financings. $287.8 million relates to refinancing of existing facilities where we managed to decrease respective margins and expand maturities.

Turning to Slide 17, you can see our ESG initiatives. We continue to invest in new energy efficient vessels and induce missions through energy-saving devices and efficient vessel operations. Navios is a socially conscious group whose core values include diversity, inclusion and safety. We have very strong corporate governance and clear code of ethics. Our board is composed by majority independent directors and independent committees that oversee our management and operations.

I'll now pass the call to Ted Petrone to take you through the industry section. Ted?

Thank you, Eri. Please turn to Slide 20 for the review of the tanker industry. World GDP is expected to grow 3% in both 2023 and 2024 based on the IMF's July forecast. There's an 85% correlation of world oil demand to global GDP growth. In spite of economic uncertainties in the Ukraine crisis. The IEA projected 2.2 million barrels per day or a 2.2% increase in world oil demand for 2023 to 102.2 million barrels per day and a 1 million barrels per day increase in 2024. Chinese crude imports continue to rise, averaging 11.3 million barrels per day through July, a 12% increase over the same period last year, assisted by a record 12.7 million barrels per day imported in June.

Following a very strong Q1 across all asset classes, tanker rates softened only slightly in Q2 and remained well above long-term averages on the back of strong supply and demand fundamentals, minimum fleet growth and shifting trading patterns resulting in longer haul routes, especially for Suezmax and Aframax. The recent OPEC cut, although less than the headline numbers and seasonality have put downward pressure on VLCC rates, particularly added the Middle East Gulf.

Turning to Slide 21. As previously mentioned, both crude and product rates remain strong across the board due to previously mentioned supply and demand fundamentals. Product tankers are also aided by healthy refinery margin and discounted Russian crude exported to the Indian Ocean and the Far East returning to the Atlantic as clean product. 2023 crude and product ton mile growth is expected to increase by 6.6% and 11.9%, respectively, with continued ton mile growth in 2024.

Turning to Slide 22. VLCC net fleet growth is projected at 2.2% for 2023 and negative fleet growth of 0.9% for 2024. This decline can be partially attributed to owners hesitance to order expensive long-lived assets in light of macroeconomic uncertainty and engine technology concerns due to CO2 restrictions enforced since the beginning of this year. The current record low order book is only 2.1% of the fleet or only 19 vessels, the lowest in 30 years. Five VLCCs will deliver during the balance of this year, one each in '24 and '25. Vessels over 20 years of age are about 14% of the fleet or 128 vessels, which is about 7x the order book.

Turning to Slide 23. Product tanker net fleet growth is projected at 2.1% for 2023 and only 1.1% for 2024. The current product tanker order book is 9.7% of the fleet, one of the lowest on record, and is approximately equal to the 9.8% of the fleet, which is 20 years of age or older. And concluding the tanker sector review, tanker rates across the board continue at strong levels. Combination of below average global inventories, growth in global oil demand, new longer trading routes for both crude and products as well as the lowest order book in 3 decades. And the IMO 2023 regulations should provide for a healthy tanker earnings going forward.

Please turn to Slide 25 for the review of the dry bulk industry. Chinese dry bulk imports volumes held up well in the first half who have a net fleet growth slightly outpaced trade growth. That and the unwinding of congestion continue to put a cap on rates. For Q2, the BDI averaged 1,313, a 30% increase over Q1 with cash providing the majority of that increase. As of yesterday, the BDI stood at 1,194. While Chinese economic indicators continue to disappoint, it remains to be seen if the government will address these issues sufficiently to revive economic growth with past levels. Going forward, supply and demand fundamentals remain intact, a normal seasonal stronger second half the historically low order book, declining net fleet growth, softening U.S. dollar and tightening GHG emission regulations remain positive factors, which are reflected in the FSA market. Overall, dry bulk trade in the second half of '23 is projected to increase by about 3% over the first half of this year.

Please turn to Slide 26. With regard to iron ore, China's GDP grew at 6.3% in Q2 of this year. Should China implement stimulus measures, this should maintain already healthy iron ore demand. Global iron ore trade is expected to increase by 3.6% in the second half of 2023 over the first half of this year. Coal trade continues to be impacted by the war in Ukraine as a ban on Russian coal shifted trading patterns towards longer haul routes. Seaborne coal trade is expected to decrease by 2.7% in the second half of this year over the first half of 2023. As with coal, the global grain trade is also impacted by the war in Ukraine shifting trading patterns to longer haul routes. Seaborne grain trade volume is expected to grow by 2.5% in 2023, aided by ton mile growth of 3.7%. Russia recently abandoned the Black Sea grain export deal, additional grain volumes from Brazil, Europe and Russia are expected to make up the shortfall and further add to ton miles.

Please turn to Slide 27. The current order book stands at 7.8% of the fleet, one of the lowest since the early 1980s. Net fleet growth for 2023 is expected at 2.9% and only 1.9% in 2024 as owners remove tonnage that has become uneconomical due to the IMO 2023 CO2 rules enforced since the beginning of this year. Vessels over 20 years of age are about 8.5% of the total fleet, which compares favorably with a historically low order book. Concluding the dry bulk sector review, continuing demand for natural resources congested at the Panama Canal, war and sanction-related longer-haul routes combined with a slowing pace of newbuilding deliveries will all support freight rates going forward.

Please turn to Slide 29. Container rates, although well down from the first half of 2022 historic levels continued to surprise in 2023 with the Shanghai Container Freight Index or SCFI currently at 1,031, which is only slightly lower than it opened the year at 1,061. Overall, 2023 trade growth is projected to increase slightly at 0.3%. The outlook noticeably improved compared to the initial 2023 growth projection of negative 1.6%.

Total container trade is expected to remain challenging in 2023 from macroeconomic issues, including inflation, the war in Ukraine and elevated deliveries. As you'll note on the graph on the lower right, the U.S. retail inventory to sales ratio is off to a recent low, but still well below the long-term average. The graph on the lower left shows continuing growth U.S. consumer purchases of goods, which is still above pre-pandemic levels. Imports of the U.S. have slowed using port takeaway, bottlenecks and port congestion.

Turning to Slide 30. Net fleet growth is expected to be 7.3% for 2023 and 6.6% for 2024. The current order book stands at 28.5% against the 10.9% of the fleet, 20 years of age or older. About 73% of the order book is for 10,000 TEU vessels or larger. Including in the container sector review, supply and demand fundamentals remain challenged due to the economic and geopolitical uncertainties and an elevated order book. However, the prospect of Chinese stimulus and world GDP growth at 3% for both 2023 and 2024, provide a counterpoint to a challenging 2023.

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

Thank you, Ted. This does complete our formal presentation. We'll open the call to questions.

(Operator Instructions) And our first question will come from Omar Nokta with Jefferies.

Thanks for the update, always very detailed across the business and the industry. I did want to ask just about kind of -- clearly, you guys have been very active in terms of deploying your capital, I would say, wisely. You've been selling ships on the older end, and you've been investing in your newbuildings. And I wanted to ask you, you highlighted and you've talked about this for several quarters is the net LTV trying to get that down into the 20% to 25% range. Given you're a bit above that at the moment, and we can see visibly the path to get there over the next couple of years.

But in the interim, how are you thinking about deploying the capital today for getting the newbuildings that you've got and for getting these selling ships. How are you thinking about deploying capital for secondhand ships on the water today? Do you see opportunities there given the pullback we've seen definitely in dry bulk and containers and as you mentioned, some uncertainty ahead just overall. Do you think there's opportunities to deploy capital and acquiring secondhand tonnage at discounted prices.

I'm just wondering Omar. I think you have seen how we are looking. I mean the macro environment, we see the challenge, and they can be from Ukranian, the continued war in Ukraine, the Chinese, again unexpected Chinese dynamic growth and Western countries that are between inflation and recession, nobody knows exactly if and when.

So we try to be conservative. We see on the Container segment, we have done a renewal of our fleet were 100% fixed so we are sitting in a position to watch the market. On the tanker segment, as you very well said, we are optimistic on the market. We see that longer ton mile both on crude and products to be here and remain. We see -- and what we have done, we showed all the assets we sold about 25% of our fleet replaced with high-quality vessels which we also chartered-out on quality counterparties, providing a 12%, 13% return. And basically limiting our [integral] value. This is on -- and then -- so this is a position where we continue and we chartered-out our vessels at very attractive rates.

Now on the dry, we are -- we have done a replacement of our fleet. We are opportunistically fixing our vessels on strength, and we are working on any year, we will have 10% of our fleet replaced, more or less, depending on the position and the replacement. Our guidelines on what we are trying to achieve, you can see very clearly from our actions. Now looking on our targets, we have been [apicultaing] what is liquidity you want to have per vessel, and about $2 million per vessel and our target A to Z, net LTV. And this is two areas where I think is fundamental to us. As we never know what will happen in next year, this is very fundamental on how we focus on this.

And just -- you mentioned $2 million per vessel of cash on hand or liquidity is the target?

Yes. And this is something you have heard that previously for us that -- it is basically calculated on the net LTV, so...

Yes. Okay. And then maybe just on a follow-up, you highlighted the MR newbuildings, you ordered 2 late last year, you just ordered another 2. You fixed the initial ones on a 5-year charter where new residuals really come down -- any residual risk is really low. And just in thinking about the latest 2 orders, do you think -- is it plan or is the thought process to also secure those 2 newbuildings similar to the first 2 on these 5-year charters? And also, can you give a sense of whether the charter of the first 2 has given indications of interest on [wanting more]?

I mean we see quality counterparties. I mean we see top end users that they like this kind of vessels. We are talking about by replacing this -- getting the older vessel out and getting these new MR2 who have substantially reduced carbon of footprint, less consumption. So this is -- we see a high demand for quality price. And securing this specification, I mean we think that we will be able to fixed on these vessels, the second 2 vessels in attractive charters, and not necessarily to the same counterpart, but we are not eliminating that possibility.

Okay. Got it. And then maybe just finally on just the overall, you have the newbuildings in the containerships. And in the tankers, you just took delivery of your final Cape newbuilding. In terms of further newbuildings as opportunities arise, do you think there's something to do in dry bulk, or do you look maybe to perhaps balance out the portfolio that given that is where your biggest footprint is, at least in terms of vessel count, or is dry bulk also an opportunity for newbuildings if there's -- if you see things that makes sense.

Stratos always have this nice graph in the past where basically the newbuilding prices are on dry bulk and any stand-forward period, they don't need much at this point. And we have -- but we are always open on possibilities of investors investing in the water. We are looking and we are doing our math on a long on every segment. We are trying to be as disciplined by. We don't forget we bought over 10 dry bulk vessels, which we already have completed and put them on charters, on 5-year charters. And that was done -- the last one was in this quarter, I think. So basically, this is the position we already have taken, and we did it -- we have those lessons in 2020 also. So it was some time ago, 2021. [The overall there'll be some opportunities].

(Operator Instructions) And our next question will come from Chris Wetherbee with Citi.

It's Rob on for Chris this morning. Could you give an update. We've seen some nice uptick in terms of the freighters pricing Mainland China to U.S. West Coast in the past couple of months. We've also seen a little bit of an improvement off some lows in terms of Mainland China to Europe. Could you give us an update in terms of what you're seeing within your customer base as we think about peak and looking out to next year for the container market?

Right. So our view is a bit more from macro that we're watching the different routes. It's a -- some are up, some are down. You can see the average on the SCFI that we talked about has been pretty good. The U.S. consumer continues to surprise a bit. Remember, we're leasing out these ships to the other charters who are looking at the end users. We see a lot of -- there's some newbuilding overhang, right, but on the lower size is below 13,000, deadweight, I think the order book is probably half of what it is of 28%. So we're very confident going forward that the charterers will be looking at taking on ships. It's like the housing market as most of the ships have been taken, and if you're looking to get something, there's not much out there. So some of the time charter rates have been going up and so is the duration, which is a very good sign for us. But it's a challenging year for us and for the market. But I do think you'll see some surprise numbers. And of course, being 100% fixed, we can sit back and watch it objectively.

No, that makes sense. And as we're thinking about next year, kind of how fixed are you guys in the time charter, can you just kind of remind us where you are with regard to charters coming off over the next couple of years?

Stratos?

Yes. In next year, we only have around 80%. We own around 80% of our vessels, container peak. And we are starting to get also delivery of the newbuilding vessels coming from the end of this year. So we will have also the replacement of the cash flows of the business [for container market]. But I would say that we are pretty much covered for at least '24 in our fleet in the container sector.

That's helpful. Obviously, there's been a lot of noise about climate change and the impact in terms of certain key trade routes, we're seeing very, very low levels in the Panama Canal, which is causing kind of backlogs. Are you seeing that in other trade routes? And maybe you could just kind of talk higher level kind of what the impact you're seeing from congestion and from low water levels is having on just broader demand across the different vessels that you guys operate in?

Yes, that's a very good and very topical. Ted will go through, but a big picture, you should think of the following. I mean we saw the pickup on the waiting for Panama Canal. That is basically a 50% increase of what usually was there. And that is -- it is actually going to be effect -- it's like congestion. It something affects -- it creates longer time at sea, longer ton mile, and they have to reverse. That is one charging point, and then -- and it is basically like congestion. So I mean...

Yes. It's such a big topic, the climate change. I think you're going to El Nino now. You're going to have some better grain out of South America, less out of Australia, you have water issues in Europe, which would sort of eliminate some of the takeaway from the biggest ships as the barges go inland. There is thing in the yang also. I think China was having rain in the wrong places. So it's every year, you're going to be looking at different issues that affect. But I do -- as Angeliki said, the Panama Canal is definitely a fresh water issue, which is related or not the climate change, but it's going to run through the winter that could bring congestion for bulkers that are going with grain, the containers coming back, some of the cases coming back from the Pacific. There's a lot of issues here. But really, the macroeconomics ones that we think are more instrumental in driving the market, but it's certainly an issue that we're all watching on the climate chain side.

And Ted, on the bulker with regard to the Panama Canal, are you getting inbound inquiries from some of the container, the vessel operators to really kind of extend trade route, i.e., kind of go around Africa as opposed to through the Panama Canal given where the backlog is of getting through the Panama Canal, or is that not yet something we're seeing.

Yes. No, not yet. I think you're going to see some more congestion as the Gulf grain season opens and clogs that canal more. You'll be seeing some grain vessels going through the Suiss going out to the Far East. So even if congestion stays where it is, I think as Angeliki said, we were probably at about 80 ships normally about 130 now on the Canal 4 days, not so much. But as that goes up, that may stay there in those numbers. But what you'll be seeing is other ships doing longer routes, which you don't calculate into the canal congestion, right, but it's going to be affecting the routes, and it makes the fleet more inefficient, which is obviously brings the rates up.

At this time, there are no further questions. So I would like to turn the call back over to Angeliki for any closing remarks.

Thank you. This complete our second quarter result. Thank you.

Thank you, ladies and gentlemen. This does conclude today's program, and we appreciate your participation. You may disconnect at any time.