Safe Bulkers Inc (SB) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Safe Bulkers conference call to discuss financial results for the first quarter 2012. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr. Loukas Barmparis; Chief Financial Officer, Konstantinos Adamopoulos; and Chief Operating Officer, Ioannis Foteinos. At this time, all participants are in a listen-only mode. (Operator Instructions). Following this conference call if you need any further information on the conference call or the presentation, please contact Matthew Abenante at Capital Link at 212-661-7566.

I must advise you that this conference is being recorded today, Wednesday, May 9, 2012.

Before we begin, please note that this presentation contains forward-looking statements as defined in section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended concerning future events, the Company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements.

Although the company Believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company.

Actual results may differ materially from those expressed or implied by any such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels; competitive factors in the market in which the Company operates; risks associated with operations outside the United States; and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

And we now pass the floor over to Dr. Barmparis. Please go ahead, sir.

Good morning. I am Loukas Barmparis, the President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the first quarter of 2012.

Yesterday, after the close of the market in New York, we announced our financial results. Before we present them, we will discuss the information in relation to our Company.

Safe Bulkers is a premier drybulk shipping company, mainly transporting cargo such as coal, grain, iron ore and other drybulk commodities. Currently Safe Bulkers owns 20 high specification vessels, comprising of five Panamaxes, three Kamsarmaxes, 10 Post-Panamaxes and two Capes. We have a contracted order book of nine vessels from top quality CPIs in Japan and China, comprising of three Panamaxes, three Kamsarmaxes, two Post-Panamaxes and one Cape to be delivered through 2014.

As presented in slide four, currently we are one of the youngest modern and high quality fleets in the industry with an average age of 4.2 years as of May 4, 2012.

In slide five, we provide information for our long history since 1958. Key takeaways are our well-experienced management team through shipping cycles. Management investing in ship-owning activities solely through Safe Bulkers has fully aligned interests with those of our public shareholders. Management has a [double] hedging approach resulting in operational excellence. Governance policies are consistent and well adapted to market conditions.

On slide six, we present the average 4TC Baltic Cape and Baltic Panamax index. The market has been trading at low levels during their first quarter of 2012. Medium-sized vessels have been lately performing better due to seasonal high demand for carrying grains from East Coast South America and North Atlantic, while activity in coal trading remains sustainable. This has pushed the market higher over the past month, and Panamax daily charter rate yesterday was about $12,000, a substantial improvement in comparison to the very lows of the market at the beginning of the year.

Overall presently Panamax charters are trading in parity with the past 12 months' average rate, but well below the 10 years' average, which is about $27,700.

On the other front, the Cape suffered excessive demand for iron ore evidenced during the fourth quarter of 2011. The market has cooled off and currently is staying at significantly low levels, well below the past 12 months average and the 10 years average and in many cases even lower than the operating expenses. At this point we remind you that all our Capes are chartered out in long periods at comfortable levels.

The main reason for the current outlook of the market is the excess of lighter vessels, which is expected to increase in view of the big order book going forward in 2012 and to a lesser extent in 2015.

On slide seven we provide information about the order book. As of the end of the first quarter of 2012, an existing fleet of four Panamaxes was 161 million deadweight tonnage. The order book is reported to be 37 million for the remaining of 2012 and substantially smaller, 17 million for 2013 and 5 million for 2014.

We observed a similar situation for Capes. The existing fleet was about 261 million deadweight tons as of the end of last quarter. The order book is reported to be about 46 million tons for the remaining of 2012, 17 million for 2013 and 5 million for 2014.

On the other hand, oversupply might be eased by the slippage on deliveries, which according to market analysts was 30% for 2010 and 2011, and is expected to exceed 20% for 2012.

Further to this, accelerated scrapping activity for eight vessels in a low freight rates and high scrap values environment will contribute in lowering the net fleet increase.

We present on the right two graphs, the one showing the age distribution and the other the scrapping activity. 14% of the total drybulk fleet is over 21-years-old and could be possibly eliminated from the total fleet in the years to come. During the first quarter of 2012, the scrapping activity has risen 6.8 million tons, which is in annualized terms is expected to exceed the record scrapping volume of 23.8 million of 2011.

On slide eight, we present a graph with the actual GDP growth, which is living together for expansion of the BRIC countries -- Brazil, Russia, India and China. BRIC countries have the biggest market share in terms of the transportation of dry bulk commodities and are driving forces for the drybulk shipping industry.

We can see that GDP growth has been strong over the years and is expected to be sustainable, according to IMF's measures. At the moment, China, India and Asia and Africa are going in very satisfactory rates, having a huge capacity in order to adjust to the global threat of industrialization and urbanization.

Increased demand for drybulk cargoes is expected as shown on the bottom graph. We think that thus we will move ahead, demand for drybulk commodities will gradually balance the excess supply of vessels, resulting to jumping market improvement in the coming periods and years. Our Company is well positioned with an order book of nine vessels with deliveries until 2014.

Moving on to slide nine, through these years in the shipping market, we have adopted seven policies and strategies. We have been very carefully managing our assets, trying to invest in lower parts of the business cycle and new buildings expanding and renewing our fleet with modern, fuel-efficient, shallow-drafted vessels. We have a consistent chartering policy employing our vessels both in period and spot charter markets, always seeking to conduct business with established reputable customers, maximizing our profits, minimizing our counterparty risk and maintaining future cash flow visibility.

We have been consistent with our operations policy to maintain a young, modern, flexible and fuel-efficient fleet, resulting in low daily operating expenses and higher utilization ratio. We have focused on our financing policy, resulting in a strong balance sheet and liquidity, ensuring financial flexibility, possibility to invest in the lower part of the cycle and comfortable debt in compliance with financial covenants.

Our dividend policy is prudent by paying out a portion of our free cash flows to reward our investors while maintaining the remaining portion for future expansion.

In slide 10, we show good expansion, which, by the year 2014, is expected to reach 29 vessels. We invest mainly in newbuild sister vessels, which are fuel efficient and can carry more cargo in the same draft, plus seeking to be ahead of our competition.

Going to next slide, number 11, as of May 4, 2012, the charter carriage for our fleet, including an existing fleet of newbuilds, was 81% of anticipated ownership days for 2012, 59% of the anticipated ownership days in 2013, and 33% of anticipated ownership days in 2014.

We seek to employ our vessels in period time charters in order to have visibility of our future cash flows, while we maintain certain vessels in the spot market to have the flexibility that the spot market offers in low charter periods and the upside potential when the market improves. Over the years, we have long-term relations with some of the world's largest consumers of marine drybulk transportation services and [client] companies in the shipping industry, some of which are presented on slide 12.

On slide 13, we evaluate the performance of our chartering policy against the spot market, which we are at the foremost of the times.

In slide 14 we show our daily OpEx and management fees. Compared to industry average reported at about $8,000 (see slide 14), we (inaudible) operations contributing an increasing Safe Bulkers net income.

On slide 15, at the bottom graph, we present the net debt per vessel, which currently is in the order of $16 million per existing vessel. We maintained low interest expense as presented on the top graph where we allocate our debt at margin level. Our intention is to finance our new building program from equity and debt, while we maintain a comfortable debt to asset and comply with our financial covenants.

In slide 16 we show our liquidity and our ability to finance our capital expenditures requirements. As of May 4, 2012, our liquidity was $244.1 million, while our capital expenditure requirements were $236.8 million. The analysis of CapEx per year and our liquidity per component is presented in this figure.

We have also included our operational cash flows, which is supported by our contracted period time charters. We also have the ability to raise additional indebtedness against seven debt-free newbuild vessels upon their delivery, providing us with further financial flexibility.

In slide 17, it presents historically our quarterly earnings per share and our quarterly dividends. Our Board has declared the 16th consecutive dividend since our IPO in the amount of $0.15 per share payable on 31st of May. We intend to pay out a portion of our free cash flows to reward our shareholders, while we maintain another portion to finance our future expansion as per our policy presented on the left.

Now our Chief Financial Officer, Konstantinos Adamopoulos, will present you in detail our financial results.

Thank you and good morning to all.

Slide 18 illustrates a comparison of selected three-month financial key points of our performance for the quarter ended 31st March, 2012 and the respective figures of last year.

For the quarter of 2012, net revenues increased by 4% to $44.1 million from $42.3 million in the respective period of last year. Net income for the quarter of 2012 was $21.6 million, a decrease of 21% from net income of $27.3 million in the same period last year, whereas adjusted net income for the same quarter of 2012 was $22.9 million as opposed to $27.4 million during the same period in 2011.

The decrease in net income is mainly attributed to the following factors. Net revenue of $44.1 million compared to $42.3 million. Vessel running expenses of $8.1 million compared to $5.7 million. Loss on derivatives of $1.2 million compared to almost zero for the same period in 2011. Bulkhead expenses of $1.3 million compared to $100,000 last year. Depreciation of $7.3 million compared to $5.6 million for the relevant quarters in 2012 and 2011 respectively.

EBITDA was $30.7 million for the first quarter of 2012, a decrease of 11% from $34.4 million in the respective period in 2011. Adjusted EBITDA was $31.9 million for the first quarter of 2012, a decrease 7% from $34.5 million in the same period of 2011. Earnings per share and adjusted earnings per share for the first quarter of 2012 were $0.30 and $0.32 respectively, calculated on a weighted average number of 71.9 million shares compared to $0.41 and $0.42 respectively in the first quarter of 2011, calculated on a weighted average number of 65.9 million shares.

For the definition and reconciliation of EBITDA and adjusted net income, EPS and EBITDA, please refer to slide number 21.

Slide 19 presents a summary of our key financial figures during the first quarter of 2012 when compared with the same period in 2011. Our net revenue increased by 4% to $44.1 million from $42.3 million. Our adjusted net income for the first quarter of 2012 decreased by 16% to $22.9 million from $27.4 million during the same period of last year. Our adjusted EBITDA for the first quarter of 2012 decreased by 7% to $31.9 million from $34.5 million during the same period in 2011. Adjusted earnings-per-share for the first quarter of 2012 of $0.32 compared to $0.42 in the first quarter of 2011 calculated respectively on a weighted average number of shares of 71.1 million and 65.9 million.

In the second table at the bottom of slide 19, we see that the total debt as of 31 March, 2012, decreased by 2%, amounting to $474 million as compared to $484.3 million as of December of last year.

The result of our financial performance is clearly demonstrated by the Company's consistency in its dividend policy, maintaining a prudent and meaningful dividend policy throughout the last crisis in contrast to the vast majority of their industry peers.

Moving on slide 20, we present the operating highlights for the first quarter of 2012 and 2011. As of 31 March, 2012, we own and operated 20 vessels, and we achieved the utilization rate of 99.8% compared to 16 vessels and the 100% utilization rate during the same period of 2011. The average daily time charter equivalent per vessel for 2012 was $24,890 compared to $29,322 for the same period of last year.

For the first quarter of 2012, daily running expenses increased by 18% to $4713 compared to $3989 in the same period of last year.

On slide 21 we presented a reconciliation of our adjusted net income, earnings per share and EBITDA from net income.

Turning to slide 22, the Company has declared for the first quarter of 2012 adjusted dividend of $0.15 per common share payable on or about May 31, 2012, to shareholders of record at the close of business on 23rd of May. This is the 16th consecutive quarterly cash dividend since our Company's IPO more than three years ago.

Summing up our presentation on slide 23, market conditions at the moment are challenging; however, we stand prepared as a long-term oriented company. Having been in shipping for more than 50 years, we know the industry, and we believe in this industry.

We actively monitor our order book of fleets. We intend to continue to opportunistically expand and renew our fleet by placing new building orders when we can negotiate attractive terms from shipyards for high-quality vessels. Our strategy has been to focus on ordering fuel-efficient and solid draft newbuild vessels that comply with the latest Maritime and environmental regulations and that are based on the most recent design developments. These units offer us competitive operational advantages, as well as lower running costs compared to single-hull vessels.

As a result of our track record and reputation in the industry, we believe that we have developed strong long-term relationships with key shipyards in Japan and China. Active management of our order book and fleets may at times lead us to opportunistically terminate or delay contracts that require vessels or to sell the vessels when we believe that they are financial or operational advantages in doing so, which allow us to relocate resources more productively.

Our liquidity and strong balance sheet provides us with financial flexibility. At the same time, we follow a prudent dividend policy for the long-term benefit of all our stockholders in our Company. Our proactive part of the Company is fully aligned with public shareholders implementing and optimizing for this advantage.

Our (inaudible) can be in slide 24. Thank you all for listening, and we are now ready to accept questions.

(Operator Instructions). Gregory Lewis, Credit Suisse.

When you touched on the uptick in the Panamax and Supermax rates at the beginning of your presentation, can you provide a little bit more color in what is driving that? In terms of, are we starting to see some bifurcation in the market where vessels are being evaluated against each other in terms of which vessels can generate better economics in terms of the consumption and speed? Is that something that is happening right now?

Could you please repeat the first part of your question?

In other words, are we seeing a bifurcation in the market where newer vessels are being evaluated against older vessels in terms of consumption and speed, and that is sort of what is driving the Baltic index rates higher?

So I take over from Loukas this question as he is on more the day to day commercial stuff.

What is happening at the moment, I think that all ships, they have a very tough time to get fixed. That is why we see the record scrapping going on.

I mean charterers they calculate every dollar, every cent. They are not happy to fix sometimes they are asking you even on your own ship, an existing ship, modern ship, to try and improve the existing consumption by some magic way by doing some house cleaning and things like that to improve, let's say, the daily consumption by one ton. So when they negotiate even on modern ships things like that, imagine how obsolete the older fleet is becoming. So, indeed, there is a lot of comparison between ships. Even between modern ships, there is a lot of differences.

Okay, great. And then I had a question on the portfolio of the charters. It looked like three vessels -- the Trader, the Marina and the Eleni -- if we were to match up their charter rate as reported in this press release versus the previous press release, it looks like those all sort of trended up. Was that a timing issue? What was the reason for that?

The reason is that normally in the past we have provided information for actual days that we receive. In this table we provide information for charters that we recognized, which probably helps you better to come closer to our results or to predict better our results.

So previously and also in our annual report, you could see that we have reported in detail year by year for each period what was the exact rate. For charter rates that have, let's say, steadied over time, there is no difference. But, for certain vessels that have, let's say, valuable charter rates, you may see differences, and the important figure here is the figure that is recognized in our books.

The average, so, in other words, in the peak of the market back in 2007/2008, most of the charters were five-year charters. We were fixing them at decreasing charter rates, so we were putting a charter rate at $40,000 a day. We were putting $60,000, $50,000, $40,000, $30,000, $20,000. So in decreasing order, so we can have the safety and the money in the account earlier. So this $60,000, $50,000, $40,000, $30,000, $20,000 in the books was always appearing as $40,000 throughout, let's say, for example. That is why now there is reason to put it the average rate of that period.

Okay. Great. And then just one final question. Following the equity raise, I mean your cash position went up -- it should have gone up somewhat each quarter. When we think about the deliveries that you took already this year, I'm just trying to tie up cash. When we think about the delivery of the, what, the Efrossini and the Horizon, where those vessels primarily paid in cash? I mean just as I look at those vessels, as I look at your balance sheet, I look at your debt position, was that how we should think about it where those vessels were primarily paid with in cash?

Exactly. Yes, they were paid in cash, and the finance was not raised in this first quarter. They were delivered in February, both they were paid in cash in their final installments, and their finance was not drawn in that quarter.

It would be drawn in the second quarter or in the third quarter or something like this.

And is that just a timing issue where you did not want to have to pay -- just given the spread between what you would be paying on your debt and what you would be earning on your cash?

Yes, exactly. We don't need to incur the expenses. Early on so the deliveries much more run smooth and straight forward with the ship yards, one signal we don't involve (multiple speakers)

We have been doing this in almost all of our (multiple speakers)

Every time we do the same. I mean you don't involve lawyers, international papers, if there were expenses, etc., etc. I mean over historically over 32, 31 vessels delivered to the Company over the years, I think 95% of those have been on a cash basis.

Christian Wetherbee, Citi. Everybody please stand by, and the conference will resume very shortly. We will just go back to the Q&A queue now. Christian Wetherbee, Citigroup.

If I could just start off, it looks like you secured a two-year charter for one of your new build Kamsarmaxes recently. I'm just wondering, as we go forward for the seven or so vessels that are coming off charter this year, I guess do you feel that rates are at a level that justifies going out to that two-year range right now, or are you more prone to seeing how the market trends into the fall before you start to charter out on a more longer duration?

Yes, I think current levels do not justify going for two years. I think you refer on the picture that Kamsarmax to be delivered now in the next few days. This was done last October. There was a bit of a window there. There was a window of opportunity. The rate went up to $15,250. Currently it is around $11,000, the two-year rate. We are not going to have to accept $11,000 or $12,000. We want to see higher rates.

Maybe in the fourth quarter, we should start seeing again these rates for one- or two-year pictures. We will judge at that time if it is worth booking these rates because we are feeling that next year the market will be a lot better than what it is this year.

Okay. Fair enough.

So we will not rush to fix ships that operate in the end of the year.

Okay. Is it fair to say then once that period market becomes attractive to you,is that the point where we could see you maybe become a bit more acquisitive?

Look, the idea of the offering and all these things was to be fully flexible to invest in the low cycle, in low point of the cycle. In the lowest point of the cycle, I was always referring to it that it would be the next six to 18 months. Before now, I call it the next 12 months. So any time from now up to 12 months is the right time to invest.

So the Company is looking to invest and to expand in the low point because that is what will give long-term profitability to the Company. If you invest in ship assets, you will always make money. You won't make money maybe year one immediately, but over five or 10 years, you will make a very big return.

Fotis Giannakoulis, Morgan Stanley.

I would like to ask about the current state of the market. You mentioned that the rates they have reached the 12-month average, and we have seen the Panamaxes going up to $12,000. How much of this movement is purely because of the grain season, and do you see any activity in other commodities? Has there been any pickup in coal or iron ore compared to the previous quarter?

The market moved, let's say, from the low level of February of $6000 a day on the spot market to around $12,000 as it is today. It is, indeed, the South America season started the grain exports from South America, which is seasonal. It started a bit late. It started in April instead of March, but also we are seeing a decent move of coal. We see that there is demand from China for coal, and our expectation is that it will be increasing. A), because we have the price of coal dropping by 20% in the last six months, and we see a lot of export of coal from US East Coast to China, which is increasing also the ton miles. And I believe that there will be big demand over the next months also over the summer for movement of coal into China. So we are a little bit more optimistic for the latter part of this year.

I understand that this is the (inaudible) on the Panamax side. And although you do not have any available vessels on the Capesize segment, do you see -- how do you see the demand from Europe for iron ore if you have seen any slowdown the last quarter, and what could be the risk potential for further deterioration of the European economy, meaning for the iron ore market and Capesize rates?

Yes. Iron ore, as you said, our Capes are fixed long-term, so we don't have Capes on the spot market. I think it will improve. I think the market on the Capes will improve because price of iron ore has come down, and it is at levels that the Chinese will be buying iron ore. I think that we have seen some more and encouraging signs from the steel mills in China that they start producing more in the last few weeks, a lot more steel production in the last two weeks.

We expect also the Bank of China, the Chinese government to reduce their reserve ratio, which is going to help construction and infrastructure or development. So I think that we have seen the laws of the Capesize, and it can go really only one way. I don't think that there will be dramatic changes in the second half of this year, but easily the Capesize could reach $20,000 by the end of this year in the spot market. So it happened also last year, we saw it better in the second half in the last fourth quarter than we have in the previous half of 2011. So I'm optimistic.

Now Europe, I mean you know we are not optimistic about what is happening in Europe. On the other hand, the lack of demand from Europe will push commodity prices further down, especially in coal, and this will get the ton miles.

Okay. Thank you. And my last question has to do about the debt financing conditions and how do you evaluate the availability of debt in the market? And if you see banks facing problems with their portfolios, that could further push asset values even lower?

Yes. I think asset values depend firstly on the freight market and then on world banks too. So if the freight market has hit the bottom and is bound to show some signs of recovery, I expect prices to stop falling. I think they have reached an equilibrium. I don't see them going further down.

Of course, the banks they have problems because there are a lot of ships financed in the peak years. And, as you know, banks usually they are keen to lend money when the assets are expensive, and they are afraid to lend money when the assets are cheap. So they have done the same mistake, and indeed, they have some problems with the assets that the market value is below what is the current debt.

So they will continue to have issues this year, the banks. But I think that the asset prices really depend on what the freight markets do. So if we see freight market more encouraging in the second half of this year, not a big increase, but a small encouragement will help stabilize, and second-half prices will not go much lower.

On the other hand, new building prices will go a little bit lower because there is time lag between the time second-half prices stop dropping and the time shipyard prices stop dropping. And I expect shipyard prices to keep dropping for another 12 months at least.

Can you remind us what are the terms that one can achieve for a new building contract in terms of payment installments?

Look, I think that you can get in a major Japanese shipyard now [$10, $10.70] quite easily, so it has very soft terms.

In China, you just name it. I mean you call it. You pay 5% and 5% later, and some is traded in the end and things like that. There are various things the yards are trying to induce owners toward them. But because of a lack of finance, low freight rates, a lot of deliveries still to materialize from the last cycle, etc., the owners are not keen to rush. That is why I see that there is another 10%, 15% on new building prices to come lower.

Ryan Adkerson, IBERIA Capital Partners.

Could you help us out with some cash flow items? Specifically what were your capital spending payments during the quarter? As it relates to cash balances, could you reconcile your press release statement that cash boxes totaled $59 million while the quarter-end balance sheet showed about $18.5 million?

The things that we don't normally disclose, the payment in the quarter, the capital expenditure per quarter, and you know, the cash flow, to pay the cash flow at the end of the quarter until the 4th of May includes -- it is a -- this is influenced by higher payments, by loan drawings and repayments.

Thank you. That is helpful. And, as a follow-on, your press release stated you have liquidity of $180 million, but that seems not to include your cash position. Would it be more accurate to say your liquidity is closer to $240 million?

Yes, this is slide 16. Go to slide 16, you will say that the total liquidity piece is $244 million. This is without taking into account cash flows from now on, from operations, and without taking into account any debt that could be raised on the seven debt-free new buildings. So seven debt-free new buildings could be, let's say, very conservatively -- that could raise another $100 million quite easily by just doing 50% finance, so $100 million is there. And whatever is the surplus from operations, which is also quite an important number, which we do not include there.

So the whole CapEx remaining for the nine vessels is already available as we stand at the moment. So the extra debt on the seven debt-free new buildings and the operational cash flow is over and above this number for further activities.

Ken Hoexter, Merrill Lynch.

I'm sorry. I might have missed this in the beginning of the call. I got on a couple of minutes late. But what do you see as the appetite right now for some of the -- renewing some of these longer-term charterers?

It makes no sense. It makes no sense even if they show appetite. The charters make no sense because the rates are so low for long-term fixing. It is like giving them a big present. I mean we are not interested to -- I mean the maximum we will fix now is something like three to five months or something like this, short periods. We cannot go and fix $10,000 or $11,000 or $12,000 five-year charter. It does not make sense.

So even if (multiple speakers) they don't really show appetite as well because the contracts they are securing does not pay them to pay -- to fix a ship for long-term. But also not only for the honor, it does not make sense to go and book something now for long-term.

So we stick with our policy. Our open ships will be fixed on the spot market and around whatever the market was, $12,000, $15,000 or whatever, and keep them open when the opportunity arises to do better.

Can you update me on what you were hinting on before as to the demand? I think you were talking in terms of coal before. Can you update what you see in terms of iron ore on the global market as well?

Well, to be honest with you, our ships they carry very, very seldom the iron ore because it is carried on the Capesize. We only have two Capesizes in the water. They are on long-term business, and even those are carrying (technical difficulty)-- those are carrying coal at the moment.

So I mean we are not the experts of the iron ore. But we are seeing lately reports from China, reporting that the Chinese steel mills are pushing a little bit their production of steel in the first 10 days of April, the day that came out 2 million, other 2 million tons a day of production, which is an increase from previous months. So this is some good sign that things are trying to improve. And I believe that the second half we will see better rates on Capesize bulk carriers. Not a huge difference, but not the stupid rates of the first quarter.

Thank you. At this point, gentlemen, there are no further questions. Please continue.

Okay. Thank you very much, and we are looking forward to post the next quarter of earnings (technical difficulty) conference call. Thank you very much to all.

Thank you, gentlemen. Thank you to all our speakers today. That does conclude your conference. Thank you for participating. You may now disconnect.