Star Bulk Carriers Corp. (SBLK) on Q3 2021 Results - Earnings Call Transcript
Operator: Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the Third Quarter 2021 and 9 month financial results. We have with us Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton, President, Mr. Nicos Rescos, Chief Operating Officer, Mr. Simos Spyrou, and Mr. Christos Begleris, Co-Chief Financial Officers of the Company. At this time, all participants are in a listen-only mode. There will be presentation followed by question-and-answer session. . I must advise you that this conference is being recorded today. We now pass the floor to one of your speakers today, Mr. Spyrou. Please go ahead, sir.
Simos Spyrou: Thank you, Operator. I'm Simos Spyrou, Co-Chief Financial Officer of Star Bulk Carriers and I would like to welcome you to our conference call regarding our financial results for the third quarter of 2021. Before we begin, I kindly ask you to take a moment to read the safe harbor statement on slide number 2 of our presentation. In today's presentation, we will go through our Q3 results, cost evolution during the quarter, a walk-through of our dividend policy, an overview of our Balance Sheet and operational and ESG update, and the latest industry fundamentals before opening up for questions. Let us now turn to Slide number 3 of the presentation for a summary of our third quarter 2021 highlights. The Company reported a record performance this quarter. Net Income for the third quarter amounted to $220.4 million and adjusted Net Income of $224.7 million or $2.20 earnings per share. Adjusted EBITDA was $277.8 million for the quarter. On the bottom of the page, you can see the evolution of our adjusted Net Income and adjusted EBITDA performance. For the third quarter, we declare a dividend per share of $1.25 payable on or about December 22nd, 2021. During Q3 2021, our Company prepaid in full the $50 million outstanding 8.3% senior notes, which were due in November 2022. In addition, as part of the authorized share buyback program, we repurchased 466,268 of our shares in open market transactions at an average price of $22.01 per share for aggregate consideration of $10.3 million. In November 2021, we had 75,000 tons for Q1 2022 of the VLSFO-HSFO spread at an average price of $134.8 per ton time. In November 2021, we released our third annual environmental, social, and governance report which records our ongoing effort to further strengthen the Company's environmental stewardship, social contribution, and corporate governance, and provides a transparent account of our ESG strategy and performance. On the top right of the page, you will see our daily figures per vessel for the quarter. Our TCE rate was $30,626 per vessel per day. Our combined daily OPEX and net cost G&A expenses per vessel per day amounted to $5,291 per day per vessel. Therefore, our TCE less OpEx and G&A is at $25,335 per day per vessel. Finally, for the fourth quarter of 2021, we have covered 71 % of our fleet available days at a daily rate of $38,250 per vessel. Slide number 4 graphically illustrates the changes in the Company's cost balance during the third quarter. We started the quarter with $242.8 million in costs and generated meaningful positive cash flow from operating activities of $251 million due to the strong trade market. After including debt process and repayments, our notes repayment, CapEx payments for ballast water installations as well as the second quarter dividend payments, we arrived at a cost balance of $371.7 million at the end of the third quarter. Slide 5 has a walk-through of our dividend policy with an example for the dividend calculation for third quarter 2021. As of September 30th, 2021, we owned 128 vessels and our total cash balance was at 30 -- $371.7 million with a minimum cash balance per vessel as of September 30th of $1.9 million. On November 16th, 2021 pursuant to our dividend policy, our Board of Directors declared a quarterly dividend of $1.25 per share payable on or about December 22nd, 2021 to all shareholders of record as of December 10th, and the X dividend date is expected to be on December 9th, 2021. Please turn now to slide number 6, where we highlight the continued strength of our Balance Sheet. Our total cost today stands at $531.7 million, including $30 million revolving facility, which is currently undrawn. Meanwhile, our total debt stands at approximately $1.6 billion. Our working capital stands at approximately $80 million. We have completed 4 financings, which will raise $400 million in senior debt and result in interest savings of about $5 million per annum. Our annual amortization is $207 million per annum and our proforma average margin, approximately 2.4%. Finally, by the end of the year, we will have 511 vessels and no debt maturities until the third quarter of 2023. In Slide number 7, we demonstrate the inherent operating leverage and cash flow potential of the Company and the illustrated free cash flow per share, as well as the potential cash flow yield. For an example, with approximately 46,700 fleet available days per year, based on the current 2022 FFA curve, Star Bulk will produce $3.8 million of free cash flow and yield of approximately 20 %. I will now pass the floor to our COO Nicos Rescos for an update on our operational performance.
Nicos Rescos: Thank you, Simos. Please turn to Slide 8. We will provide our operational update. Operating expenses, excluding non-recurring expenses was $4,288 per day per vessel for the 9 months ending in 2021. Net cash G&A expenses were $1,053 per vessel per day for the same period. Despite continuing operational and related restrictions which have a direct impact on operating expenses to combination or in-cost management and a scale of the group, enable us to maintain very comprehensive costs, to being the lowest of our later most profitable income amongst our peers, and continue to rate at number 1, . Slide number 9 provides a fleet snapshot in some guidance around our future dry dock and ballast water system installation expenses for the next 15 months. And their endless total for 5 days. . Star Bulk operates one of the largest driver of fleets with 128 vessels geared towards larger sizes. Our expected driver expense for the next 15 months is estimated at $32.9 million. The drive total of 31 vessels is $26.3 million towards the ballast water installations CapEx. In total, we expect over approximately 150 for the fourth 50 months periods. We anticipate 97 % pf our fleet would be fitted with ballast water systems by the end of 2022. The above numbers are based on current estimates around wider collective planning, vessel employment, and yard capacity. These figures incorporate our current understanding of present and future shipyard congestion. On the fuel spreads have recently been increasing due to an upward momentum on fuel prices, a pickup in jet fuel demand, and increased . With an estimated annual rate of consumption of 800,000 across the southern fleet, we expect covering 'cause covering vessel by the end of Q2 credit 2022. Given a 94 % of our vessels are fitted with scrubbers are continuing to increasing high-five spread have a significant value generation for our . I will now ask our Chief Strategy Officer, Charis Plakantonaki to provide an update on the latest energy development.
Charis Plakantonaki: Thank you, Nicos. Please turn to Slide 10, where we provide an update on Star Bulk ESG activities. The third annual Star Bulk environmental, social, and governance report has been published and is available on the Company's website. The report has been developed following rigorous global reporting standards, the disclosures of which have been assured by EY's Climate Change and Sustainability Services. During June 3, 2021, Star Bulk joined the Maritime Anti-corruption Network, a global business network with more than 160 companies, which works with governments, NGOs, and civil society to eliminate maritime corruption. On the decarbonization zone, we have participated actively and sponsored the Next Wave: Green Corridors report presented at COP26 last week, a multi-stakeholder process which analyzed the feasibilities of specific trade routes between major point hubs where 0 emission solutions could be demonstrated. We have participated in the development of the Poseidon Principles for Marine Insurance, an initiative by the Global Maritime Forum, which serve as a framework to better align Hull & Machinery portfolios with responsible environmental impacts. Star Bulk has become a signatory to the Call to Action for Shipping Decarbonization, an initiative by the Getting to Zero Coalition which publicly calls on government and international regulators to take action in support of shipping decarbonization. Within the scope of the call, Star Bulk has made specific climate commitments on greenhouse gas transparency, on international collaboration, and on pilot and demonstration R&D projects on green energy. I will now pass the floor to our CEO Petros Pappas for the market update and his closing remarks.
Petros Pappas: Thank you, Charis. Please turn to Slide 11 for a brief update of supply. During the first 10 months of 2021, a total of 32.9 million dead weight was delivered and 4.9 million dead weight was sent to demolition for a net fleet growth of 28 million dead weight or 3.1% since the beginning of the year.
Operator: Pleased be advised we have switched to the backup.
Petros Pappas: Despite the 31.4 million dead weight more orders reported year-to-date compared to 15.8 million dead weight of over the corresponding period of 2020, the order book still stands at the historical low level of 6.8% of the fleet, including options that have been declared. The strong increase in containers imported during the last year has filled up CPR capacity until the end of 2023. Uncertainty on future propulsion as a result of upcoming environmental regulations combined with increased shipbuilding costs has helped to keep new orders under relative control. Furthermore, the surge of global steel prices has pushed scrap prices to record levels and may make demolitions of average and attractive option during seasonal downturns. Average steaming speeds of the dry bulk fleet currently stands at 11.9 knots. And despite the improved crate rate environment, it has only increased by 2 and 1/2 year-over-year. Quarantines related to COVID-19 pushed port congestion to record levels during the third quarter, and health rates to hit 14 year high. Congestion at Pacific ports has corrected during the last month, but still remains at inflated levels, and combined with political tensions between and China and Australia played strong inefficiencies for trade with a positive effect on vessel utilization. As a result of the above trends, net fleet growth is projected to end up at approximately 1.5% during 2021, an average out at 2 % per annum during 2022 and 2023. Let's now turn to Slide 12 for a brief update of demand. According to Clarksons, total dry bulk trade during 2021 is projected to expand by 4.8 percentage ton-miles. During the first three quarters of the year, dry bulk volumes have experienced a strong recovery following the synchronized global economic stimulus and the gradual reopening of economy supported by vaccination programs against COVID-19. Record high commodity prices during 2021 have provided a strong incentive to major producers of dry bulk cargos, expand output, and exports during 2022. Having said that, China has experienced a strong slowdown during the third quarter of 2021 in response to high energy and raw material costs and strict lending requirements affecting the real estate market. We're still at the early stages of the global recovery from COVID 19 with the IMF projecting global GDP growth of 4.9% in 2022. According to Clarksons, dry bulk trade is projected to expand 2.4% during 2022, while increased Atlantic exports and political tensions between China, Australia, I expect to support ton-mile growth and vessel requirements over the next years. Iron ore trade is expected to expand by 2.2% during 2021 and 1.5% in 2022. During the first half of 2021, China steel production expanded by 11.5% but since July, the government imposed strict production curbs resulting in 13.2% year-on-year decline during the third quarter. The Chinese restrictions should help ease energy shortages and are expected to last until the end of the Winter Olympics. On the other hand, steel makers from the rest of the world have increased production by 16.6% year-to-date and are still unable to meet regional demand. Brazil iron ore exports are slowly recovering from the 2019 disaster and have increased by 7 % year-on-year. Coal trade is expected to expand by 7.8% during 2021 and 2 % in 2022. During the first three quarters of 2021, China and India thermal electricity output increased at a higher pace than domestic coal production, and the combination created a shortage of supply that pushed stocks lower and prices to record high during the third quarter. And India have increased domestic production during the last month in an effort to increase stocks ahead of this winter. Nevertheless, due to the La Nina phenomenon, a colder than average winter is expected to boost power demand from households and to affect domestic production of coal. Moreover, the Chinese ban on Australia n coal exports, power utilities, and steel make us to diversify and seek cargoes -- coal cargoes from longer distance sources such as South Africa, Colombia, the U.S., and Canada, but also increase imports from Indonesia that experience long delays due to quarantine measures. Grain price is expected to expand by 2.9% during 2021, and 3 % in 2022. China's demand for grain is projected to remain strong due to the five-year plan focusing on food security. U.S. corn exports have experienced a record high season while sales for the current marketing year stand at elevated levels. The U.S. soybean export season started with delays, but is catching up and it's projected to remain strong over the next month in the wake of the Phase 1 trade deal. Looking to the next marketing year, Brazil coarse grain and soybean exports are projected to experience record high shipments and generate significant miles for smaller sized vessels. Minor bulk trade is expected to expand by 6.4% during '21 -- 2021 and 3.1% in 2022. Minor bulk trade is the strongest correlation to globe road to GDP growth and smaller geared vessels will continue to benefit significantly from the synchronized consumption recovery. Shortages of steel products and forces of price arbitrage continue to incentivize Pacific exports to the Atlantic while the container sector strength has had the positive spillover effect for dry bulk. Moreover, West African bauxite exports are projected to generate strong ton-miles for Capesize vessels during the next years. Finally, our outlook for the market during 2022 and 2023 remains positive. The very low order book combined with the lack of yard space, uncertainty on future vessel propulsion, and increased inefficiencies create a favorable supply side picture for our industry and support our optimistic view on the future prospects of the dry bulk margins. Back to you, Operator.
Operator: Thank you. . Your first question today comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.
Ben Nolan: Hi. Thanks. Let's see where to start. First of all, I guess just the easy one, could you maybe -- is it possible to break down the 71 % of days fixed by segment at all?
Petros Pappas: Hi, Ben. We have covered 62 and 1/2 % of our Cape start at 46,600, 74 % of our Panamax at 35,100, and 77 % of our Supramax at 35,000.
Ben Nolan: Perfect.
Petros Pappas: 250.
Ben Nolan: And my next question is related to just a few things that were a little different than I expected. First of all, the dry docking days for the fourth quarter were a little different than I expected. First of all, the dry docking days for the fourth quarter were a lot higher than they looked like that they were in the -- projected to be in the -- when you reported last quarter. I was curious where that stands and also the G&A was a little bit high too and then in the release you called out stock-based comp, but how should we think what's the right run rate for G&A going forward?
Simos Spyrou: Ben, hi. This is Simos. The increase of the cost G&A expenses for the third quarter versus the third quarter of 2020 was entirely due to the Euro USD effect. So basically on an absolute number, we should expect that basically the change and the strengthening of the dollar in the fourth quarter is going to assist. But you have to subtract basically the non-cash item, which flows from the third quarter, the share-based compensation which is non-recurring. On the dry dock days, I will pass it to Nicos.
Nicos Rescos: Hi, Ben. For Q3, 5 out of the 6 dry docks we carried out also involve ballast water installations, which take a bit longer and, of course, we have the additional costs. So that's why you see the difference in the days costs.
Ben Nolan: So those were push back from the third quarter or something, is that what happened?
Nicos Rescos: These other ones that took place during the third quarter.
Ben Nolan: Well, it was -- in the last release, you had said that you expected 46 days in the fourth quarter and now it's 194.
Nicos Rescos: Well, that's -- basically, we have 6 ships in Q4. We have also the ballast water installations. So that's why you see more days than previously expected that were supposed to happen earlier in the year.
Ben Nolan: And then last for me and I'll turn it over, is seeing a little noise about you guys putting vessels on -- handful of vessels on time charter, just curious where that stands in terms of how much maybe of the fleet is contracted for next year as well and how you're thinking about the combination of spot versus contract?
Simos Spyrou: Well, our coverage for Q1 basically is around 17 %. Basically we have big Cape worth, 9 Panamax worth, and 9 Supramax worth coverage for Q1 at just below $32,000.
Ben Nolan: Wow, that's pretty good. Nice work on that. I appreciate the color. Thanks all.
Simos Spyrou: Thank you, Ben.
Operator: Thank you. And your next question comes from the line of Amit Mehrotra from Deutsche Bank. Please go head, your line is open.
Amit Mehrotra: Thanks, Operator. Hi, everyone. Hopefully you can hear me. I wanted to -- I had a couple of questions. First, maybe just a market-related question. We've obviously seen a pretty significant step down in spot rates. I think, Petros, you mentioned that congestion. I was wondering if you'd give us a little bit of an overview of what you're seeing on end market demand growth in China. Obviously there are some emission mandates, there's the Olympics coming up. What are you seeing in terms of risk associated with demand there? And then also just talk about how the psychology of the market is changing whether those are charterers perspective. Because clearly it were very hot market earlier this year, things have cooled down. I wonder if there's any psychological impact that may be driving it or could drive it even further if you could talk about that as well.
Simos Spyrou: Thank you, Amit. It may take me a little bit longer to answer your question. First of all, the market is down for three reasons. These are China, China, and China.
Petros Pappas: And to explain further than that, we had a strong steel making reduction to the tune of 20 % almost in the last couple of months, which is obviously negative for imports and, of course, it also affects congestion -- it reduces congestion. We saw China increase their local production because -- and capping prices so therefore less import. Actually, imported coal is more expensive than local coal. We saw -- before that, higher commodity prices basically led to a certain demand distraction at least in the short term. And China basically wanted clear skies for the Olympic games. So it's a combination of clear skies and reduction of commodity prices from China. That's what their goal was. But let me make a side here which I think is important. I was going through the imports of China earlier today and I realized that in 2022, China -- 2021 -- in the last -- in the 10 months of 2021, China actually imported 2 million tons less than last year. And you remember what we all used to say that if China sneezes, we will catch pneumonia -- the market will catch pneumonia, well, China sneezed and we didn't catch exactly pneumonia. So I think that happened because the rest of the world came up. And where -- when we're talking about 4 % increase in import in trade in 2021, actually, that's about 180 million tons of additional trade. All of it came from countries other than China. I consider this as extremely important and especially for the future. Now, talking about the future, we are very positive. Actually, we remain very positive. We think there's going to be a slow down during the Q1 for the reasons already explained. We think that the market will start moving after the Winter Olympics. We foresee very strong grain trade coming from Brazil and to a lesser degree from Argentina. We think that coal prospects are pretty good, especially from India. But China will also -- China having achieved their goal will probably turn to more imports. As I said before, international prices are cheaper. Iron ore -- China imported 38 million tons less of iron ore this year in total. We think that will change going forward and we think that most -- a lot of it is going to come from Brazil. So we expect more ton-miles, which is going to be positive -- very positive. Actually, ton-miles are more important than .
Amit Mehrotra: I'm sorry, go ahead, Petros, sorry.
Petros Pappas: Another couple of minutes. Then China -- we're positive about China. We think that after February, March, it will have to start a new easing cycle and will stimulate the economy and infrastructure. Let's also not forget supply -- supplies. In the next year we have 28 million tons of orders. If we have 8 million scrap, that's 2.2% increase in supply and 2023 worth $20 million those orders. If they is 6 million scrap, that's going to be 1 and 1/2 % supply. So the supply situation is very positive. We also believe that the strong Chinese currency is going to help imports and it will make freight cheaper for them. We think that inefficiencies will continue to exist. We don't think that China will change their COVID-19 rules for a long while. And finally, we also think that oil prices will remain strong and that will be this incentive towards increasing speed, not to mention environmental regulations that will kick in later on in time and they will help as well. So I try to make a general comment. Let me just say very quickly that -- on specific vessels. Within the Supras, we'll do very well next year as well because we think container market is going to be good and there will be an overflow of cargoes from the containers through the bulk side. And we also believe that there's going to be a strong minor bulk market. Well, the market -- final market side, we think grains are going to be very strong and don't -- never forget that grains are long distance cargo. And coal will be relatively strong as well as I previously stated. And Capes -- Capes, we see weak during Q1 but then we count on Brazil imports and West African bauxite imports to increase and we think that the market is going to improve after Q1. So I hope I didn't tire you, but I tried to --
Amit Mehrotra: No, that was very comprehensive and I apologize for interrupting prematurely earlier. If I could my follow-up question is less macro and more micro focused. Star Bulk has a breakeven of a little bit under $11,000 per day which means given that you guys are at your cash threshold levels, anything above even that level will translate into dividend. Year-to-date, you've had about 23,000 per day average time charter equivalent, which is not a wonderful number, its an okay number. It's a mid-cycle number and you still been able to payout over $2 per dividend -- per share in dividend for the first nine months of the year, which I think speaks to the micro aspect of the capital structure and the model. My question is after that fake preamble, my question is that, I assume you guys are just incredibly frustrated by the way the equity value of the Company has reacted to the se payments, which is something like 15% yield maybe annually.
Amit Mehrotra: which is really the outcome so far at least is not clearly the intended outcome of the strategy. And the question I have is that, how committed are you to this strategy in the context of how the market is taking you now? And keep in mind with that 10 years of a bad market so it might take more than 9 months of a good market to change people's minds, but talk about how patient you guys are because I can imagine the level of frustration is pretty high at the moment.
Petros Pappas: First of all, I will turn part of the question to Hamish but let me say that we don't get easily frustrated to
Petros Pappas: begin with. Let me also say the following. I was doing another calculation earlier today. I like math and I was looking at a pay rate and average day rates were around $17,500. And if you calculate that, everything in a thousands less
Petros Pappas: less than $11,000 cost that you mentioned, that would actually give us 15 % yield over next year and every $1,000 dollars above 11 would give us about 2.4% yield. Like if we made $12,000, it would 4. -- 2.4%. If we made $13,000 would be 4.8, etc. which I consider actually pretty good in view of our very low costs. But I will turn the rest to Hamish.
Hamish Norton: Amit, basically it gives us a warm and fuzzy feeling to distribute cash to needy shareholders around Christmas and our dividend policy remains in effect.
Amit Mehrotra: Yeah, but that's not really the answer to my question, Hamish. The question was really around, you have many options for distributing excess cash, you certainly have share buybacks, which I've been very much against, but there are a lot of other people that are not against that and certainly on paper it makes sense. There is vessel acquisitions which certainly don't makes sense with the equity for sure, but may make sense with cash. But just talk about at what point do you guys say that looking at this strategy it's not giving us the intended consequence or the intended outcome and so you pivot to something else. Are you close to that point? Do you want to give it another year? Where's your collective thinking on that?
Hamish Norton: We -- Amit, I have no other thoughts in our head at this point. We're not planning on buying ships in the near term. We are planning on finishing up the authorized number or amount of share buybacks probably financed by selling a couple of vessels as long as we can do that without too much disruption in the market, and we would hope to finish that up in the next quarter or so but we're continuing on this path.
Amit Mehrotra: Great. Very good. Thank you very, very much. Congrats on the results and hope you guys have a nice holiday. Thank you.
Petros Pappas: Thank you. You too.
Hamish Norton: Thank you very much.
Operator: Thank you. Your next question comes from the line of Randy Giveans from Jefferies. Please go ahead. Your line is open.
Randy Giveans: how is it going?
Petros Pappas: Great.
Simos Spyrou: Great, Randy.
Randy Giveans: Great to see the dividend obviously above expectation that $1.25 clearly making some steps with the accretive share purchases there. You answered the question a little bit there, Hamish, in terms of the remaining 40 million. So I guess glad to hear that's going to be finished here in the next few months. I guess just looking at the dividend, obviously, 4Q quarter-to-date rate guidance is very strong. You already have some bookings into the first quarter. So just sequentially from here, obviously, there's changes in working capital and others, but how should we think about the 4Q dividend compared to the $1.25 announced for 3Q?
Hamish Norton: Well, you -- as I've told you in the past, Randy, you're the securities analysts. We just run the shipping Company. We don't try to make forecasts about the future, especially not in public. I'm sure you will be pretty accurate.
Randy Giveans: Was just seeing if there's any nuance to changes to working capital or debt repayments that we need to factor in for the fourth quarter that maybe weren't there in the third quarter, but that's fine. I'll asked you offline for that. And then I guess looking into the first quarter for the hedge of the fuel, 75,000 metric tons, is the quarterly fuel burn about 250,000 tons still or how meaningful is that hedge for the first quarter?
Christos Begleris: This is Christos. Hi, Randy. Essentially, we have around 200,000 tons approximately per quarter, and we have hedged 75,000 so 38 %. If we see the spread jumping, it's not unreasonable to assume that we may increase the edge. But so far the hedge has proven to be .
Randy Giveans: And then just following up on that, what does that translate to on a Capesize, for example, in a dollar per day?
Christos Begleris: Can you repeat the question?
Randy Giveans: What are the $30 a ton spread, what is the savings or premium however -- whatever term you want to use for Capesize?
Christos Begleris: Well, a Capesize vessel has levels of around 135. It's approximately at $350,000 per day, the savings that we will generate 3 and 1/2 to $4,000 a day.
Randy Giveans: Perfect. That's what we're having as well. That's it for me. Thanks, fellas.
Christos Begleris: Thank you, Randy.
Operator: Thank you. Your next question comes from the line of Omar Nokta from Clarksons Security. Please go ahead. Your line is open.
Omar Nokta: Hi, guys. Good afternoon. You've exhausted pretty much most of the questions I had, but I did want to ask the same issue you brought it up. The way you are viewing the second hand market today in terms of valuations, this is probably, I would say perhaps a good test to gauge the overall resilience of vessel values since they've shot up so much this year with all the volatility we're seeing in the spot market now. Just wanted to ask how you, from your perspective, are seeing the secondhand market shaping up here? Has there being any indication that values are softening as a result of what we're seeing or things still fairly firm?
Petros Pappas: Hi, Omar. It's Petros. We think that second hand values have gone down by about 10 %, perhaps. That's our estimate at this point in time.
Omar Nokta: Thank you. And that would be I guess, Petros, for typical 5 to 10 year old secondhand ships.
Petros Pappas: Yes.
Omar Nokta: And then I know it's probably sensitive to an extent, but in terms of, as you said, financing the buyback with some vessel sales, is any particular part of the fleet you would look to monetize in this environment today?,
Hamish Norton: I think we'll basically look at what we get good value for, what's easy to sell without disturbing the market. I think it will change from day to day and we'll be very careful about it.
Omar Nokta: Got it. Thanks so much.
Petros Pappas: We would market down. That's what Hamish means, I think.
Hamish Norton: Yeah.
Omar Nokta: I understand. Well, thank you, and thanks, Petros.
Hamish Norton: Thank you, Omar.
Operator: Thank you. Your next question comes from the line of Mark Murphy from H.C. Wainwright. Please go ahead. Your line is open.
Mark Murphy: Thank you. Good afternoon. Just one question to follow-up on bookings for first quarter. I know you were talking a few months ago about securing more days for the first half as there were some uncertainty there with China slowing down. With rates -- with booking very attractive rates for 17 % of the fleet, do you -- would you book at a lower rate as well or do you think you'll stay spot for the rest of this weakness?
Christos Begleris: First of all, we actually didn't expect the market to go down that fast to be honest, between mid-October because this is hedging we did 2, 3 weeks ago. It was up 2, 3 weeks ago. We didn't expect to go down that quickly. We are expecting a rebound somewhere in the next 2 weeks or so. If that happens, then we will increase our coverage for Q1.
Mark Murphy: I like your example there of 15 % yield at -- current at the day rates. Is that something that you guys are thinking about just to provide some visibility of the dividend?
Christos Begleris: Mark, I'm not sure I completely understood the question.
Mark Murphy: Not I just -- there's a lot of talks about sustainability and visibility of dividend. Would you consider booking more ships at these lower rates since the returns would be very attractive, or would you just stay spot?
Christos Begleris: Well, actually we're positive about next year. It is only Q1 and mainly on Capes that we are -- we think it's going to be slower. So if we fixed, we would fix for Q1 mostly and that's it.
Mark Murphy: No, that's great. I'd like your chartering strategy so keep it up. Thank you
Christos Begleris: Thank you, Mark Murphy.
Operator: Thank you. I will now hand the call back for closing remarks.
Petros Pappas: Thank you, Operator. Just two quick reminders. The 15 % yield at present day at the low market and that this market that we've seen during 2021 has been without China being in the picture. And that in our view means that once China re-enters at some point next year, it will sow a much stronger market. Thank you very much and Merry Christmas and Happy New Year and we'll talk to you again in February.
Operator: Thank you. That does conclude today's conference. Thank you for participating. You may all disconnect.
