Genco Shipping & Trading Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 22, 2024

Key Takeaways

  • Q4 Financial Performance: Adjusted net income of $0.43 per share and a 173% QoQ dividend increase to $0.41 per share.
  • Operational Leverage: Q4 TCE rose 44% QoQ to over $17,000/day with benchmark outperformance of $1,300/day and Q1 is 81% fixed at ~$18,700/day.
  • Balance Sheet Strength: Closed a $500 M revolving credit facility, reduced net debt by 55% over three years to a 15% net loan-to-value ratio, and holds $295 M of undrawn liquidity.
  • High-Yield Dividend Policy: Targets 100% of excess cash flow, delivering an annualized yield of ~9% in Q4, nearly double the 2-year U.S. Treasury rate.
  • Drybulk Market Drivers: Multi-year high Capesize rates fueled by tight supply, seasonally strong cargo volumes, and disruptions at the Panama Canal and in the Red Sea.
AI Generated. May Contain Errors.
Earnings Conference Call
Genco Shipping & Trading Q4 2023
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Genco Shipping and Trading Limited 4th Quarter 2023 Earnings Conference Call and Presentation. Before we begin, please note that there will be a slide presentation accompanying today's conference call. That presentation can be obtained from the Genco's website at www.gencoshipping.com. To inform everyone, today's conference is being recorded and is now being webcast at the company's website, www.gencoshipping.com. We will conduct a question and answer session after the opening remarks.

Operator

Instructions will follow at that time. A replay of the conference will be accessible anytime during the next 2 weeks by dialing 1877 674-seven thousand and seventy and entering the passcode 373,966. At this time, I will now turn the conference over to the company. Please go ahead.

Speaker 1

Good morning. Before we begin our presentation, I note that in this conference call, we will be making certain forward looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward looking statements use words such as budget, estimate, expect, project, intend, plan, believe and other words and terms of similar meaning in connection with the discussion of potential future events, circumstances or future operating or financial performance. These forward looking statements are based on management's current expectations and observations. For a discussion of factors that could cause results to differ, please see the company's press release that was issued yesterday and materials relating to this call posted on the company's website and the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10 ks for the year ended December 31, 2022, and the company's reports on Form 10 Q and Form 8 ks subsequently filed with the SEC.

Speaker 1

At this time, I would like to introduce John Wobensmith, Chief Executive of Genco Shipping and Trading Limited.

Speaker 2

Good morning, everyone. Welcome to Genco's Q4 2023 conference call. In addition to reviewing our Q4 2023 year to date highlights, we want to use this opportunity to provide an update on the progress we are making 3 years into our comprehensive value strategy as well as on the industry's current fundamentals. We will then open up the call for questions. For additional information, please also refer to our earnings presentation posted on our website.

Speaker 2

Starting on Page 5, 2023 marked another strong year for Genco. We took concrete steps to drive sustainable long term value while achieving the top corporate governance rating across 64 public shipping companies for the 3rd consecutive year. We also made progress enhancing the company's ability to thrive through all industry cycles as we executed across the three pillars of our comprehensive value strategy focused on dividends, deleveraging and growth. We ended 2023 with our strongest quarter of the year as outlined on Slide 6. For the Q4, we achieved adjusted net income of $0.43 per share and declared a $0.41 per share dividend representing 173% quarter over quarter increase to the dividend.

Speaker 2

Complementing the sizable returns we provided shareholders during the quarter, we also continued to delever while executing several key strategic growth initiatives. This included increasing our earnings capacity by implementing the next phase of our fleet renewal program. Additionally, we closed out a $500,000,000 revolving credit facility that meaningfully increased our borrowing capacity, reduced margin, extended maturities and enhanced our ability to take advantage of opportunistic growth. Turning to the fleet. Performance was strong in the Q4 and underscores the meaningful operating leverage of Genco's asset base and the importance of our barbell approach to fleet composition.

Speaker 2

During the quarter, our operating leverage was evident as Capesize rates spiked the multi year highs in December, enabling us to increase Q4 TCE by 44% and achieve our highest TCE of the year at over $17,000 per day. We also generated our lowest cash flow breakeven rate for the year, resulting in significant margin expansion and an increased Q4 dividend, which I mentioned a moment ago. Notably, in the Q4, we once again achieved the time charter equivalent benchmark outperformance and are pleased to have ceded our internal benchmarks for the year by $1300 per day while generating adjusted EBITDA of over $100,000,000 Looking ahead, we expect the positive momentum and our strong performance to continue in the Q1. For Q1, 81% of our available days are fixed at over $18,700 per day, an increase of 34% versus Q4 levels. This strong performance is notable, especially considering that Q1 has historically been the seasonal low point in the drybulk freight market.

Speaker 2

On Page 7, we look back on the development of our comprehensive value strategy based on our ongoing progress in 2023. In April 2021, management and the Board laid out a clear path and related objectives to transfer Genco into a low leverage, high dividend yielding company with significant financial flexibility to provide shareholders returns and opportunistically grow through the dry bulk shipping cycles. Since that time, we have made significant progress towards these goals and importantly have balanced our capital allocation priorities having paid $170,000,000 in dividends, acquired $236,000,000 of vessels and paid down $249,000,000 in debt. Moving to slide 8, we have declared compelling dividends over the last 4.5 years including 9 since the announcement of our value strategy. Over this 18 quarter period, cumulative dividends to shareholders amount to $5.155 per share or 29% of the current share price.

Speaker 2

Further supporting our ability to pay sustainable dividends is our recent success executing the next steps of our fleet renewable strategy as displayed on Slide 9. In November 2023, we purchased 2 2016 built scrubber fitted Capesize vessels for $86,000,000 while divesting 3 2,009 and 2010 Capesize vessels. This trade further modernized our Capesize fleet and reduced the risk profile while also increasing 20 expect 2024 drydock savings of approximately $10,000,000 as we avoided the expensive third special surveys for these ships. In line with our barbell approach to fleet composition noted on Slide 10, we'll continue to evaluate further opportunities in the sale and purchase market to renew our fleet. Turning to Slide 11.

Speaker 2

We believe Genco is in a highly advantageous position going forward. Specifically, based on our success lowering our debt outstanding by 55% over the last 3 years, we have an industry low net loan to value, an industry low cash flow breakeven rate and nearly $300,000,000 in undrawn revolver availability. This provides significant financial flexibility and optionality for the company going forward in a cyclical and capital intensive business. As such, we believe that Genco is well positioned to operate in both up and down markets as shown on Slide 12. With approximately $1,000,000,000 in fleet value and taking into consideration our scale and operating leverage, we expect Genco's fleet to significantly benefit from a rising market.

Speaker 2

With that said and given our access to capital, we are also able to take advantage of countercyclical opportunities to buy vessels to increase our earnings power much like we did prior to the recent Capesize rally in early Q4. Going forward, a key priority for Genco is continuing to be good stewards of capital for shareholders and continuously evaluating capital allocation priorities. On Slide 13, we summarize key tenets of our approach to capital allocation. 1st, maintain low financial leverage to lower cash flow breakeven levels based on the significant operating leverage inherent in the business. 2nd, pay compelling quarterly dividends consistently to shareholders.

Speaker 2

The third, opportunistically grow the asset base. And the 4th is to employ a barbell approach to fleet composition by maintaining a fleet of Capesize vessels for upside potential, while owning Ultramax and Supramax vessels with a more stable earnings stream. We believe our low leverage, high dividend payout model executed in scale is industry leading in the dry bulk shipping public markets. Given the volatility and the cyclicality of dry bulk shipping, we also believe it creates the optimal risk reward balance to provide sizable returns to shareholders, opportunistically grow the fleet and enhance our earnings power through the cycles. I will now turn the call over to Peter Allen, our Chief Financial Officer.

Speaker 1

Thank you, John. On Slides 15 through 17, we highlight key financial metrics of the company. Specifically for Q4 2023, Genco recorded net income of $4,900,000 or $0.12 and $0.11 basic and diluted earnings per share, respectively, which includes a non cash special impairment charge of $13,600,000 relating to the agreed upon sale of 3 older, less fuel efficient Capesize vessels. Excluding this non cash charge, adjusted net income was $18,600,000 or $0.43 basic and diluted earnings per share. Adjusted EBITDA for Q4 totaled $37,100,000 bringing the full year 2023 total to $101,500,000 During Q4, our net revenues increased by 50% as compared to Q3, while our recurring cost structure remained approximately flat over the period, illustrating the high degree of operating leverage inherent in the business.

Speaker 1

This operating leverage is best displayed by our Capesize vessels, specifically those on index length contracts. These ships achieved an average TCE of over $33,000 per day in Q4, 90 1 percent higher than in Q3, directly benefiting from the rapid rise in the Capesize market at year end. With such operating leverage, there is less of a need for financial leverage to achieve strong returns. On Slide 18, we highlight the trajectory of our debt outstanding over the last 3 years and our continued voluntary debt repayments. Through the end of 2023, we have paid down nearly $250,000,000 of debt, meaningfully reducing our leverage.

Speaker 1

Given our 100% revolving credit facility, we will continue to actively manage our debt balance to save on interest expense, while opportunistically drawing down for vessel purchases given our nearly $300,000,000 of undrawn capacity. During the Q4, we closed on a $500,000,000 revolving credit facility, which is a key step in the continued development of our capital allocation approach. This facility increased our borrowing capacity by over $150,000,000 lowered pricing on margin by 30 to 60 basis points from the previous facility and extended maturity to the end of 2028. This 100% revolving credit facility structure provides further flexibility and aligns well with our value strategy as the RCF structures enables Genco to continue to voluntary pay down debt in line with our medium term goal of 0 net debt without losing the capacity to draw down to fund growth. To this point, we took advantage of the company's meaningful liquidity position opportunistically acquire 2 modern high specification Capesize vessels.

Speaker 1

We'll continue to assess additional sale and purchase transactions in the market in line with our fleet renewal strategy. As of December 31, 2023, our cash position was about $47,000,000 and our debt outstanding was $200,000,000 bringing our net debt level to $153,000,000 and net loan to value ratio to 15%. With $295,000,000 of undrawn revolver availability, our total liquidity position at the end of the year was $342,000,000 Following the completion of the agreed upon vessel sales in the Q1, we anticipate our net loan to value ratio to reduce to 10%. Moving to Slide 19, we highlight our transparent dividend policy, which targets a distribution based on 100% of excess quarterly cash flow, excluding maintenance and withholding for future investments. The nature of our variable quarterly dividend and our fleet's operating leverage enables shareholders to directly benefit from freight rate increases as our Q4 dividend increased by 173 percent to $0.41 per share.

Speaker 1

Our Q4 2023 dividend represents an annualized yield of approximately 9% on the current share price, nearly double the 2 year U. S. Treasury rate of approximately 4.7%. Looking ahead to Q1 2024 on Slide 20, we anticipate our cash flow breakeven rate excluding extraordinary annual meeting related expenses to be $9,752 per vessel per day, well below our Q1 TCE estimates to date of $18,724 per day for 81 percent fixed, pointing to another strong quarter. I will now turn the call over to Michael Orr, our drybulk market analyst to discuss industry fundamentals.

Speaker 3

Thank you, Peter. As depicted on Slide 22, after an atypically soft Q3, the drybulk market increased meaningfully in the Q4 with keepsized vessels reaching multi year highs over $50,000 per day in December. These strong rates continued into the historically softer period leading up to the Lunar New Year in February. Capesize rates reached a 15 year high for this time of year driven by continued tightness in the Atlantic Basin. Currently Capesize and Supramax rates remain at firm levels of approximately $23,000 $13,000 per day respectively.

Speaker 3

Slides 2324 highlight the aforementioned seasonality of the dry bulk freight market, which has historically seen a reduction of cargo availability, particularly from Brazil, due to poor weather conditions and scheduled maintenance coupled with the timing of new building deliveries in the later New Year. However, various geopolitical events continue to impact the drybulk freight market as highlighted on Slides 2526. In October, low water levels in the Panama Canal impacted a number of ships that could transit resulting in heavy delays and rerouting of vessels. One of these options was to divert vessels through the Suez Canal. However, in December, attacks on commercial vessels in the region led many shipping companies to no longer transit the Southern Red Sea and Gulf of Aden area, further disrupting the efficiency of the global drybulk fleet.

Speaker 3

Approximately 7% of drybulk trade transit through the Suez Canal. Larger scale tonnage rerouting over an extended period of time could increase 10 mile demand for dry bulk shipping, all else equal. Regarding the Chinese steel complex on Slide 2728, China's iron ore port inventories have been building over the last several months from very low levels, but still remain well off of 2022 highs. China's iron ore imports rose by 7% in 2023 year over year, supporting iron ore prices which remain firm at approximately $120 per tonne. China steel production was flat year over year in 2023.

Speaker 3

However, India grew substantially at 12%, while ex China output increased on a year over year basis for the last 6 months. Looking ahead to 2024, the World Steel Association forecast China's production to remain at 2023 levels, while the rest of the world is expected to see growth of 4%, potentially signaling an increase in demand from developed countries and support from the secondary trade routes outside of Asia. In terms of the grain trade, the end of Q1 represents the start of the South American grain season, which typically sees an increase in Brazilian soybean exports, which is supportive to minor bulk rates. As shown on Slide 29, the USDA is forecasting another strong crop out of Brazil. Regarding the supply side outlined on Slides 30 to 32, net fleet growth in 2023 was 3%.

Speaker 3

Historically low order book as a percentage of the fleet as well as near term and longer term environmental regulations are expected to keep net fleet growth low in the coming years. While we expect volatility in the freight market, the foundation of a low supply growth picture provides a solid basis for our constructive view of the drybulk market going forward. I will now turn the call back over to John for closing remarks.

Speaker 2

Thank you, Michael. Before we turn to Q and A, there are a few key points that I'd like to highlight. First, we are executing clear plan and doing so with a commitment to strong corporate governance. We've made demonstrable progress results for the Q4 and full year demonstrate the strength of our industry leading commercial platform and our significant operating leverage. We are pleased to outperform benchmarks and increase the TCE by 44% from 3rd quarter levels.

Speaker 2

Finally, we believe the key steps we are taking are positioning us to create value both today and for the long term. This concludes our presentation and we would now be happy to take your questions.

Operator

Thank you. Your first question comes from the line of Omar Khokta from Jefferies. Your line is now open.

Speaker 4

Thank you. Hey, guys. Good morning. Thanks for the update. And thanks for outlining obviously the strategy as you've been has been ongoing now for 3 plus years or so.

Speaker 4

I wanted to ask just about the dry bulk market overall. Clearly, things have been and as you were touching on just now in the presentation, things have been much healthier than expected. Definitely going into 4Q, there were not expectations for rates to jump as they did. And so far here in the Q1, things have been much healthier as well. And just wanted to dive just a bit deeper, just kind of maybe from your perspective, if you could just give us a sense of what do you think is really behind this market?

Speaker 4

Is it demand? Is demand really the driver here? You obviously talked about the Red Sea, the Panama Canal. Is that also having an issue on the margin? Or how would you characterize this market, say, today versus last year at this time when things were looking fairly soft?

Speaker 2

So obviously, great question, Omar. I think you have to start with the supply side, which is again continues to be very low in terms of percentage of the fleet on order. We're going to have even lower deliveries this year versus last. And then as we get into 2025, deliveries slow down even further. And again, they're from very low levels to begin with.

Speaker 2

So we have a very good supply demand balance. This Q1 though and we really started to see it towards the middle of the Q4. We've seen actual increased volumes on iron ore, bauxite, coal. I think the certainly the El Nino effect that has created dry weather in the iron ore areas in Brazil has enabled Vale to increase production from what would normally be a seasonal low because it would typically be the rainy season when in fact it's been pretty dry. So we've seen increased iron ore.

Speaker 2

We've seen increased bauxite out of West Africa. Coal shipments have been strong. We are about to come into peak grain season for the Southern Hemisphere. Things look very, very good there in both Brazil and Argentina. Argentinian corn had a pretty bad year last year.

Speaker 2

This year looks like it's going to be close to a record on the corn side. So that all looks positive. But then you talk about some of the inefficiencies. I think the Panama Canal is probably causing greater inefficiencies than the Red Sea, though certainly the vessels avoiding the Red Sea are part of the story as well. But when I look at it, fundamentally, I believe the market is being driven by low supply, demand has been up, volumes have been up, and then we do have some inefficiencies that have been created around the Panama Canal and the Red Sea area Southern Red Sea area.

Speaker 4

Thanks, John. That's helpful context, kind of broadly on the market. And then just maybe as a follow-up, wanted to ask on your fleet renewal strategy, you sold the 3 older Capes to fairly firm, it looks like, and they continue to push higher. Just wanted to ask if you can maybe touch a bit on what we're seeing or what you're seeing in the sale and purchase market? And then also, is that influencing in any way how you're looking at fleet renewal today versus say 2 months ago?

Speaker 2

I would tell you there is a flurry of activity, particularly in the Capesize sector. But the smaller midsize vessels are moving off the shelf, so to speak, as well. But what's happening in Capes is, I would call it a little bit of a frenzy, to be quite honest with you, in the S and P market. The 2 ships that we bought those 2016s which we paid $43,000,000 they probably easily were $50,000,000 today and that's a very short period of time. That's up 16%, 70% in a month and a half.

Speaker 2

And it's very difficult to find eco vessels as well. And we've also seen a lot of Newcastle and Axes being sold. I think it's I think as on the ship owning side, we all appreciate it. I'm not so sure if it's filtered on down to the rest of the world yet in terms of what values are being paid on ships. But it's definitely moved up significantly over the last 30 to 60 days.

Speaker 2

I would also tell you just in general the sediment in the in particular in the Capesize markets moved up. Those again going back to the 2 ships that we just bought, we were able to fix those vessels on index linked deals at 128 percent of the BCI. So very firm percentage numbers over and above the benchmark index and then plus scrubber economics obviously on top of that. So it's there's a lot of positivity right now. On the fleet renewal side, as long as we can trade out of older ships for similar relative values, as newer ships we'll continue to do that.

Speaker 2

So I would tell you again particularly in the Capesize sector it's very difficult to find highly eco high fuel efficient vessels, which is what we're focused on.

Speaker 4

Very good. Thanks John for that color. Appreciate it. And I'll turn it over. Thank you, Omar.

Operator

Your next question comes from the line of Liam Burke from B. Riley. Your line is now open.

Speaker 5

Thank you. Good morning, John. Good morning, Peter.

Speaker 2

Good morning.

Speaker 5

John, the index linked charters for the 5 Capes have worked out pretty well for you. They run about a year. How are you looking? Do you see opportunities to add more Capes to those fixtures? Or do you just prefer to keep the rest of the Cape fleet in the spot market?

Speaker 2

Yes. So look, the index deals are effectively in the spot market, right, because they're earning a daily rate basis to DCI. Right. We do have 3 vessels, the Endeavor, the Resolute and the Defender rolling off somewhere around April, maybe a little bit later from their index deal. So I think we'll look to do probably renew a couple of those.

Speaker 2

In general, we like being direct with our customers, but we also believe in portfolio approach, particularly in the Capesize sector. And when you can earn 128% of the BCI plus scrubber, that is those are very firm numbers. So yes, I think we'll do a little renewal. I don't see us expanding much beyond what we've done today. Okay.

Speaker 5

It's more of a macro question. But in the presentation, you discussed the replenishment of inventories on the iron ore side in China with production being flat, the rest of the world picking up the slack in terms of iron ore demand. Are you seeing that this early in the year? Or are you just seeing your iron ore trade replenishing Chinese inventories?

Speaker 2

I would say for the most part, it's replenishing Chinese inventories. But we do expect that as we have a recovery ex China on the steel side, we'll see more iron ore flow. You're correct that production levels are projected to be flat this year. You'll start to see production growth again next year. So I think that's positive.

Speaker 2

But don't lose sight of the fact, particularly for the Capes, the growth that's coming this year in the bauxite trade and most likely a continued strong coal market.

Speaker 5

Great. Thank you, John.

Speaker 2

Thank you, Liam.

Operator

Your next question comes from the line of Ben Nolan from Stifel. Your line is now open.

Speaker 6

Thanks. Hi, guys.

Speaker 2

Hi, Ben.

Speaker 6

So going back to asset values and whatnot, and John, you're talking about a frenzy market. It seems like usually when the market's a frenzy, it's better to be a seller than a buyer. Although you did say the appetite is especially true for the more modern eco ships, which are harder to find. Do you think I mean is this the kind of environment where you can look at some of your maybe older assets and maybe not even match them up yet with a new asset to pair against, but take advantage of just strong appetite? Or is the appetite maybe not quite as strong for some of the 15 year old type assets?

Speaker 2

Yes. Look, I think the appetite is strong across the board. I just think it's a lot more challenging to find the newer ships. And yes, that would be something that we would look at. Though I would tell you, we don't have an interest per se in shrinking the fleet from these numbers.

Speaker 2

We're very constructive on not just asset base, but the overall markets because of the low supply situation. For the next few years, in terms of what we can see, We like being in dry bulk shipping. So in terms of shrinking the fleet, as a rule, I don't see us doing that. But of course, we're going to take advantage of opportunities even if it may mean short term selling some older ships and then medium, longer term replacing them.

Speaker 6

Got it. Okay, that's helpful. And then from a macro perspective, I'm curious, especially given all of the grain coming out of Brazil, which tends to be a very long haul grain voyage anyway. With issues in Panama Canal, with issues in the Red Sea, are we starting to see any shift in sort of the appetite of ship type? Is there a growing preference maybe to move some of that grain on, I don't know, on a Camstrom MAX as opposed to Super MAX or are you seeing anything along that front just to take advantage of the scale for the longer distances?

Speaker 2

I wouldn't say there's a shift, but Panamaxes and Tamsarmaxes have traditionally carried grain out of that area. But I wouldn't say there's actually a shift. I mean, I think the camps this time of year in that area, the Camstarmaxes and the Ultramax market, Supramax market are fairly well linked. They're using all types of vessels to move that grain. And again, in terms of Brazil, you're talking about another record crop off of last year projected on soybeans.

Speaker 2

Corn is down, but very slightly. And then again, the Argentinian corn is going to move up. I mean, I think we only maybe about 27,000,000 tons last year, but it's going to be 45,000,000, 46,000,000 tons this year. So again, that's going to be a record crop. I was actually down there last week.

Speaker 2

I saw it for myself. It is there's a lot of corn coming out of Argentina over the next few months.

Speaker 6

All right. Well, I appreciate it. Thank you, guys.

Operator

Thank you, Ben. Your next question comes from the line of Sheriff El Magrabi from BTIG. Your line is now open.

Speaker 7

Hey, good morning. Thanks for taking my question.

Speaker 2

Good morning.

Speaker 7

First, regarding the leverage on the Ranger and the Reliance, is the thought to pay that down over time? I realize you have some cash from vessel sales coming in Q1 or could we see those ships secured under a new facility?

Speaker 1

Hi, Shreed. Thanks for your question. Yes. So like John mentioned earlier, we paid $86,000,000 for those 2 ships in aggregate. We tapped the revolver and drew down $65,000,000 So in a bucket that was 75% loan to value, but obviously the leverage position of the company is very significantly lower than that pro form a 10%.

Speaker 1

As we're getting the sale proceeds from those 3 ships, we're going to actively manage our debt position to reduce interest expense and flow through the bottom line. The great thing about our new revolver is that there's no term loan component to it. So we can pay down debt, not lose borrowing capacity. And then if we do see an opportunity like the company saw Q4, we can then tap the revolver to draw down. So I think to your point, there will be some active management of our debt from the current level of $200,000,000 as those proceeds come

Speaker 7

in. Thanks, Peter. That's helpful. And then you highlighted a handful of demand drivers for the recent market strength, and I think Omar's question touched on this. But a chunk of it seems to be the impact of canal delays on fleet supply.

Speaker 7

So do you think a full year of canal disruptions or maybe the better part of the year has been priced into vessel values? It sounds like the positive impact of El Nino in Brazil could also be a drag in the Panama Canal, for example.

Speaker 2

Again, the Panama Canal is real in terms of creating fleet inefficiencies. It's hard to put a percentage of the fleet that's necessarily being taken out. But as I said, it's real. But again, I go back to the cargo floats. I mean, we've seen iron ore and bauxite up 10% over last year's level.

Speaker 2

So those are real meaningful numbers, particularly when you have such a low order book and such a low delivery schedule, it creates a tremendous amount of leverage by just moving up incrementally on the demand side.

Speaker 7

Great. Thanks for taking my questions.

Speaker 2

Thank you. Take care.

Operator

Your next question comes from the line of Benedict Nitinnes from Clarksons Securities. Your line is now open.

Speaker 8

Thank you. Just wanted to touch upon the Capesize as well, I guess, building on the questions of some of the other guys. You talked about the lower than normal seasonal factors and the trends in the secondhand market. How do you view potentially locking in some of your Capes on with current FFA values at around $27,000 for the remainder of the year?

Speaker 2

So in the past, we have definitely locked ships away for 1 to 2 years, even 3 years at a time, particularly as you brought up in the Capesize sector. We think that is a good way to manage risk. We are still relatively we are still bullish on the Capesize market. So I would say it's a little too early to lock in, but it is certainly something that we're looking at. And as I said, we've done it in the past and from time to time we think it's the right move to take some risk off the table in the Capes.

Speaker 2

The other thing I would point out is the index deals that we've recently done as well as the past index deals have options for us to fix periods of time within those transactions. So and we've done that. We actually and it was just to sort of get through the month of February. But we have that option to lock longer term.

Speaker 8

That's great color. And also if I could just touch upon the fleet renewal as well. You've been quite active on the Capeside, but when should we expect to see some of the same for Supramaxes or if at all?

Speaker 2

You will. We're focused on some of the 58s. It's hard to put a definitive timeframe on it except that I would say I expect it to happen this year. Keep in mind that we have bought 11 ultras since 2018. So this has been an ongoing process.

Speaker 2

But now with where vessel values are, they seem to be firming. The momentum from the Capes are moving down into the midsized vessels. So it's starting to make sense on the valuation front for some of our older 58. So it's definitely on the table. Just a little hard to give you the exact timing, but I certainly believe this year.

Speaker 8

Okay, perfect. Thank you. I will return to the queue.

Speaker 2

Thank you.

Operator

As there are no further questions at this time, this concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.

Speaker 2

Thank you.

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