Genco Shipping & Trading Limited (GNK) Q2 2017 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Second Quarter 2017 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 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. [Operator Instructions]. A replay of the conference will be accessible any time during the next two weeks by dialing (888) 203-1112 or (719) 457-0820 and entering the pass code 2914626. At this time, I will turn the conference over to the Company. Please go ahead.

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 anticipate, 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-K for the year ended December 31, 2016, and the company's report subsequently filed with the SEC. At this time, I would like to introduce John Wobensmith, Chief Executive Officer of Genco Shipping & Trading Limited.

Good morning, and welcome to Genco's Second Quarter 2017 Conference Call. I will begin today's call by reviewing our second quarter 2017 and year-to-date highlights. We will then discuss our financial results for the quarter and the industry's current fundamentals, and then finally open up the call for questions. Turning to slide 5, we'll review Genco's second quarter highlights. During the quarter, our year-over-year results improved and we grew our cash position to $181 million, reflecting higher spot market rates achieved by the majority of our vessels in our fleet and our progress in implementing our commercial initiatives aimed at taking advantage of our leading drybulk platform. During the second quarter, demand for drybulk commodities continued to be strong and the freight market strength that materialized at the end of the first quarter carried into the beginning of the second quarter as a result of record Chinese steel output, which led to heightened demand for seaborne iron ore and coal cargoes. Additionally, the South American grain season aided in supporting smaller-class vessels. While the drybulk fleet expanded at a higher pace to do a significant year-over-year decline in scrapping, we expect the market to continue to come into balance, which we anticipate would support a stronger rate environment. For the second quarter, we recorded a net loss of $14.5 million or $0.42 basic and diluted loss per share, or on an adjusted net loss basis a $12.5 million loss or $0.36 basic and diluted net loss per share, excluding the $1.3 million gain on the sale of our vessel and a $3.3 million non-cash impairment charge. During the quarter, we completed our vessel sale program as we delivered the Genco Prosperity to buyers in May. This was the last of the 10 vessels previously identified for sale. On slide 6, we have identified Genco's leading market position, highlighted by our strong balance sheet and liquidity position, which together with our cost leadership provides us with the appropriate foundation to capitalize on a market recovery. As displayed in the chart on the right side of the page, we have improved our margins significantly through our commercial initiatives undertaken to date, which have been reflected in our time charter equivalent rate. On top of this, we have also reduced our daily vessel operating expenses through various cost-saving measures put into place to date. The results seen through our commercial, technical and operation initiatives taken to date further demonstrates the strength of our overall platform. In addition to drawing on a diversified fleet to take advantage of a potentially stronger rate environment, we remain well positioned to capitalize on compelling growth opportunities as we seek to further enhance Genco's industry leadership. Moving now to Slide number 7, we provide a brief overview of our fleet. Having completed our vessel sale program, Genco's fleet now consists of 60 drybulk vessels made up of 13 Capesize, 6 Panamax, 4 Ultramax, 21 Supramax, 1 Handymax and 15 Handysize vessels, with a total carrying capacity of approximately 4.7 million deadweight tons. On Slide 8, we further highlight Genco's fleet composition and its strong alignment with global trade dynamics. As part of our leading and sizeable drybulk operating platform, Genco maintains direct exposure to both the major and minor bulk commodities. As depicted in the charts on this slide, the distribution of Genco's fleet, made up of Capesize and Panamax vessels transporting major bulk such as iron ore and coal, as well as Supramax and Handysize vessels moving grain and various minor bulk commodities, largely marrying global trade flows. This provides us with a competitive advantage and enables Genco to capitalize on key trade routes while providing customers a full-service logistics solution. Through our diverse fleet serving major and minor bulk commodities, Genco provides a level of stability as well as upside earnings potential for shareholders. Specifically, Genco's Capesize and Panamax vessels are highly correlated to iron ore cargo flows, providing the company and shareholders significant upside to a market recovery. Complementing this, our minor bulk fleet provides a steadier income stream as well as versatile cargo-carrying capabilities. Since the beginning of the year, Genco has maintained an intense focus on implementing initiatives aimed at optimizing our commercial strategy and enabling the company to better capitalize on its leading and sizeable operating platform. We maintain an active approach to revenue generation, focused on our in-house commercial platform, which is aimed at increasing margin. Overall, our fleet's deployment mix remains weighted towards short-term fixtures, which provides optionality in a rising freight rate environment. Moving to Slide 9, I will discuss a number of these initiatives we have implemented for our major bulk fleet. One of the primary areas has been on expanding our customer base through active efforts to build and strengthen relationships with leading iron ore producers and other cargo owners. We are pleased with our year-to-date progress executing on this important initiative, having contracted with many new blue chip charterers including Trafigura, Uniper and Koch. In addition to our efforts of getting closer to cargo, we have also concentrated on strengthening the strategic deployment of our fleet. The steps we have taken to continue to stagger the expiration dates of charters as well as weight expirations toward the second half of this year have positioned us to capitalize on a potentially stronger rate environment in the third and fourth quarters. Of note, several contracts on our Capesize fleet, the class of vessels that we believe possess the most upside potential to improving fundamentals of the iron ore and coal trade, expired during the second half of 2017. Furthermore, we are in the process of establishing a Singapore presence to focus on the employment of our Capesize vessels as well as backhaul trades on the minor bulk fleet. This is expected to enable Genco to have real-time management of Capesize fleet to augment earnings and to allow us to continue to expand our access to cargo providers, similar to what we are doing on our minor bulk fleet. An active profile in the Far East market will allow Genco to further implement its commercial platform and operate full scale logistics service. For purposes of our Singapore presence, we have identified an individual to serve as our head of major bulks and spearhead the employment of our major bulk fleet going forward. Moving on to slide 10, I will discuss our initiatives aimed at strengthening the commercial project -- prospects of our minor bulk fleet. First, we optimized our fleet deployment and repositioned select vessels to the Atlantic Basin during a seasonally softer rate environment at the beginning of the year. As the drybulk market continues to recover, we believe this decision will serve us well and enable Genco to capture earnings premiums offered by the Atlantic market. Currently, we have a balance split between Atlantic and Pacific exposure for our Ultramaxes and in-house managed Supramax and Handysize vessels. Second, we have undertaken a process to ensure we achieve better utilization of our fleet by optimizing the geographic trading of each vessel based on vessel class, cargo, customer and port requirements. Finally, we have made significant progress building out our in-house commercial platform as we provide a full service logistics solution to cargo owners, incorporating voyage charters and direct cargo listings to our service offerings. As part of our effort to enhance our in-house capabilities and to drive further revenue growth, earlier in the year, we added a Commercial Director of the Minor Bulk Fleet, who is now overseeing the chartering of a number of Supramax and Handysize vessels that previously traded in pools. We expect to have all vessels currently in pools to be delivered to Genco and be part of our in-house commercial platform by mid-November. I will now turn the call over to Apostolos Zafolias, our Chief Financial Officer, to discuss our financials.

Thank you, John. Turning to slide 12 of the presentation, our financial results are presented. For the second quarter and six months ended June 30, 2017, the company generated revenues of $45.4 million and $83.6 million respectively. This compares with revenues for the second quarter of 2016 and the six months ended June 30, 2016 of $31.9 million and $52.8 million respectively. The increased revenues in both 2017 periods were primarily due to higher spot market rates achieved by the majority of the vessels in our fleet versus the same periods last year. In the most recent quarter, increased revenue was partially offset by the operation of fewer vessels as compared to 2016 second quarter. For the second quarter of 2017, the company recorded a net loss of $14.5 million or $0.42 basic and diluted loss per share. Adjusted net loss is $12.5 million, or basic and diluted loss per share of $0.36, excluding $1.3 million for gain on sale of vessel and $3.3 million non-cash impairment charge. This compares to a net loss of $110.7 or $15.32 basic and diluted loss per share for the second quarter of 2016. For the first half of 2017, the company recorded a net loss of $30.1 million or $0.89 basic and diluted loss per share. This compares to a net loss of $165.1 million or $22.87 basic and diluted loss per share for the first half of 2016. Basic and diluted net loss per share for the 3 and 6 months ended June 30, 2016 has been adjusted for the 1-for-10 reverse stock split of Genco's common stock effected on July 7, 2016. Turning to Slide 13, we present key balance sheet items as of June 30, 2017. Our cash position, including restricted cash, was $181 million. Our total assets were $1.5 billion, which consist primarily of the vessels in our fleet and cash. Our total debt outstanding, gross of $10.2 million of unamortized debt issuance costs, was $525.8 million as of June 30, 2017. Moving to Slide 14, our utilization rate was 96.6% for the second quarter of 2017. Our TCE for the second quarter was $8,439 per vessel per day, which compares to $4,618 per vessel per day recorded in the second quarter of 2016. The increase in TCE was primarily due to higher spot rates achieved by the vessels in our fleet during the second quarter of this year versus the second quarter of last year, as well as the progress in implementing our commercial initiatives. Daily vessel operating expenses decreased to $4,333 per vessel per day for the second quarter of 2017 compared to $4,511 per vessel per day for the comparative 2016 period, predominantly due to lower expenses related to cooling and insurance as well as the timing of purchases of stores, partially offset by higher drydocking expenses related in the second quarter of 2017 period. The decrease in operating expenses demonstrates our continued focus on cost management initiatives. Daily vessel operating expenses for the 6 months ended June 30, 2017 were $4,364 per vessel per day versus $4,542 per vessel per day in the comparative period last year. We believe daily vessel operating expenses are best measured for comparative purposes over a 12-month period in order to take into account all of the expenses that each vessel in our fleet will incur over a full year of operation. Based on estimates provided by our technical managers and management's views, our daily vessel operating expense budget for 2017 is $4,440 per vessel per day on a weighted average basis for the entire year for our core fleet of 60 vessels. Turning now to Slide 15, we outline our breakeven rates. Our breakeven levels remain among the lowest in the industry, which is a direct result of the vessel OpEx optimization initiatives that we have implemented over the last several years, substantially reducing operating costs without sacrificing the company's high safety and maintenance standards. We anticipate Genco's cash breakeven rate to be $7,245 per vessel per day for the third quarter of 2017. We've also provided further detail on these breakeven rates in the appendix of the presentation for your reference. In addition, at the bottom of the slide we have provided our drydocking schedule through the rest of the year. We expect our vessels to be off hire due to drydocking for a total of 80 days for the third quarter and 20 days for the fourth quarter of 2017. The estimated drydocking costs for the third and fourth quarters are anticipated to be $3.2 million and $0.9 million respectively. As discussed in the previous call, the Genco Tiger and the Baltic Lion were off hire to complete repairs of the vessels' loop filtrations systems. Repairs on the Baltic Lion were completed in mid-May and the vessel has since returned to service. The Genco Tiger's permanent repairs were completed on August 3, and we expect that our loss of hire insurance will cover approximately 20 of the 30-day loss during the third quarter at a rate of $20,000 per day per vessel. The timing of the revenue recognition may be pushed into the fourth quarter of 2017. I will now turn the call over back to John to discuss the industry fundamentals.

Thank you, Apostolos. I'll begin with slide 17, which represents the Baltic Dry Index. At the beginning of the second quarter, the BDI continued to increase after a strong finish to Q1. During April, the average BDI was over 1,200 representing the highest average for a month since November of 2014. However, heading further into the quarter, the BDI came under pressure, reaching a low of 818 by early June before rebounding over 900 on June 30. Turning to slide 18, we outline some of the key market developments influencing the freight rate environment. Heightened demand for seaborne iron ore cargoes continues to be the preeminent driver of the drybulk market. Specifically, China's imports for the commodity have risen by 9% year-on-year during the first six months of 2017. Four of these six months have seen China's imports exceed the 90 million ton threshold, a mark that was only reached three other times on record heading into this year. There is a seasonal aspect to shipments which has led to volatility in drybulk freight rates in the year-to-date. We believe that the freight rate reaction to periods of rising demand and the subsequent volatility that ensues is a positive sign conveys that supply and demand fundamentals are improving. At the moment, we are seeing a strengthening of demand for high quality seaborne iron ore, led by augmented levels of steel production in China. As detailed on slide 19, China's steel output has risen by nearly 5% in the year-to-date, which includes a record level of production in June. Steel price increases seen in each of the last nine weeks have helped improve margins for domestic steel producers and have further incentivized production at these current levels. This has resulted in increased demand for iron ore at a time when more ore typically becomes available from major producers in Brazil and Australia during the second half of the year. Specifically, since 2009, Brazilian iron ore exports have increased meaningfully during the last six months of the year when compared to the January to June period. In addition to rising steel production, another key factor impacting the drybulk market has been the relative strength of the Chinese coal trade. After increasing by 25% in 2016 year-on-year, that strength continued through the first half of 2017 as imports have grown by 23% year-on-year. Some of this growth is due to a low base during the same period of 2016 as the resurgence of the Chinese coal trade began to take hold in June of last year. Since that point, China's monthly coal imports have been greater than 20 million tons in all but one month, as the Chinese Government has worked to shut excess domestic mining capacity. While domestic coal production fell by nearly 10% last year, output has increased so far this year by approximately 5%, which includes an 11% year-on-year increase in June. This comes despite the government closing 111 million tonnes of excess coal capacity, representing 75% of its 2017 stated target. In addition to the global coal and iron ore trades, we highlight the global grain and certain minor bulk trends on slide 20. The South American grain season has been a driver for the smaller vessel classes and their expectations for a strong North American grain season to materialize in the coming months. Additionally, Malaysia has extended its ban on bauxite mining through the end of the year. This has resulted in a shift of the global bauxite trade to more long-haul routes from the Atlantic into the Pacific, particularly from West Africa. On slide 21, we outline currently supply side fundamentals. The drybulk fleet grew by 2.4% during the first half of 2017, after taking into account the scrapping of older tonnage. This compares to 2.2% fleet growth registered in all of 2016. As sentiment within the drybulk space has turned more positive, scrapping has slowed, leading to a higher pace of fleet growth. While demolition volumes have declined by nearly 65% year-on-year, several key developments have still materialized. A total of 12 vessels built in 2002 have been scrapped to date. This represents vessels that are 15 years old and due for their third special survey. Vessels scrapped built in 2002 are the second most prevalent year of vessel demolitions to date, behind 1997, which represents a 20-year-old vessel, or the fourth special survey. Furthermore, of the 20 Capesize vessels scrapped in 2017, 5 have been greater than 250,000 deadweight tons, which already exceeds the 3 vessels of that type scrapped in 2016. There remains 48 VLOCs in the drybulk fleet, with an average age of 24 years old. This tonnage on an aggregate basis is approximately 4% of the Capesize fleet. On the newbuilding front, 67 newbuilding vessels were contracted in the second quarter, the highest quarterly total since Q4 of 2015. Despite these orders, the order book as a percentage of the fleet is still manageable at 7.5%, the lowest point since 2002. In terms of size, the drybulk order book currently stands at 61 million deadweight ton, while tonnage 20 years or older totals 57.9 million deadweight ton. Approximately one-third of the vessels on order are currently scheduled to deliver by the end of this year. It remains to be seen how much we'll actually deliver, considering that the slippage rate is approximately 35%. In conclusion, with regard to the industry's current supply-side fundamentals, we believe scrapping, slippage and cancellations are all essential components of reducing the supply growth, which could lead to a more balanced supply and demand equation going forward. This concludes our presentation, and we are now happy to take your questions.

Thank you. [Operator Instructions] We'll take our first question from Doug Mavrinac with Jefferies. Please go ahead.

Hey, John, I just have a few follow-ups for you this morning, with them mostly being focused on kind of what you ended your prepared remarks on, and that was kind of the state of the market. My first question is, when you look at kind of how Cape rates have performed recently, we've seen an uptick in rates; corresponds with an uptick in iron ore prices. My question is just, real simply, is the uptick in rates a reflection of an increase in fixture activity orifices it just more sentiment-driven because you've seen an improvement in pricing?

I think it's both, Doug. I think some -- the current uptick that we've seen really centers around Australia. We have seen those round-trip rates go -- they were down in the 5,000, 6,000 a day range maybe 3 weeks ago, and we just actually fixed the Genco Constantine at 14,500 for an Australian round. So, quite a pick-up. And the nice thing is, it doesn't take much to move these rates. So you have a few extra cargoes coming in and there's quite a bit of leverage now, which shows you the real improvement in the supply and demand side. There've also been some Brazilian fixtures that have started to pick up, but I would say most of it's been centered around Australian rounds.

Okay. That's actually not only very helpful but very interesting. So whenever you think about, kind of, as we go forward, second half of this year, 2018, I think you guys have a very interesting chart on Page 18 of your presentation, where you show this big ramp-up of Vale's S11D project. It's more next year, even though it started this year. So when you look at the recent uptick, it's not really the Brazilian project, and I guess in a way it can be said that that's still -- the best is still to come. I mean, is that fair to say?

Yes. I think, from a seasonal standpoint, Brazil -- as I said on the prepared remarks, Brazil does tend to ship higher volumes in the second half of the year. And Samarco -- sorry, S11D as you pointed out is slowly ramping up. So you expect to see more of that at the end of this year going into next year. And then I just mentioned Samarco. Vale has now said that that will be up and running. They haven't given a definitive date, but once that comes online that's probably another 18 million to 20 million tonnes coming out of Brazil.

Got you. Very helpful. And then, throwing something into the mix which we haven't talked about in a very, very long time, but when you consider finding a home for a lot of that production capacity that's coming online, obviously for since the last nine years we've been mostly focused on kind of what is Chinese import demand going to be, and so on. But before the financial crisis, the EU was a big importer of iron ore and coal and whatnot, and even in one of your slides you mention how they're still the number two in terms of regions of steel production. And so, when you look at iron ore imports into that market, coal imports into that market, still down 20%, 25% since the financial crisis, my question is; a, as economic activity there is starting to pick up, are we starting to see some more cargo flows into that market? And then, B, if not, is that something that could happen or is there something structural that would prevent that happening to get back to "more normal" levels from where we were pre-2008?

So, I think, just addressing the coal side, I think that's a little more difficult to assess. I mean, I think the EU is slowly trying to dial back its thermal coal production of electricity. Having said that, we're seeing more and more imports into Turkey on the coal side, and obviously, that whole coal story is shifting out to Asia and China, but also growth-wise, Vietnam, Taiwan and the Philippines. On the iron ore side, I think that's a little easier to talk about because you are seeing steel production slowly recover in Europe, which will require iron ore shipments, particularly out of Brazil going forward. So I do think there's more to come there.

Okay. Interesting. And then 1 final question on the demand side of things. When you look at the [technical difficulty] half of this year [technical difficulty].

Doug, we lost you there.

It does look like Doug disconnected. We will take our next question from Magnus Fyhr with Seaport Global.

Couple of questions here. Just to follow up on the coal market, a lot of different news out of China about them reducing imports from some of the ports. What are you guys seeing in your day-to-day operations there as far as the flow of coal into China?

Look, I mean, we've seen an increase in terms of cargo volumes that are moving. I think, short-term it's fairly easy to say that that will continue because of the low inventory levels. Hydropower production in terms of rainfall has been down. And so, I think the fundamentals are there short-term. I think it's harder to look into the future, medium to longer term. Having said that, you're definitely seeing large investments obviously still made by Chinese companies in Australia coal facilities, which, I view that as a positive sign.

Right. And you guys have a very diversified fleet and with turning the core now being cash flow positive, maybe it's time to start playing offense. Where do you feel like you could expand, and if you look at your different categories of assets?

Okay. Look, I -- this is something obviously we talk about a lot. We like the fundamentals on the supply and demand side on the Capesize sector, and then we also see expansion on the Ultra Supramax side. I think the Panamaxes, due to the age as well as not having a critical mass on the commercial side, will be something that we focus less on. But in terms of growing this company, it will be looking at the Capes, because of the growth in the iron ore trades that we see over the next few years, and then on the Ultra Supramaxes, which is a little more steady, but we do see growth on the grain side in the minor bulks.

And we will take our next question from Fotis Giannakoulis with Morgan Stanley.

I want to ask you about the supply picture. How do you view the appetite from ship owners in adding additional tonnage, especially now that the -- seems that the resale prices, they have surpassed the contract prices.

Look, we've seen some ordering, obviously. We -- Cargill ordered some Capes. I think we're seeing more activity around the [Indiscernible] sector and even the Ultramax sector. Look, any ordering we do not want to see at this point, we really would like to see this market be in full recovery modes, which I think you know we've been talking about towards the end of this year going into next year. But it -- I guess in one sense, it shows you that we are entering a healthier market. I think the good news is, we're not seeing these large-scale orders that we saw a few years ago. We're seeing more of the 4 to 6 range, and it's something that obviously we're going to watch closely, but we don't -- at this point, what's on the books right now, we do not look at as problematic. And again, I think you've got, what, 61 million deadweight ton on order? And if you look at 20-plus-year-old ships, it totals about 59 million deadweight tons. So I -- and with continued growth on the demand side, I still think at least for the next couple years here we're setting up for a nice recovery.

Thank you, John. Can you give us the profile of those who are most likely candidates to place orders? Are the Chinese, the COSCOs of this world, and -- or end users? Are there major ship owners? Private ship owners? Is there financing for placing orders? And especially, I'm asking because there are some concerns about the Chinese lease market that was active at the beginning of the year. How is the availability of financing?

Look, I still think it's tight. I think -- I'll come back to your Chinese leasing company. But, I mean, in the European banking sector, it's very tight, particularly for newbuilds. And there is -- there are Chinese leasing deals that are out there. They are not easy to get done. I still think there is a fundamental issue with most Chinese yards in the fact of getting refund guarantees put in place, which is paramount to doing an order. So I don't think these things are all that easy yet, even with a source of financing on the Chinese market side. I know there's a lot of talk about it and I know there have been some deals that have been done, but we're not seeing in a large scale way yet.

Thank you, John. That's very helpful. And 1 last question. I mean, you mentioned about the iron ore, and because you have access to a very wide range of commodities and you see a lot of commodities moving around, how do you view the demand in other minor commodities? And I'm trying to get your feeling about the macro, the global economy. First quarter, everybody was very optimistic about a synchronized macro recovery. Is this something from what you see that you can add to your view, to the view about the world?

Look, we're definitely seeing the grain trades up. I think that's an easy one, on the soybean side as well as the wheat side. We're seeing bauxite shipments up. I think the minor bulks in general, which is a pretty good test of global economy, particularly in Asia, we are definitely seeing a recovery. It's not just Chinese-based, which I think is important. Vietnam is growing. Philippines are growing. Taiwan is growing. So yes, I think we are seeing a recovery from a world GDP standpoint, at least from what we can see in cargo flows.

[Operator Instructions] And we'll take our next question from Doug Mavrinac with Jefferies. Please go ahead.

John, just had a couple additional questions, I'm not quite sure what happened there. And I apologize if I repeat whoever was on after me. I heard Fotis' questions but not the second person's. And so, as I was speaking, the only thing I was going to ask was, on the -- finishing up on the demand side, when you look at the second half of this year, are there any specific demand catalysts that you're expecting to say, hey look this could be positive for the market? Or do you expect to be more of, hey look the US export season is going to be big, so that will be an improvement, and you've got S11D ramping up? So do you expect volatility around a gradual improvement to the up and to the right in the second half or is there something specific that you're saying, look this is really going to have a positive impact on the market during the next handful of months?

I think it's both. I think you're going to continue to have volatility in the larger vessel classes. I think that's a given. And it's -- I will tell you, it's one of the drivers to us establishing a presence in the Far East in Singapore, so that we can actively manage that volatility. I think on the iron ore side, we see shipments being larger in the second half than they were in the first half, which is normal seasonality. And I think on the grain side, yes, I think there's going to be a pretty good US Gulf season, and I think there's going to be a good Black Sea season as well. So a strong Atlantic for the grain trades.

Got you. Very helpful. And then, final question -- I was going to ask something on the supply side, but I heard Fotis already mentioned it, and on the topic of capital availability. But on the supply side and more really I guess on the asset value side, what you guys are seeing in[]what are you guys seeing in the S&P market? I mean, obviously, asset values have increased. Must be improved demand or at least better demand than we've -- saw recently. But when you look at kind of what's going on there, I mean, the orders of magnitude of the activity levels relative to where we were, say, 3, 6 months ago -- how does that compare? And when you look at who's out there looking to go long tonnage, is there anything telling about the parties that are involved, like, these guys have a great track record, or that sort of readthrough, that you may be able to glean from what's going on in the S&P market?

Yes. So I think, you look at the January-February-March time frame, there was a ton of activity on the S&P side. That certainly started to drop off a little bit in -- actually, quite a bit in May. And if you look at -- I think there were maybe 24 ships that were done in May, and then you start to look at June, and you start to see a pickup. And then for July, sort of flat over June. I still think it's a fairly liquid market -- that we're not seeing as many transactions as we -- as we saw in the first quarter of this year. Again, as these freight rates -- what we believe will happen continue to recover, you will see these asset prices also move up in conjunction, and most likely see more sales being concluded.

And we will take our next question from Espen Landmark with Fearnley. Please go ahead.

Yeah, hi. Good morning, guys. I just wanted 2 questions on the fleet -- kind of, the fleet renewal seems to be high on everybody's agenda, right? And you guys have done a great deal already. The main driver is it just simply the size difference of Supramax versus Ultramax? Is it kind of an age factor? Is it drydock provisions? Is it upcoming regulation? Or is it just simply a mix of everything, that kind of gets you scrapping more vessels, or selling them? Or...

I think it's a mix of everything. But if you look at -- we identified 3 Panamaxes for sale. Those are the -- that we will be looking at down the road from a strategic standpoint. And I think there's two things there. It's not having the critical mass like we have on the Capesize and the Ultra Supramaxes from a commercial standpoint; but also the age of those ships. As you know, the -- as you get to closer to that 20 years, vessels become more expensive to maintain. Eventually, ballast water treatment systems will come into play as an additional CapEx item. So that's why in the Panamaxes at least 3 of those, anyway -- 3 or 4 of those, we will be thinking more and more about exiting.

All right. And then, for instance, on your -- on Supramaxes you have the smaller ones in the 50s, and then you have some Ultramaxes in the 63,000, 64,000 deadweight ton. What's kind of the -- we call it the rate differentials that you're seeing for these ships?

Well, the 64,000s are probably in general earning, call it, 15% to 20% above the index, the BSI. And some of the smaller ships are probably 5% to 7% less than that, using a benchmark BSI ship.

At this time there are no more questions. This concludes the Genco Shipping & Trading Limited conference call. Thank you all, and have a nice day.

Thank you.