Star Bulk Carriers Corp. (SBLK) Q4 2023 Earnings Report, Transcript and Summary

Thank you for standing by ladies and gentlemen. And welcome to the Star Bulk Carriers Conference Call on the Fourth Quarter 2023 Financial Results. We have with us Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou; and Mr. Christos Begleris, Co-Chief Financial Officers; Mr. Nicos Rescos, Chief Operating Officer; and Mrs. Charis Plakantonaki, Chief Strategy Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today. We will now pass the floor over to your speakers today. Mr. Spyrou, please go ahead, Sir.

Thank you, operator. I am 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 fourth quarter of 2023. 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 Q4 results, financings and share buybacks, a short update on the ED [ph] bulk transaction, fleet development and operations, the latest on the ESG front, and our views on industry fundamentals before opening up for questions. Let us now turn to Slide number 3 of the presentation for a summary of our fourth quarter 2023 highlights. Net income for the fourth quarter amounted to approximately $40 million and adjusted net income of approximately $64 million. Adjusted EBITDA was $114 million for the quarter. For the fourth quarter as per our existing dividend policy, we declared a dividend per share of $0.45, with record date as of March 12, 2024. Since June 2021, we have returned to shareholders $1.1 billion in dividend distributions, and over $400 million in share buybacks. Our total cash today stands at $312 million pro forma for the delivery of our four remaining sold vessels and a payment of the respective debt, as well as the bridge facility. Meanwhile, our pro forma total debt stands at approximately $1.121 billion, translating in a pro forma net debt of approximately $800 million. On the top right of the page, you will see our daily figures per vessel for the quarter. Our time charter equivalent rate was $18,296 per vessel per day. Our combined daily OpEx and net cash G&A expenses per vessel per day amounted to $6,081. Therefore, our TCE less OpEx and G&A is approximately $12,215 per day per vessel. Looking towards fleet renewal; in the last 12 months we have agreed to sell 17 vessels with average age of 13.7 years and received insurance proceeds from one vessel which was declared as a constructive total loss. Total gross proceeds from these vessels were $366 million. During the fourth quarter, we completed a $380 million repurchase of 20 million shares from Oaktree Capital. The shares were repurchased and subsequently cancelled. The Oaktree share buyback was funded from vessel sale proceeds of $254 million, plus $76 million of new debt financing, $13 million of proceeds from the ATM, and $38 million cash released from the minimum cost threshold of $2.1 million per vessel for the 18 vessels that have been sold. Slide 4 graphically illustrates the changes in the company's cash balance during the fourth quarter. We started the quarter with $302 million in cash and generated positive cash flow from operating activities of $88.6 million. After including debt proceeds and repayments, CapEx payments for ESD and Ballast Water Treatment System installations, the third quarter dividend payment, the Oaktree share repurchases and ATM issuances; we arrived at a cash and cash equivalent balance of $282 million at the end of the quarter. This figure includes a $20 million adjustment as this amount was released from the vessel sales and went against the financing of the Oaktree share buyback. Slide 5 illustrates a summary of the recently announced Eagle Bulk transaction. We have been working closely, we figured our team and our lawyers to be able to complete the merger in early April 2024. This transaction will create a global leader in dry bulk shipping with a large diversified and scrubber-fitted fleet of 167 vessels. This is a low stock transaction on NAV-to-NAV basis, with a combined market cap of approximately $2.6 billion. Eagle shareholders will receive 2.6211 shares of Star Bulk per share of Eagle. Star Bulk shareholders will own approximately 71%, and Eagle’s shareholders will own approximately 29% of the combined entity. Since the deal was announced, we filed with the SEC, an F4 registration statement with respect to the shares of Star Bulk common stock based to Eagle shareholders pursuant to the Eagle merger agreement which became effective on February 12, 2024. The Board of Directors of Eagle fixed February 12, 2024 as the record date for the determination of Eagle shareholders entitled to receive notice of, and vote at the Eagle special meeting. The Eagle special meeting will be held on April 5, 2024. Subject to Eagle shareholder approvals and customary closing conditions, we expect that the Eagle merger will close shortly thereafter. I will now pass the floor to our COO, Nicos Rescos, to talk about our operational performance and then update on our fleet renewal and CapEx update.

Thank you, Simos. Let's turn to Slide 6 where we provide an operational update. Operating expenses excluding non-recurring expenses were up $4,977 for Q4 2023. Net cash G&A expenses were $1,104 per vessel per day for the same period. In addition, we continue to rate at the top amongst our listed peers in terms of Rightship safety score. Please turn to slide 7 for an update on our fleet sales and our recent newbuilding orders. In December, we entered into a contract for additional three firms shipbuilding contracts with Qingdao Shipyard with the construction of 82,000 Kamsarmax newbuilding vessels at competitive price levels having increased the size of our order from two to five vessels. The vessels are being built in China to high specification using the latest fuel efficient engine coming into production in 2024. Our shaft generator reducing the energy requirements while vessel is at sea, and now turned to marine power provisions. The above measures ensure best-in-class fuel consumptions and emissions. On the vessel sales front, we continue disposing of vessels opportunistically at historically attractive levels, having agreed during Q4 to sell 7 vessels for total gross proceeds of $122 million, reducing our average fleet age and improving overall fleet efficiency. During Q1, we agreed to sell another two Capesize vessels, the Big Bang and the Pantagruel for total gross proceeds of $36.3 million. Furthermore, we took delivery of 2 out of the 6 long-term chartering Eco vessels that will be delivered to us throughout 2024. And specifically, a tenacious [indiscernible] Kamsarmax and a tenacious Star Bulk Ultramax. Considering the aforementioned changes in our fleet mix, we operate one of the largest dry bulk fleets amongst U.S. and European listed peers with 122 vessels on a fully delivered basis with an average age of 10.5 years. Slide 8 provides a fleet update and some guidance around our future dry bulk and available total of 5 days. In the top right of the page we provide a CapEx schedule illustrating our new building CapEx and vessel energy efficiency upgrade expenses with 100% of our fleet now being ballast water treatment systems fitted. Our expected dry dock expense for 2024 is estimated $20.5 million for the dry docking of 40 vessels. In total, we expect to have approximately 950 of five days [ph] for the same period. Based on our latest construction schedule, our newbuilding vessels are expected to be delivered in Q4 2025, Q2 and Q3 2026. In line with the EEXI and CII regulations, we will continue investing in upgrading our fleet with the latest operational technologies available, aimed in improving our fuel consumption and reducing our environmental footprint, further enhancing the commercial attractiveness of the Star Bulk fleet. Regarding our Energy Saving Devices program, we have completed and tested retrofits of 31 vessels with 16 more to follow for retrofit by the end of 2024. The above numbers are based on current estimates around dry dock, the rate of planning, vessel employment and yard capacity. Finally, we are working together with Eagle management towards a seamless integration of the ship management platforms from April 2024 onwards, should the merger receive shareholder approval. I'll now pass the floor to our Chief Strategy Officer, Charis Plakantonaki, for an ESG update.

Thank you, Nicos. Please turn to slide 8, where we highlight our continued leadership on the ESG front. Star Bulk along with four other leading ship owners in Greece have joined the Loads Register Foundation in establishing the maritime Emissions Reduction Center in Athens based non-profit organization. The center, we support the development and adoption of new and existing solutions to reduce greenhouse gas emissions of the global fleet, while fostering the collaboration among maritime value chain stakeholders to safely navigate to net zero. For a third year in a row, Starbuck has participated in the carbon disclosure project, maintaining its score of fleet, which indicates a maturity of management level or taking coordination action on climate issues. This call placed Star Bulk above the industry average of mining [ph], and also above the global average of sea which indicates awareness level. On the regulatory front, Star Bulk has taken all necessary measures to prepare for and ensure compliance with the inclusion of shipping in the EU Emissions Trading Scheme, which came into force on January 1, 2024. We have also prepared to timely align our ESG reporting with the EUs Corporate Sustainability reporting directive, which will apply for the first time in the 2024 financial years for reports published in 2025. Due to fall 2023, we continued enhancing our employee engagement and wellbeing programs, increasing the retention rates of our [indiscernible]. With regard to regulations, Star Bulk is continuing to invest in new systems, technologies, policies and training to strengthen its communications in cybersecurity, including the deployment of high bandwidth internet and next-generation firewalls on board in live phase [ph]. In December 2023, Star Bulk was granted the Sustainability Award at the Annualized Greek Seating [ph] Awards. I will now pass it over to our CEO, Petros Pappas for a market update and his closing remarks.

Thank you, Charis. Please turn to slide 10 for a brief update of supply. During 2023, a total of 35.3 million deadweight was delivered and 5.4 million deadweight was sent to demolition for a net fleet growth of 29.9 million deadweight or 3.1% year-over-year. Furthermore, 42.8 million deadweight were placed during the year when newbuilding order books presently standing at the still low level of 8.5% of the fleet. Limited shipyard capacity until late-2026. high shipbuilding costs and future green propulsion uncertainty are keeping new orders under relative control. Furthermore, vessels above 20 years and 15 years of age, stand at 8.5% and 20.6% of the fleet, respectively. While scrap prices have stabilized at elevated levels and to make demolition above weight and energy in efficient tonnage and more attractive option during seasonal downturns over the next years. During the second half of the year, the average steaming speed of the dry dock fleet decreased to a new low of 10.95 knots due to downward pressures from inflated bunker costs and new environmental regulations. We expect the EEXI CII regulations to increasingly incentivize slow steaming retrofits and to help moderate supply over the next several years. Global port congestion adjusted lower over the last two years, and we expect that it will follow seasonal patterns from now on. In the short term, the combination of draught in Panama and Red Sea tensions has led to a major decrease of canal transits and is causing inefficiencies that organically [ph] mitigated by the seasonal market weakness. As a result of the above trends, nominal fleet growth is unlikely to exceed 2.5% per annum over the next few years. Let's now turn to slide 11 for a brief update of demand. According to Clarkson's total dry bulk trade during 2023 is estimated to have expanded by 4.4% in turn miles. Trade volumes during the fourth quarter increased by 6.2% year-over-year, supported by record coal and iron ore exports and recovery of minor bulk trade, while stronger Atlantic exports and inefficiencies have benefited from miles. China dry bulk imports increased by 12.2% despite weak macro sentiment and a struggling property sector. Gradual stimulus measures over the last year, heavy investment on infrastructure and manufacturing, and higher exports have provided support for raw materials demand. On the other hand, dry bulk imports from the rest of the world declined by 2% as demand during the first half of 2023 was affected by high energy and food costs related to the war in Ukraine and tightening monetary policy by Western economies in the efforts to fight inflation. During 2024, dry bulk demand is projected to increase by 1% in terms with the IMF upgrading it’s global GDP growth forecast to 3.1%. The Chinese economic recovery from zero COVID policy is still at early stages and is expected to accelerate once the property market stabilizes and consumer confidence returns. Demand from the rest of the world is experiencing a strong recovery since September supported by decline in energy, food and borrowing costs. Meanwhile, the years started with ton miles receiving strong support, but geopolitical and canal inefficiencies. Iron ore trade expanded by 6.2% during 2023 and is projected to contract by 0.4% during 2024. China crude steel production increased by 0.9% during 2023 after two consecutive years of contraction, supported by inflated steel product exports. Domestic iron ore output and stockpiles are moving higher, but still stands well below last year's levels. Crude steel production from the rest of the world declined by 1.2% during 2023 as the first half was affected by high energy costs and weak margins. Having said that, steel prices [ph] next China experienced a strong recovery during the fourth quarter and is expected to remain strong throughout 2024. Coal trade expanded by 6.9% during 2023 and is projected to contract by 1.4% during 2024. Global focus on energy security is inflated cold trade while the sampling of Russian exports has benefited ton miles. Chinese imports surged by an impressive 61% compared to 2022. As thermal electricity increased by 6.4%, hydropower contracted by 4.9%. And domestic coal production growth was limited to 4.3%. India is emerging as a leading coal importer with electricity demand currently outpacing domestic coal production growth and stockpiles at relatively low levels. Grains trade contracted by 0.6% during 2023, and is projected to be down by 2.9% during 2024. Grain trade was affected by the increase of experts from Argentina, the U.S. and Ukraine, while Brazil experienced record soybean and corn seasons that helped fill the gap. Falling prices of agricultural commodities, better crop yields in North and South America, the recovery of Ukrainian volumes and increased demand from emerging economies are expected to inflate grain trade over the next years. Moreover, Panama Canal constraints this year will inflate on miles as historically 25% of U.S. exports are moving through the canal. Minor bulk trade expanded by 3.7% during 2023 and is projected to expand by 3.9% during 2024. Minor bulk data has the highest correlation to global GDP growth and is supported by COVID [ph] global macroeconomic fundamentals. Atlantic steel shortages continue to incentivize Pacific exports and inflate backhaul trades. Furthermore, expanding West Africa bauxite exports generates long-term miles for capsize vessels with Guinea exports up 24% during 2023. As a final comment, the outlook for dry bulk market remains positive due to favorable supply dynamics, geopolitically driven inefficiencies in trade, and a recovery of demand supported by large global infrastructure investment needs for the world's [indiscernible]. Star Bulk expects to take advantage of variation strength in the dry bulk market, having mostly maintained this diverse scrubber fitted fleet in the stock market and will thus continue to create value for its shareholders. Without taking any more of your time, I will now pass the floor over to the operator to answer any questions you may have.

Thank you. [Operator Instructions] Our first question is from Amit Mehrotra with Deutsche Bank. Please proceed.

Hi, everybody. Good to talk to you all. I want to maybe start with the dividend expectations. For the first quarter there's obviously a lot of moving parts in terms of year-to-date bookings and asset sales, asset acquisitions. You've been helpful in the past and kind of helping us calibrate, you know, directionally at least. Wondering if you can kind of help us synthesize all those moving parts and what our expectations to be of dividend for the first quarter?

I was actually thinking that might be a CFO question but -- you know, obviously we don't give guidance on dividends. The first quarter is not looking at that.

And we have provided a figure of performer cost as of today, including the remaining deliveries for the 4 vessel sales; so it's $112 million pro forma as of today. Amit, you should be only keeping us meaning liquidity, the $2.1 million per vessel that we have on the water right now; so it's now pro forma for the last four deliveries, it's 110 vessels, then you should add a figure of approximately $38 million, which is the dividend that we have just declared to be paid during the following days for Q4. So roughly you can see, you know, how -- what is the remaining excess cash as of today and make your projection for the remaining of the quarter.

Okay.

And working capital -- you know…

Do we expect working capital to be a source or a thing?

Well, more or less it should be slightly negative.

Okay. That's helpful. And if you follow-up on maybe more precise numbers later on. I guess the second question for me; obviously, there is a lot of disruption in the Red Sea. I think there was some reports that maybe a few of your vessels have been kind of under threat in that region. I mean, Hamish or Petros, what do you guys think is going to happen now? Obviously, we've seen containership rates move higher, we've seen tanker rates move higher; is there a synthetic reduction in capacity is occurring as you -- dry bulk vessels go around the Cape of Good Hope [ph]? What are you seeing in terms of the latest for the dry bulk market in terms of what's happening in the Red Sea?

Hi, Amit. Okay. First of all, let me explain the situation about our company. We had two cases of various charters where we asked our charters not to go through then Suez Canal but legally, we could not do that because until that time we did not know about the attacks to the Eagle Bulk and Jenko [ph] vessels. And therefore, we got advised that we had to follow the charter party and send the vessels through Suez; so the first vessel passed and it was attacked three times. Fortunately, it was not hurt; nobody on board nor the vessel. But while that was happening, the second vessel was already passing Suez, so we couldn't divert it. And that has continued and it was attacked again. Going forward, we will not be passing Suez Canal anymore because we are obviously a target of the Houthis having -- being a public company registered in the U.S. So that's -- that was -- I wanted to clarify this so that people know. Now, let me give you a few examples. If you had a vessel in the U.S. Gulf, and you wanted to go to Qingdao [ph] in China, it would be a distance of like that 10,000 miles. But if Panama Canal doesn't work for bulk carriers as it doesn't right now, you would have to go through Suez Canal, and that would be 14,100 miles; therefore 41% longer distance. And when -- and if you cannot do Suez Canal, then you have to go through the Cape which is 15,400 miles, and therefore it's 54% higher -- longer than it would be through the Panama Canal. And then, again, if you are in Rotterdam, you want to go to Qingdao [ph] -- if you go through Suez Canal, it would be 11,000 miles and through the Cape it would be 14,300 miles; therefore 30% longer. So if in theory, no vessel passed through the Suez or Panama Canal and the voyage started in the U.S. Gulf or the continent, that would be like a 35% increase in miles, which basically, is about between 10 and 15 days longer. So on trips that are 50 days long, it would they would become 60 or 65 days longer. So this is the worst possible situation. If you start from Brazil, it would -- you don't have a problem, you just go through the Cape. Or if you start more through the south, same thing. If you are in the Mediterranean, and you don't go through Suez Canal, it's even worse, because you have to go to Gibraltar and all the way around. Therefore -- and because front-hauls or back-hauls are less than the inter-Atlantic and the inter-Pacific or the Indian Oceans trades. I would say that if both canals were totally closed, that would mean an increase in -- a decrease in supply of vessels of about 8%; this is not happening exactly. Of course, through Panama Canal we are not going but there is a lot of vessels that are going through Suez Canal. So I would venture to say that the effect right now of the supply is about -- for both canals would be about 3%, 4% [ph]. Sorry about the long explanation.

Okay. That's very helpful. Thank you, Petros. I guess my last question, and then I'll hand it over. I wanted to ask this to Hamish because obviously, Hamish, you have a very deep corporate finance background. I guess I've just been amazed, you know, if I look at over the last five years, the way you guys have grown -- I think you've added 55, 60 vessels through ship per share deals that were actually struck below the public equity value of the company which is remarkable. And obviously, now you're adding this Eagle transaction; so the promise of this Star Bulk becoming a platform through this low debt structure is coming to fruition. And I guess the only question I had, is there a certain amount of size where you guys just become too big to manage? Or can this thing continue depending on the opportunity to present themselves? So Hamish, I was wondering if you could answer that question. And then, also kind of -- are you seeing greater interest because it becomes a little bit of the snowball effect where more and more of these come -- more and more of these deals get done, maybe more and more come to you as well to -- if you could talk about that?

Well, I mean first of all, from your lips to God's ears; I -- this is how we would love to have everything work out. First of all, let's get the Eagle deal done first before worrying about what to do next. You know, there is a little bit of not wanting to bite off more than we can chew. And we do need to integrate Eagle properly and make sure we keep the best of both companies before we start looking for follow-on deals. But -- you know, look, I don't think there is a specific level at which the company is too big to manage. We are a pretty small company compared to say, a large airline or a large container line. And those companies are quite well managed. And I think Nicos Rescos may have something to say about our ability to manage a fleet of two or four times the size but -- you know, if a container line or an airline can do it, I think we can do it. And we haven't seen an increase in interest yet but I think it's reasonable to think we might once the Eagle deal is closed.

Okay, all right. Thank you. Congrats on all your success, everybody. Appreciate it.

Our next question is from Omar Nokta with Jefferies. Please proceed.

Thank you. Hey, guys good morning -- or sorry, good afternoon. I just wanted to touch on a couple of mixed questions in the back and forth you had. And then also Petros, on some of your opening comments just discussing the market. Clearly, 4Q was a bit stronger than a lot of us were thinking going into the quarter, and then so far 1Q is averaging quite a bit better; definitely than last year but also your bookings to-date are higher here in 1Q versus 4Q. So just wanted to ask, you mentioned that the disruptions that are going on in the Red Sea and the Panama Canal have -- maybe smoothed out a bit of the one/two decline that we normally would see. Obviously, that that seems like the main or it's a big piece of what's happening; but is there also something else happening? Is there demand story that's driving this as well? Or do you attribute what we're seeing in the market here really just due to the disruption?

Hi, Omar. First of all, I should also add the effect that the Ukraine war is having in the market, because there are second not -- does not export any more to closer destinations in Europe but they have to export towards China and India, and therefore, that also has an effect. So all these along with the Panama Canal and the Red Sea, these three inefficiencies are creating a major positive for shipping, and they're affecting the market during a quarter that would otherwise be slow -- be slower. But overall, I would say that -- first of all, I think that these inefficiencies will continue to exist; I don't see them going away very soon. It will have to be several months or even years before we go back to normality. So I think they will continue to support the market for a while. Apart from that, we see a strong U.S. economy, a strong Indian economy. We believe that China will support its economy going forward, and this is very important because during 2023, it was China single handedly that supported the trade. I think that they increased their imports by about 280 million tons, where the Rest of the World was actually negative. So we think China will continue because they have not yet accomplished their goals, along with U.S. and Indian economies, we think that the Rest of the World starts to recover as well. And don't forget the environmental regulations. These are going to affect supply. There's no question about that. And on top of that, we have a relatively low order book at 8.5%. You will be seeing influx of vessels of about 3% to 3.5% every year. We think up to now, there hasn't been much scrapping because the markets are decent. But in the future, they will have to scrap more. So we represent 3%, 3.5% influx and scrapping about 1%, 1.5%. It's -- we may be seeing 2% to 2.5% need for demand. And already, just inefficiencies cover that and go even further than that. So personally, I see for these reasons, I see a strong market during '24 and most probably '25 as well.

Great. Thank you Petros for that detail. And then maybe just wanted to switch gears just on the other topic or one of the topics being the dividend and there's -- and I think Amit was mentioning and clearly that's been happening, which is that you become a bit more dynamic in terms of managing the fleet. It was much easier for me or for us when you had those 128 ships, and it was fairly static and so it was very easy for us to model the dividend. Given the buybacks, I guess, just in general, with you being a bit more active on the fleet front, you're seemingly perhaps more transaction oriented. Any sort of thoughts on squeaking the dividend policy to a percentage of earnings payout or do you like, say, the strategic honesty or clarity of just the ending cash balance approach?

Yes. I think we value the fact that you can't get it wrong if it ends up depending on cash on your balance sheet that you have. A percentage of any other quantity could somehow due to some unanticipated events, not match up with cash that you actually have. So I think you do like this formulation. I feel your pain as far as forecasting it.

But Omar, this is Simos. Just to reiterate again what I said before to Amit, we gave a figure of our cash balance pro forma today as of the delivery of the last four vessels to be delivered within the following months. This is $312 million. On purpose, we said that we are releasing the $2.1 million for minimum cash threshold for the 18 vessels that have been sold. So you may assume that after the delivery of the last vessel, all the proceeds of the sales are used for the financing of the two blocks that we have acquired during the fourth quarter and the repayment of the bridge facility. So the $312 million cash pro forma that we have as of today is the net cash, net of any sale proceeds, and it includes only the $2.1 million threshold for the remaining 110 vessels, the $38 million of cash that we will distribute as a dividend for the fourth quarter and any cash above this is potentially the dividend free cash for the first quarter. So you may start modeling out of this balance the dividend for the first quarter.

Okay, got it. Yeah. Thanks, Rescos, for that color. We'll do that and also thank you, Hamish as well -- and Petros. That's it for me.

Our final question is from Nathan Ho with Bank of America.

I think I'd like to just maybe follow up a little bit more on the fleet strategy, especially post acquisition, how we should be thinking about your fleet size over 2024 and 2025? Obviously, a pretty significant expansion, but still like I think nearly 30% of your current fleet, approximately 15 years and older. How much of a focus is it to source additional vessel sale opportunities from here?

Well, I think we are going to be focused on growth as well as fleet renewal. So I think that the fleet is probably going to be quite dynamic for a while -- basically because we do need to make sure that we sell older vessels at the appropriate time and that we buy newer vessels at the appropriate time and that we enter into business combinations that are attractive to our shareholders. So I don't see us sort of sitting back and relaxing. We do, as I said, have to make sure we do a good job integrating Eagle. But hopefully, that will not take all of 2024.

Got it. Got it. Okay. That's helpful. And maybe just a follow up on both Omar and Amit's questions regarding the Red Sea. How has your conversations with some of the [indiscernible] and insurers been threading ensuring charters through the Suez Canal now. Has that been -- do you see that as like a significant capacity restraint moving forward for, say, other carriers from an economic standpoint to transit across?

Up to a couple of weeks ago, the cost had not gone up that much. Right now, it's gone up a little bit. We are very well-covered at relatively low rates. But as I said, we won't be going through Red Sea so doesn't apply anymore. For whoever it does, I suppose that the more vessels that have shipped to hire the insurance rates that will be asked by the insurers. But overall, the cargo has to go to its destination, and it's a matter of calculation. So let's say, a guy starts from the continent with a charter which has chartered the vessel. He will have to calculate whether it pays off to go through the Cape or through the Suez Canal. As far as -- and with the Suez Canal, he will also have to take into account the potential risks. But just looking at the cost, it's going to be, let's say, 11 days longer through the Cape. So he will have to pay higher and bankers [ph] for 11 days. But through Suez Canal, he will have to pay for the cost of the canal plus the insurance. So as the insurance increases, it's possible that won't make much difference whether it goes through the Cape or through Suez.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

No remarks, operator. Thank you very much.

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.