Genco Shipping & Trading Limited
Q3 2013 Earnings Call Transcript

Published: 7 Nov 2013

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Genco Shipping & Trading Limited Third Quarter 2013 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. We will conduct a question-and-answer session after the opening remarks and introductions will follow -- instructions will follow at that time. A replay of the conference will be accessible at any time during the next 2 weeks by dialing [phone] or [phone] and entering the passcode 1570639. At this time, I will turn the conference over to the company. Please go ahead.

[Unknown Executive:]

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 a 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, the 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, 2012, and the company's subsequent reports filed with the SEC. At this time, I would like to introduce John Wobensmith, the Chief Financial Officer of Genco Shipping & Trading.

[John C. Wobensmith:]

Thank you. Welcome to Genco's Third Quarter 2013 Conference Call. With me today is Peter Georgiopoulos, our Chairman; and Apostolos Zafolias. I will begin today's call by discussing our third quarter highlights as outlined on Slide 3 of the presentation, followed by a review of our financial results for the 3 months period ended September 30, 2013. I will then turn the call over to Apostolos to discuss the industry's current fundamentals. Peter and I will then be happy to take your questions. During the third quarter, we utilized our large and modern fleet to continue to provide multinational charters of high-quality tonnage while maintaining the ability to capitalize on the positive long-term industry fundamentals. We remain focused on preserving an efficient cost structure and effectively managing the company through the current drybulk shipping cycle. Turning to Slide 5. Genco recorded a net loss of $35 million, or $0.81 basic and diluted loss per share, for the 3 months ended September 30, 2013. Genco's cash position, excluding Baltic Trading Limited at the end of the third quarter, was $57.7 million. During the third quarter, we continued to employ a majority of our vessels on short-term or spot market-related contracts with credit-worthy counterparties such as Cargill International, Pacific Basin, Lauritzen Bulkers and others. This opportunistic time charter strategy positions Genco to take advantage of freight rate increases and, combined with our cost-effective operating platform, expand the company's future earnings potential in a stronger drybulk market. Moving to slide 6, we provide a summary of our fleet. Genco's modern and diverse fleet bodes well for Genco to continue to provide its leading customers with service that adheres to the highest operational standards and take advantage of the positive long-term demand for the global transportation of iron ore, steel and other core commodities. Excluding Baltic Trading's fleet, we currently own a fleet of 53 drybulk ships, consisting of 9 Capesize, 8 Panamax, 17 Supramax, 6 Handymax and 13 Handysize vessels, with a total carrying capacity of approximately 3.8 million deadweight ton at an average age of 8.5 years. Turning to Slide 8, I will begin by providing an overview of our financial results for the third quarter and 9 months ended September 30, 2013. Please note that we are reporting our financials on a consolidated basis as a result of our equity ownership in Baltic Trading. For the 3- and 9-month period ended September 30, 2013, we recorded total revenues of $59.4 million and $145.7 million, respectively. This compares with revenues for the third quarter of 2012 and 9 months ended September 30, 2012, of $54.4 million and $177.2 million, respectively. The increase in total revenues for the third quarter of 2013 compared to the prior year period is primarily due to higher charter rates achieved by our Capesize and Panamax vessels, the operation of 2 additional vessels via Baltic Trading and fewer off-hire days for planned dry dockings. The net loss attributable to Genco for the third quarter of 2013 was $35 million, or $0.81 basic and diluted loss per share. The net loss attributable to Genco for the 9 months ended September 30, 2013, was $128.6 million, or $2.98 basic and diluted loss per share. This compares to a net loss attributable to Genco of $38.4 million, or $0.90 basic and diluted loss per share for the third quarter of 2012; and a net loss attributable to Genco of $99.3 million, or $2.40 basic and diluted loss per share, for the 9-month period ended September 30, 2012. Next, on Slide 9, you will see the income statement effects of Baltic Trading's consolidation with Genco Shipping & Trading Limited. This will provide you with a more detailed breakdown of the financial performance of the 2 separate companies. Key consolidated balance sheet and other items, as presented in Slide 10, include the following

[Apostolos Zafolias:]

Thanks, John. I'll start with Slide 14, which points to the drybulk indices. Represented on this slide is the overall Baltic Dry Index. As can be seen on the graph, a slow but gradual rebound commenced in the beginning of the third quarter, while September recorded a new all-time high for Chinese iron ore imports, pushing Capesize rates to a peak of $42,000 per day, the highest level seen in almost 3 years. The leading factors behind the strong increase in trade rates were a combination of moderated supply growth and increased iron ore volumes out of Brazil and Australia on the back of higher Chinese steel production. Overall, although we believe there still remains excess vessel supply in the market, the performance of the Baltic Dry Index illustrates that the declining pace of fleet growth has enabled freight rates to be more responsive to increases in cargo demand as market-wide fleet utilization improves. On Slide 15, we further look into some of the contributing factors to the rise in the BDI and summarize other recent developments in the drybulk freight market. On the demand side, iron ore trade continues to be the focal point of drybulk trade as demand for steel continues to drive increased imports of the commodity into China. Chinese steel production recorded an 8% increase through the first 9 months of the year, leading to a 9% increase of iron ore imports and a new monthly record of 74.6 million tons in September. The increased dependency of imported ore continues to be a positive catalyst for freight rates. Increased volumes were seen from both long ton-mile sources, namely Brazil and Australia, during the third quarter. 112 million tons of imported commodity was sourced from Australia during the third quarter, representing a 22% year-over-year increase. And expansion plans from BHP, Rio Tinto and Fortescue resulted in record quarterly production figures for all the miners. Brazil exported just under 90 million tons of ore during the quarter, recording a 17% increase when compared to the previous quarter and a 9% increase over the third quarter of 2012. At the same time, inventories at Chinese ports have slightly increased to 79.1 million tons, but still stand 9.4 million tons lower than the same time last year as steel production remains strong. Smaller class vessels also saw a relative improvement in earnings during the third quarter. Both Panamax and Supermax vessels benefited from strong demand for Chinese coal imports, as well as strong Atlantic grain movements. On the supply side, we have seen ongoing deceleration of new building deliveries since the peak in June of 2012. For the 9 months to September of 2013, deliveries were 43% lower as compared to the same period last year. Lastly, we believe that as global growth prospects and sentiment in the rest of the world begin to improve, existing vessel availability could be absorbed by traditional raw material importers like Japan, Europe and South Korea. The Bank of Japan recently revised its GDP growth forecast for 2014 to 1.5%, while manufacturing activity and factory output grew at the fastest pace in over 3 years during October. Turning to Slide 16, we outline a number of short and long-term catalysts that we believe will impact the drybulk market going forward. One of these catalysts is expected to be the long-haul iron ore trade from Brazil to China. Since 2010, iron ore exports from Brazil have peaked in the fourth quarter of every year. Although iron ore prices through the third quarter have remained at around $130 per ton, limiting arbitrage opportunities, we continue to believe that incremental ore capacity entering the market could result in the displacement of Chinese domestic ore with imported ore. Brazil and Australia also produce higher-quality ore than China produces domestically. As a result of the Chinese government attempting to reduce emissions, higher-quality raw materials from international sources are likely to be in greater demand. On the coal front, we believe that the return of Colombia to the export market, following the Drummond strike during the third quarter, will result in a strengthening of exports for the remainder of this year and into 2014. Additionally, we consider the Indian coal trade to be a significant catalyst moving forward. To date, India has experienced substantial increases in steam coal imports as electricity needs rise. According to Clarksons, India's steam coal imports are projected to rise by 17% in 2013 to 143 million tons. Going forward, we also believe that India's increased steel production could result in higher coking coal imports due to lack of high-quality domestic reserves. On the supply side, scrapping of older tonnage and slippage of new building contracts remain important factors of slowing fleet growth. 18.2 million deadweight ton was demolished year-to-date as compared to the 33.6 million deadweight ton for the entire year of 2013. On Slide 17, we talk more about the demand side fundamentals. September was another strong month for steel in China as monthly production increased by 11% year-over-year to 65.4 million tons, bringing year-to-date steel production to 587 million tons. The large increase has predominantly been driven by firm infrastructure investment and real estate development. Although preliminary production data for October shows a slight decline in steel production, steel stockpiles have also reduced and prices have stabilized. Steel production is expected to be approximately 780 million tons in 2013 and forecast to be over 800 million tons in 2014. Japan and India also experienced a healthy growth in steel production during September, increasing by 5.5% and 4.7%, respectively. Japan Ministry of Economy, Trade and Industry forecast Q4 2013 production to increase by nearly 10% year-over-year, helped by rising domestic ore demand. The World Steel Association projects India's steel demand to grow by 5.6% in 2014, aided by attempts to implement structural reforms. Moving on Slide 18. On the left side of the page, we show the expansion plans of key iron ore producers as recently revised by the respective companies. The combined expansion plans through 2017 aggregate to 395 million tons per annum, or approximately 36% of 2012 seaborne ore trade. Most of the projected growth in export capacity in 2013 and '14 is expected to come from Australia, specifically miners Rio Tinto, Fortescue and BHP. As a result, Australia's Bureau of Resources and Energy Economics forecast an increase in iron ore exports of 16% in 2013 and 17% in 2014. As more iron ores comes to the market and the price arbitrage potentially widens, we believe Chinese domestic producers are going to have a difficult time competing internationally, particularly due to their high production costs and the low grade of domestic ore. On Slide 19, we discuss the trends in supply side fundamentals. As seen on the bottom left of the page, the current order book for 2014 to 2016, less contracts prior to 2009, is 14% of the fleet. It is our opinion that newbuilding vessels contracted prior to 2009, which totaled 15.6 million deadweight ton, or 12% of the total order book, have a low likelihood of delivering at this point, given the involved market nature of these contracts, as well as the difficulty to obtain financing. Additionally, it is our view that availability for 2015 deliveries at high-quality shipyards is limited as there are few slots remaining, if any, at the current time. This development would help with the ceiling on the order book through 2015 and limits the growth to just existing orders over the next 2 years. Lastly, we know that although excess vessel supply remains a factor in the market, slowing fleet growth coupled with projected demand growth are encouraging signs towards reestablishing a more balanced long-term supply and demand equation. This concludes our presentation and we would now be happy to take your questions.

[Operator:]

[Operator Instructions] And we'll take our first question from Doug Mavrinac with Jefferies.

[Douglas J. Mavrinac:]

I just had a handful of follow-ups, with the first one being the last point Apostolos made as it relates to excess vessel supply. Since -- we've seen the improvement in rates and I think it's pretty clear that, based on your presentation, that demand growth should exceed supply growth for the foreseeable future. So I think that's pretty clear and laid out. But as it relates to excess vessel supply, have you guys, as a shipowner, begun to receive request from charters to quit slow steaming and to speed some of the vessels up? And as it relates to that, what are some of the variables that go into the decision-making on the part of charters as far as when do you speed up, how fast do you go and all that sort of stuff?

[John C. Wobensmith:]

Honestly, Doug, we haven't really had any requests from charters to speed up yet. Our Capesize vessels are definitely slow steaming. I would say they're almost ultraslow steaming, running between 10 and 11 knots. We haven't seen any speed up in those ships yet. As far as what goes into it, clearly, the cost of bunkers, or the price of bunkers, goes into that calculation. I think the number is, if you do the math, is somewhere in the low 30s as to -- in terms of Capesize charter rates, in terms of when it makes sense to speed up. But again, even when we saw charter rates hit 40, we still didn't -- we didn't see that happen. The interesting thing is that's obviously very elastic, meaning if we do speed up, yes, it's possible that it keeps a little bit of a ceiling on rates, but then your congestion goes up, so that's a mitigant. And as soon as they drop back down, you know people are going to slow down again. So we haven't seen it.

[Douglas J. Mavrinac:]

Yes. Well, what I actually was going to say is that it sounds like it could provide a floor for rates just being in a higher fuel price environment than we were at. So whenever people were looking at historical charter rates, high fuel cost price environment has an impact on what those rates could be going forward. I mean, does that sound about right, that fuel cost...

[John C. Wobensmith:]

Yes. We agree.

[Douglas J. Mavrinac:]

Yes. Okay. Got you, got you, got you. And, John, you mentioned just now that you haven't seen much of a -- or maybe I'm inferring, that we haven't seen much of a change in port congestion either?

[John C. Wobensmith:]

That's correct.

[Douglas J. Mavrinac:]

Okay. Got you. As it relates to being a shipowner and your interactions with charters and given the improvement that we've seen in spot rates over the last 3 or 4 months, have you guys started to see an increase in interests or increase in inquiries from charters to say, "Hey, are you guys -- do you have any available ships put away on a 1-year charter or a 3-year charter?" And even if you're not saying, "We want to lock-in at these levels," are you at least seeing an increase in inquiry levels? Or are they not there yet?

[John C. Wobensmith:]

No. You're definitely seeing an increase in inquiry levels and I think it's -- if you look at what some others have done in the market, you're seeing 3-year deals get done again. Certainly, 2-year deals, which we haven't seen for quite a while.

[Douglas J. Mavrinac:]

Got you, got you. Very helpful. And then just final question before I turn it over. I know you guys can't talk about your ongoing discussions with your banks, but just as it relates to the commercial lending market in general, not your guys but just lenders that you speak with or that you interact with, has their mood improved with the improvement in the market? I mean, obviously, we're seeing some shipowners ordering new ships and investors are bidding up the stocks. So SINAM has gotten better amongst those participants in the market. Would you say the mood amongst lenders is equal to that amongst some of the shipowners and investors? Or are they still kind of looking back and seeing how bad things were 3 or 4 years ago?

[Peter C. Georgiopoulos:]

I think they're still conservative.

[John C. Wobensmith:]

Yes, I agree. But they, like everybody else, see what's going on in the market. But I think it depends on the bank, too. There are still a lot of banks with their own balance sheet issues who are going to have different views from some of the banks that have strong balance sheets.

[Douglas J. Mavrinac:]

Got you. Yes. So even though asset values are appreciating, it's an ongoing work in progress, it sounds like?

[John C. Wobensmith:]

It is. But like I've said, the banks see most of the -- well, they see a lot of the same information we did. They certainly see some asset prices. That's not lost on them.

[Operator:]

We'll take our next question from Justin Yagerman with Deutsche Bank.

[Taylor Mulherin:]

This is Taylor Mulherin on for Justin. So obviously, you're definitely more incrementally positive on just the market in general going forward and it makes a lot of sense considering the order book and all that. I was a little bit...

[Peter C. Georgiopoulos:]

If you remember, if you remember on our last quarter call, we told you that we felt there was going to be a turn in the market in the third quarter. And we were pretty confident about that and I think we were proven correct. Anyway, sorry to interrupt.

[Taylor Mulherin:]

Oh, absolutely. You get to brag about that one. I was curious -- as a follow-on to that, what are your thoughts on sort of the first half of 2014? Because when I'm looking at FFAs, it's still indicating in the $10,000-per-day range in Q1. And I was sort of curious what your thoughts are more in the short term.

[Peter C. Georgiopoulos:]

We feel confident about the first half of next year. The problem with the FFA is it's such a thin market that they sometimes don't really reflect what is going to happen in the next several months. I don't know, John, do you want to add anything?

[John C. Wobensmith:]

Yes. I mean, look. I think it's fair to say that seasonally, first quarter should be a little softer, but I think there are some things you have to pay attention to. And that is the fact that iron ore inventories are nowhere near what they were at this time last year. I think there is 23, 24 days of iron ore inventories, which is on the low side. So it's not a situation like last year where there were high inventory numbers and you saw a rundown in the first quarter. I also think you have to keep an eye on what happens as far as weather-related issues in Brazil and Australia. And that's impossible to predict, right? So and as Peter said, listen, going a couple of months out on the FFA curve is fair enough, but going more than a quarter, I think the liquidity is not there. So look, we don't think it's going to be as bad as what the FFAs are indicating. I guess that's the point.

[Taylor Mulherin:]

Okay. You talked in your last question about how the market is -- the market for 2- or 3-year charters is picking up. At what point would you, as a company, become more interested in those longer-term charters? Is there a specific rate or a specific time period that you think the market would be more conducive for doing that?

[John C. Wobensmith:]

I wouldn't say there's a specific rate. But as we said on the call, we think this is the first inning of a recovery. So we're not in any mindset to start putting ships away for long-term charter right now.

[Taylor Mulherin:]

Okay. And my last question was just about scrapping. Obviously, a lot of the slowing pace of the Capesize fleet is from the order book. But I was just sort of curious what the relationship you're seeing between your expectations for improving Cape rates and scrapping. I would imagine that would go down a little bit as long as you want to hang on to some of those older ships?

[John C. Wobensmith:]

I think that's right. But keep in mind, a 20-year-old Capesize still takes a hell of a lot of money to get it through a special survey. And certainly, the price of steel has remained firm. So and there's a lot of steel replacement that goes into usually that 20-year-old Cape at that time. Look, I mean, I think it's fair to say the scrapping is going to slow down a little bit on Capes. But there are still quite a few out there that need to be taken out of the fleet and I think they will. The good news is scrap prices continue to be, again, continue to be firm. You've got 13%, almost 13% of the Capesize fleet that was built 1995 or earlier. So there is still a good piece of the fleet there that's getting overaged.

[Operator:]

And we'll take our next question from Chris Weatherbee with Citibank.

[Christian Wetherbee:]

John, can you comment at all about the potential timing of getting something done on the bank side, or are you sort of keeping that completely off-limits for the call today?

[John C. Wobensmith:]

Look, we're in active discussions with the banks. But beyond that, not going to comment. But look, I think everybody is aware that come March 31, 2014, we have covenant measures that come back into place and there is also a large amortization payment of $48.5 million due on March 31 of next year. Clearly, we are paying attention to that. And as you know, we don't sit around until we have an issue staring us in the face. We try to be proactive on these things.

[Christian Wetherbee:]

Sure. That makes sense. Switching gears just to the asset side. When you think about the fleet, you have some vessels that are sort of getting into the mid-teens on an age basis. And for the first time, sort of thinking about how you may approach what is a potential sale -- or how do you think about some of the older vessels in you fleet, kind of bigger picture, if you think out over the next couple of years? Are they assets that would be interested in selling as you go into maybe a better rate environment? Or is it something that you sort of hold on to and "more play for the charter" angle? I guess I'm just kind of curious what your thoughts are there.

[John C. Wobensmith:]

Look, I mean, we haven't discussed selling any of these ships. We'll have to see what happens as the market improves and asset prices move up, whether it makes sense to sell some of these and trade for newer ships. I think that's a little down the road. But having said that, I've got to tell you, our -- the Panamaxes and the Handymaxes that are sort of 1998-, 1999-built ships, they're all Japanese built, very -- I mean, they're good ships. They're earning well. Most of them are earning 100% of the indices, which goes to show you their performance. So from a cash flow basis, we're very happy with them.

[Peter C. Georgiopoulos:]

And we've always believed in having sort of a balanced -- more of a portfolio approach. You have some older ships that have a lower capital cost that help support modern stuff. They're earning -- they roughly earn the same cash flow, whether it's a brand-new ship that you paid a lot of money for or an older one that you've written down. And so we think that those older ones will support with cash flow our ability to buy some new ones. So what we do over time is the cash flow builds up from the older ships, we buy some newer ones. And then as time goes on, you eventually get out of the older ones. I mean, it's something we've done here at Genco. We've done it at GenMar, we've done it for many years.

[John C. Wobensmith:]

Yes. And also, keep in mind, on the maintenance side, Chris, we're the second owner of these ships. I mean, all these ships were built originally for COSCO. So you don’t have a situation where we've bought a ship that's traded hands 6 or 7 times, which is typically where you can have maintenance issues. So COSCO did a good job with them, we're obviously doing a good job with them and we're happy.

[Christian Wetherbee:]

Yes. And you can see from obviously the maintenance expense, I guess there's no sense of urgency as far as getting rid of these things because they're performing well.

[Peter C. Georgiopoulos:]

Right.

[Christian Wetherbee:]

That certainly makes sense. And then just one kind of final bigger-picture question. Just what do you think about the rate environment? Clearly, the supply/demand dynamic is better now than it's been in quite a while. When you think about sort of the pace of potential rate improvement -- I think I've asked you this question before, but I'm just kind of curious when you think out into '14, it's impossible to sort of like judge the magnitude, but I'm kind of asking you to maybe put your -- look into the crystal ball here a little bit and give us a sense of where you think rates could go, or what sort of is the threshold for improvement? Are there any mitigating factors that allow us to see sort of rates going back to maybe some of the long-term averages, which are clearly above where we've been trading the last 12 or 18 months?

[John C. Wobensmith:]

Look, we don’t want to go too much out on a limb, but $30,000 a day for Capes for a mid-cycle rate, I think, is very achievable in the medium term.

[Operator:]

[Operator Instructions] We'll take our next question from Andrew Casella with Imperial capital.

[Andrew Casella:]

Just quick, 2 financial ones. If you could break out the $57.7 million of cash between unrestricted and restricted and just remind us what are the restrictions on that balance?

[John C. Wobensmith:]

Yes. I mean, let's actually go further on that. We have a minimum cash requirement that's measured each -- at the end of each quarter that is approximately, call it, $40 million. It's $39.7 million, $39.8 million versus the $57.7 million that's on the balance sheet.

[Andrew Casella:]

So the $39.7 million is the restricted number and then whatever is remaining between that and the stated amount is unrestricted?

[John C. Wobensmith:]

Yes. The $39.7 million is the minimum cash requirement that's required by all the banks measured at the end of the quarter.

[Andrew Casella:]

All right. Great. And then just a quick follow-up. I obviously know you're sensitive to the bank conversations, but is there any color you could provide as far as what are the options being evaluated? Is it potentially asset sales and ATM? Is there any color you could provide the market?

[John C. Wobensmith:]

No.

[Operator:]

And we'll go next to Michael Webber with Wells Fargo.

[Michael Webber:]

Just a couple of balance sheet questions, then a couple of accounting questions. You already touched on the bank situation a bit and we've obviously had some very big chunks of bank that changed hands very recently, which would certainly kind of speak to your initial point that they seem to remain conservative. John, you said you're just -- basically, you guys are still just in ongoing conversations with your banks. I'm curious, when you say that, does that include non-traditional lenders that now might own your bank debt? And has that conversation kind of broadened, with the salient point being do you need that consent as well now?

[John C. Wobensmith:]

I mean, Mike, I think it's fair to say when I say bank senior lenders, it's anybody who owns that debt.

[Michael Webber:]

Okay. All right. That's helpful. If you kind of look at the -- like Q2, Q3, we've seen almost, it seems like the majority of the drybulk universe go out and raise equity, including Baltic and yourself. Can you maybe walk us through the thought process of not trying to cap that equity market when Genco was kind of peaking; and how you guys came to a decision to raise equity of Baltic and not Genco?

[John C. Wobensmith:]

Look, Genco, as we've said, we are in the middle of having discussions on restructuring the balance sheet. I think it would be difficult to actually go and raise equity at Genco without having a clear picture on what that restructuring is going to look at -- like. In terms of Baltic, again, as we said, we view Baltic as -- because of its balance sheet situation as a growth vehicle, we have found some attractive acquisitions in the market and we've used a combination of equity and debt to finance those acquisitions. Pretty clear.

[Michael Webber:]

Okay. No, that's fair. You guys, within the release and -- forgive me, I'm out of pocket and this might be in the deck that I'm not looking at, but it seemed like the drydock schedule for '14 was a bit heavy and that might just be a function of some lumpy weak growth, growth in the past, with anniversary dates all kind of coinciding. But was any of that kind of a conscious decision to either -- to maybe kind of gain your market exposure and you kind of pull some of that forward, or is that just a function of anniversary dates?

[John C. Wobensmith:]

Truly a function of anniversary dates. I mean, it's -- there were actually a couple of ships that we pulled into fourth quarter of 2013, 3 to be exact. But yes, I mean, we don't a ton of control over when these actually have to go in. And we have a little bit of control and we obviously want to accommodate charterers to make sure it fits into their schedule, but that's maybe 1 month or 2.

[Michael Webber:]

Got you. Is there any specific yard or geography that you guys tend to run your drydocks?

[John C. Wobensmith:]

Yes. I mean, we've been doing 100% in China over the last few years. I can only recall 2 drydockings that were not done in China and they were done many years ago. And we've got relationships with 4 or 5 yards over there. And as you know, we negotiate directly with those at the company and we get good terms and we've been very happy with the work.

[Michael Webber:]

Got you. Fair enough. Just one more from me and I'll turn it over. I think your commentary earlier on around not seeing an uptick in speed was really interesting. When rates kind of peaked at 40k, we kind of ran straight into that Golden Week holiday and it kind of got chopped down and it kind of stayed there. And this might be a little difficult to answer, but just based on your ongoing conversations with counterparties, if we would have stayed at 40k for the period of [indiscernible] long-haul [indiscernible] lengths or maybe 2, do you think we would have seen an uptick in speed, or is that -- and if not, where do you think that rate would be, that we would actually see a meaningful uptick in speed?

[John C. Wobensmith:]

I mean, I think, first of all, we never really had any pointed conversations with charters. But I will speculate that, yes, if rates had stayed at 40 for a while, we would have seen some pickup in speed. Definitely. Again, I think that inflection point is somewhere in the low 30s, basis the math that we've done on it and current bunker prices.

[Operator:]

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

[John C. Wobensmith:]

Thank you.