Pacific Basin Shipping Limited (2343.HK) reported strong freight rates for its Handysize and Supramax vessels in the third quarter of 2024, with rates remaining above historical averages. However, the company expressed caution about the outlook for the fourth quarter and early 2025.
Key Takeaways:
• Q3 2024 average rates: $11,700 for Handysize, $13,820 for Supramax
• Year-on-year rate increases: 53% for Handysize, 45% for Supramax
• Q4 2024 projected rates: $11,390 for Handysize, $13,040 for Supramax
• Q1 2025 expected rates: $9,510 for Handysize, $11,080 for Supramax
• Global minor bulk loadings rose by 2%
• Ongoing $40 million share buyback program
Company Outlook
• Cautiously optimistic about China's fiscal stimulus impact on dry bulk market
• Anticipates modest improvements in Q4, driven by Handysize performance
• Expects challenges in Supramax segment to continue in Q4
• Plans to maintain flexibility in cover for Supramaxes
Bearish Highlights
• Supramax underperformance in Q3 due to overextended cover
• Ongoing property market issues in China
• Slow overall growth in China
Bullish Highlights
• Strong performance in Handysize segment
• Increased activity compared to last year, with strong margins
• Normalization of Panama Canal operations benefiting U.S. grain exports
• Potential introduction of global CO2 levy by IMO supporting transition to low-emission vessels
Misses
• Supramax segment underperformed expectations in Q3
Q&A Highlights
• Addressed concerns about excess cash and capital allocation
• Discussed impact of Middle East conflict on shipping routes
• Commented on low scrapping rates and aging fleet concerns
• Explained strategy for maintaining operational flexibility
Pacific Basin Shipping Limited reported strong freight rates for its Handysize and Supramax vessels in the third quarter of 2024, with rates remaining above historical averages. The company's CEO, Martin Fruergaard, highlighted that Handysize and Supramax freight rates averaged $11,700 and $13,820 per day, respectively, representing year-on-year increases of 53% and 45%.
Looking ahead, Pacific Basin projects Q4 2024 rates at $11,390 for Handysize and $13,040 for Supramax, while Q1 2025 is expected to see rates of $9,510 and $11,080, respectively. The company has covered 74% and 84% of their Q4 vessel days at $12,570 and $12,190, respectively.
Fruergaard expressed cautious optimism about China's fiscal stimulus and its potential impact on the dry bulk market, despite ongoing property market issues. He noted that while overall growth in China is slow, commodity imports remain historically high, particularly in the steel sector.
The company reported an increase in global minor bulk loadings by 2%, with significant increases in bauxite (19%) and agribulk (11%). Iron ore loadings were boosted by Brazilian exports, despite low domestic steel demand in China.
Pacific Basin is continuing its $40 million share buyback program, which commenced in May 2024. The company has repurchased about 105.8 million shares for approximately $31.7 million and plans to continue this buyback until December 31, 2024.
Addressing the Supramax underperformance in Q3, Fruergaard attributed it to taking too much cover earlier in the year, which affected their ability to capitalize on market fluctuations. He anticipates modest improvements in Q4, driven primarily by strong performance in the Handysize segment.
The company is focused on fleet renewal, having sold 24 older vessels since 2021 and pursuing long-term charters for new, efficient vessels to enhance operational efficiency and support decarbonization goals. In the third quarter of 2024, Pacific Basin took delivery of a new 40,000 deadweight Handysize vessel from Japan under a long-term charter agreement.
Fruergaard also discussed the impact of the ongoing Middle East conflict on shipping routes, noting the normalization of transit through the Panama Canal while acknowledging challenges related to the Suez Canal. Recent disruptions in Suez Canal transit are expected to increase tonne-mile demand.
In conclusion, while Pacific Basin reported strong Q3 performance, the company remains cautious about the outlook for Q4 2024 and early 2025, particularly in the Supramax segment. The company continues to focus on fleet renewal and operational flexibility to navigate market fluctuations.
Full transcript - None (PCFBF) Q3 2024:
Operator: Welcome to today's Pacific Basin 2024 Third Quarter Trade Trading Update Conference Call. I am pleased to present Chief Executive Officer, Martin Fruergaard for the first part of the call. All participants will be in listen-only mode and afterwards there will be a question-and-answer session. Mr. Fruergaard, please begin.
Martin Fruergaard: Yeah, thank you. And welcome, ladies and gentlemen, and thank you for attending Pacific Basin's third quarter trading update call. We assume you have already reviewed the presentation so I will take a moment to briefly highlight some of its key points before moving on to the Q&A session. Please turn to Slide 3. During the third quarter of 2024 Handysize and Supramax freight rates were again above historical average for this time of the year. Despite uncertainties associated with global trade and economic growth, elevated interest rates and conflict in Ukraine and the Middle East, increased demand for grains, minor bulk and iron ore, has supported market freight rates which have shown limited seasonal volatility due to fleet inefficiencies from disruption in the Suez and Panama canals. Market spot rates for Handysize and Supramax vessels averaged $11,700 and $13,820 net per day respectively, representing an increase of 53% and 45% respectively compared to the same period in 2023. As of October 11, the Baltic Exchange Forward Freight Agreements indicate Handysize rates for the fourth quarter of 2024 at $11,390 net per day while Supramax rates are $13,040 net per day. Looking ahead to the first quarter of 2025, Handysize rates are, according to the Baltic Exchange, projected to be $9,510 net per day and Supramax rates will be $11,080 net per day. Please turn to Slide 4. Global minor bulk loadings were approximately 2% higher in the third quarter of 2024 compared to the same period last year. Loadings of bauxite, agribulk and fertilizer increased by 19%, 11% and 2% respectively while ores and concentrates and aggregates were the largest detractors, falling by 8% and 7% respectively. In the third quarter of 2024, global iron ore loadings increased by 1% year-on-year mainly due to record loadings from Brazil on long-haul voyages to China. Brazilian loadings rose by 3% compared to last year thanks to better operational efficiency, reopening of new capacities and new projects. China's domestic steel consumption is low due to reduced domestic property sector demand. The surplus steel is being exported in record volumes mainly using Supramax vessels to Southeast Asian destinations. In the first eight months of 2024, Chinese steel production declined by 3% while exports increased by 21% in the first nine months and by 16% in the third quarter. In the third quarter of 2024, global coal loadings remained flat year-on-year. This was due to a 9% increase in Indonesian loadings supported by favorable weather and a higher production quota. China's coal demand stayed high despite high domestic production and improved hydroelectric output. Coal loadings to India rose by 3% driven by strong economic growth and high electricity demand. Finally, global grain loadings in the third quarter of 2024 were 6% higher than the same period in 2023 with Argentina and the United States increasing their loadings by 51% and 33% respectively. Brazilian loadings fell by 8% due to delay in corn loadings caused by low water levels in the Amazon (NASDAQ:AMZN) River. Ukraine grain loadings surged by an impressive 367% compared to the same period in 2023, though they were still 24% lower than in 2021 before the military conflict began. Please turn to Slide 5. In the third quarter of 2024, our core business generated average Handysize and Supramax daily time charter equivalent earnings of $13,740 and $12,220 net per day respectively. This represents a year-on-year increase of 35% and 6% for Handysize and Supramax respectively. For the fourth quarter of 2024, we have covered 74% and 84% of our core committed vessel days at $12,570 and $12,190 per day for Handysize and Supramax respectively. In the fourth quarter of 2024, we anticipate reversing the provision made in relation to prior period freight tax. These reversals are expected to positively influence Handysize and Supramax TCE earnings for the fourth quarter of 2024. While the reversal of the provision is subject to certain conditions and adjustments, it is expected to be a lower amount than the reversal made to the TCE earnings for the same period in 2023. We are focusing on optimizing short-term earnings while increasing our overall 2025 coverage. For the first quarter of 2025, we have covered 19% and 29% of our core vessel days at $10,170 and $12,590 per day for Handysize and Supramax respectively. This period is usually softer due to the northern hemisphere winter and Lunar New Year celebrations. We have many open days for 2025, enabling us to benefit from stable market spot rates. Limited transit of dry bulk vessels through the Suez Canal should support ton-mile demand and freight rates. Additionally, Chinese fiscal stimulus is expected to support commodity demand, further supporting the market. Our own fleet with substantial fixed cost is the main driver of our profitability, with an approximately cash breakeven level excluding general and administrative overhead and excluding dry docking costs for Handysize and Supramax vessels of $4,620 and $5,120 per day respectively in the first half of 2024. We continue to generate healthy cash flow at current freight rate levels. Please turn to Slide 6. In the first quarter of 2024, we outperformed the Handysize spot market index by $2,040 per day, but underperformed the Supramax spot market index by $1,600 per day. Our Supramax underperformance was due to the higher cost of chartering short-term for vessels needed for our higher near-term cargo coverage in the Pacific, as we couldn't optimize our fleet balance between the Atlantic and Pacific Basin. In the third quarter of 2024, the scrubber installed on our 33 core Supramax vessels contributed $460 per day to our outperformance. Additionally, the scrubbers fitted on our four core Handysize vessels added $40 per day to our outperformance. Our operating activity contributed positively, with margins improving sequentially. In the third quarter of 2024, we achieved a margin of $1,300 per day over 6,950 operating days. We currently operate around 154 short term chartered vessels, aim to increase operating days and maintaining positive margins year-on-year. Our operating activity complements our core business by matching customer spot cargos with short-term chartered vessels, making a margin and contributing to our result in both weak and strong markets. Please turn to Slide 7. Since the commencement of our $40 million share buyback program in May 2024, we have repurchased approximately 105.8 million shares for a consideration of about $31.7 million. During the first quarter of 2024, we repurchased approximately 54.9 million shares for a consideration of about $14.5 million, capitalizing on the weakness in our share price over the period. By proactively choosing to repurchase our own shares at a significant discount compared to the intrinsic value of our assets, we currently recognize it as a more advantageous strategy compared to acquiring second hand vessels. We continue to finance the buyback of our shares through our available cash flow and internal resources, while maintaining sufficient financial resources for the continued growth of our operations. This share buyback program is intended to continue until 31 of December 2024. Please turn to slide 9. We are anticipating an ongoing disruption to Suez Canal transit, which will impact fleet efficiency and increase tonne mile demand. On a positive note, there's a broad-based increase in demand for minor bulks, including cement and clinkers, metals and ores, agribulk, fertilizers, and steel. We're also expecting a rise in bauxite production from Guinea, with most of the export heading to China. However, reduced Chinese domestic housing construction is likely to limit iron ore demand for steel production. The global shift towards renewable energy is expected to decrease overall coal demand, although there is still a robust demand driven by energy security concerns in China, India and Vietnam. Climate change are expected to continue affecting domestic crop output, which may lead to increased grain trade volumes. Additionally, the rising global demand for diversified diets and protein will continue to stimulate import demand for feed grains and soybeans. Please turn to Slide 12. We continue to monitor developments in the Red Sea (NYSE:SE) and the Gulf of Aden, which remain complex and a safety concern for shipping. This has added to tonne-mile demand, as vessels are being rerouted on longer voyages to avoid this key transit route. To minimize the risk to our seafarers and vessels, we will continue to take the much longer routes around Africa. Meanwhile, the Panama Canal has experienced increased rainfall in recent months, boosting water levels and leading to an increase in transit and normalized vessel waiting time. Please turn to Slide 14. Due to the rise in vessel prices and our goal to further decarbonize, we have been selling our older vessels. Since 2021, we have sold 24 older vessels, including 22 Handysizes, one Supramax and one Ultramax, all at attractive prices. During the first quarter, we sold two of our older Handysize vessels, taking advantage of historically high prices of secondhand vessels. Our fleet is expanding with the addition of larger and more efficient Handysize and Supramax new building vessels. Since 2021, we have purchased 20 modern secondhand vessels, compromising six Handysize and 14 supra/ultramax. This year, we also declared our intention to exercise a purchase option on one 58 deadweight Japanese built Supramax vessel built in 2016. We continue to maintain discipline in our approach to acquire high quality modern secondhand vessels to renew our fleet. We believe there's financial benefits in investing in dual fuel low emission vessels, which will offer market leading operational efficiency to our fleet while enabling us to gradually decarbonize. In 2024, we will assess our readiness to commit to ordering such a design, ensuring delivery well in advance of our initial 2030 targets. This strategy will not only align with our sustainability goals, but also position us at the forefront of innovation in the industry, enhancing our competitive edge and demonstrating our commitment to environmental responsibility. Please turn to Slide 15. In addition to acquiring vessels from a secondhand market, we can grow our core fleet through long term inwards charter of vessels that showcase the latest Japanese design, provide maximum fuel efficiency, and in some cases are equipped with scrubbers. Long term chartered vessels offer options to extend the charter agreement period at fixed rates and/or purchase the vessels at a predetermined price. Extension and purchase options provide optionality as market develop, allowing us to exercise if we see value. In the third quarter of 2024, we took delivery of a long term chartered 40,000 deadweight Handysize vessel, a new building from Japan. We await the arrival of the first of our four long term chartered 64,000 deadweight Ultramax new buildings and the third of four long term chartered 40,000 deadweight Handysize new buildings for delivery in the fourth quarter of 2024. In 2025, we have the opportunity to exercise purchase options on four Japanese built Handysize vessels, allowing us to acquire these vessels at prices below the current market value for these type of secondhand vessels. Ladies and gentlemen, that concludes our third quarter trading update presentation. I will now hand over the call to our operator for Q&A. Thank you.
Operator: We will now begin the question-and-answer session. [Operator Instructions] We have one question. Parash, would you like to ask your question?
Parash Jain: Sure. Thanks. Thanks, Martin, for the presentation. I have a few questions, but if I may start with, and some of them would be probably your guess would be as good as mine. But first to start with, in the dry bulk space, do you find optimism around the China stimulus since the end of September? And if so, where can you see the brightest spot as an early lead indicator? My second question is where we stand today, is it too early to gauge barring unforeseen situation, based on current demand and supply dynamics, 2025, will it be somewhat similar to 2024, better or worse? And my last question would be, and which you alluded in your previous call also, it seems like excess cash is chasing too few slots. For the new built asset prices at current freight rates return are suboptimal. How shall we think about your capital return CapEx policy going into 2025, including shall we expect a continuation of buyback or shall we see this more as one-off? Thank you.
Martin Fruergaard: Yeah, thank you, Parash. A few questions here. Let's see if I remember them right. First of all, the optimism in respect to China and of course, the China fiscal support that they are talking about. I think first of all, I would say about China, the thing that always surprises us a little bit is that they are a little bit -- of course, things are slow in China when you sort of look at the property market, at these things. But when we look at the commodity, the dry cargo commodity, they keep surprising us positively. So I think it's important for all to understand that in that sense, when you look at the dry cargo commodities going to China, they're still at historical high level, even though I think everybody speaks about China with low growth. And it is, of course, low growth when we talk 5% or whatever it's going to be. I think the way we look at it is that China is probably not out of whatever crisis, if we can call it that, where 5% growth is quite impressive still. But I think we all believe there's more to do. And I think that will require some fiscal support by the Chinese government. So I think the positive thing is that they are talking about this and they seem to be willing to do that. I think it's too early for us to say what impact. We can't see any sort of direct impact yet on that part of it. And I think for the minor bulk side of it, I think it would definitely be a good thing if they could solve the property issues and then get that market up driving again. I think that would definitely be very positive for the dry cargo segment. But I would say if you talk about the fiscal support they're talking about, I just don't think we have seen the real support for that. What we have seen, of course, is on the supra/ultra maxes, especially on those, the steel export has, of course, been very, very high. And it's also been part of actually driving the market in the Pacific, which has actually historically has been higher than the Atlantic, which is quite unusual. That has also been part of the cause for our issues on the outperformance or underperformance of our supras. But of course, we benefit from the steel export out of China. It's good for our Supramax business. I think on the demand supply, when you look at 2025, that's, of course, also the question we ask ourselves. I think if you make a list of pros and cons and so on, I think it adds up a little bit. So we do see some, if we want to, we can see some downsides. But on some uncertainties, we have an election in the U.S., we have some potential and ongoing trade tariffs being implemented around the world. The positive side, probably a lower interest rate, which usually is quite good for commodities and for the world growth and so on. So I think we see a lot of pluses and minuses in it. And of course, I think we can see container market might reduce a little bit at the moment, but we do constantly see these fluctuations in the market. So I think we are modestly positive about 2025, how that looks at the moment. And I think the first quarter will be very interesting to follow. I think the good thing for us this year is that the Chinese New Year is already in January. So even if you have normally the lower market early in the year, it might actually only be very short. One of the things we're discussing a lot is this lack of seasonality that we have had this year, will that continue next year? And it might do actually because of the Red Sea and the ongoing crisis in the Middle East and so on. So I think there's a lot of good questions for next year. I think, as we also say, we are focusing on taking copper, at least for first quarter, just to have a little bit more of that, just to make sure we do the right thing. But I think also this year, we didn't see the seasonality we had previous years. So of course, you can be a little bit in doubt on how that's going to be. The last one, the excess cash and our capital allocation. So nothing has changed for us. We still have the same policy that at least 50% we will pay out in dividends or we can also do some share buybacks in that part. So it hasn't changed. And as I always say, it's, of course, up to the Board to decide what to do on that side. I think it's clear, and I also said that last time, that if we can't find investments opportunities, and we have been, I think, very disciplined in not buying secondhand ships at what we consider high prices. If we don't do that and we have excess cash, I think we have, as I think we've done this year, I think with the buybacks and the dividends we have paid out this year, it will be more than $100 million. I think we have shown that that's probably what we will continue to do if we can't find other investments. That being said, we, of course, once we would like to grow and, of course, invest in new ships. The thing is, of course, on CapEx, the one that eats most cash is, of course, secondhand ships. And they are still very high and actually probably would be, as we also say, better to do share buybacks than buying secondhand ships at these levels. Even if we did new buildings, Parash, it will only be -- we only have to pay a down payment on that. And, of course, not small money, but if we did that, it's not going to be a lot of money. So the real driver of cash out -- of CapEx is, of course, buying secondhand ships.
Parash Jain: That's very, very helpful, Martin. Thanks and all the best.
Martin Fruergaard: Thank you, Parash.
Unidentified Company Representative: I'll take some questions from online. Can you provide further details on the building of the low emissions vessels? When do you think you're likely to make an order? And can you provide details on the financial benefits?
Martin Fruergaard: So as we say, we have had this project for multiple years now. And I think we are very fine in the design part of it. And of course, looked at fuel availability and the technical part of it and so on. And I've also had some discussions on prices and these things. We haven't finalized anything yet. So let's see how it goes through the year. But of course, we would only do something like that if we felt it actually created value for the company and the shareholders. But at the moment, we haven't committed to anything, but the project is still ongoing.
Unidentified Company Representative: How do you see the share buyback given that you've nearly successfully completed it? And what are your thoughts on the future buybacks and dividends?
Martin Fruergaard: Well, I think the arguments for doing share buyback is quite clear in the sense that when we look at the fair market value of the -- and when we look at the secondhand prices and we look at how we are trading, we can definitely see a benefit in buying our own share. That is the cheapest asset we can buy at the moment if we wanted to buy assets. And it has been a learning process for us. I think we have done well. I think that the guys who've been dealing with this from our side have done well. It's always a balance not to be the one driving the share price, but doing what is right. And I think we've done that. I think there's a lot of learning in it, and we will take that learning and evaluate it. The most important thing for us is to again do as we have said, and that is actually buying back $40 million of shares. So that's what we are aiming to do before the end of the year. And then we will discuss, of course, with the Board when we come to early next year in respect to dividend and ongoing buybacks. And I think there's some good learnings in the process that we will, of course, present and discuss with the Board going forward.
Unidentified Company Representative: Can you provide more details on the third quarter under performance of the Supramaxes and how do you see fourth quarter Supramax performance going forward?
Martin Fruergaard: Yeah, the third quarter Supramax under performance, as we also said at the interim part, is that we definitely have taken too much cover on our supra/ultramaxes earlier in the year and in the expectation that there will be some market -- seasonality in the market. And also that we will usually see that the Atlantic market goes up and the Pacific markets going down. That has not happened this year. So the market has developed quite unusually actually for when you go back in time. So the market has been very different at that time. So looking back at it, of course, we took too much cover on our Supramaxes and were forced to take ships in the market to, of course, perform towards the customers, to the commitments we have taken in that part. So that's the case. In the fourth quarter -- we are already in the fourth quarter. So of course, it will still have an impact unless, of course, if the freight market goes down, then, of course, our underperformance will disappear. But we do not hope that. We actually hope that the market will stay high or go even higher. And if that happens, I think we will still struggle with underperformance on the Supramax, hopefully at a lower level than it was in the third quarter. On the other hand, I think the positive thing to say is our Handysizes have actually increased outperformance and we're doing really well on that part. And still our biggest share of our fleet is still Handysized ships. So I think that's quite positive. And it's also very positive that we have changed or turned around the operating part and actually have increased the earnings per day on our operating business.
Unidentified Company Representative: Just on the operating business, the activity looks strong for the third quarter. Can you provide any further insight into the result and how we can think about the fourth quarter?
Martin Fruergaard: Definitely, I think there's a little bit more activity in the third quarter than there was last year in the same quarter, but I don't think it's actually that much more. The margins are good on that side. I think the majority of both Handysized and Supramax are actually making a good margin on the operating part. But also here, it's the Handysizes that's driving it at the moment. There's nothing indicating that we can't continue to do that into fourth quarter. And I think if you go a little bit early in the year where our margins were lower, and it's of course typical in a market that is changing, and then also the stability in the market makes it a very flat market, makes this arbitrage a little bit more difficult than previously. There hasn't been a lot of fluctuations in the market, but I think we got adjusted into the market, especially on the Handysizes, and have been able to take advantage of our position and our size in that segment. And I hope that will continue into the fourth quarter.
Unidentified Company Representative: And the last question, how do you see the impact of the ongoing conflict in the Middle East and the impact to the market of having limited transit of the Suez Canal, and now seeing transit of the Panama Canal normalizing?
Martin Fruergaard: Yeah, I think first of all, on the Panama Canal that is normalizing. And I think you can say to a certain extent, it had the positive effect that the U.S. actually have exported more grain this year than the same time last year. So of course, these things also, it of course also creates trades that now come back, and we see more of our ships also moving grain out of the U.S. Gulf. So that's of course a positive thing in it. It is of course, you can say unfortunately, but that's how it is. It is positive for the dry cargo segment, also our segment that so few ships are willing to go through the Red Sea and prefer to go South of Africa. That of course has a positive impact on the supply and therefore our market. I think we should also always remember that it doesn't mean that all the ships will go south. It actually also means that maybe trades are changing and people will buy the commodities for somewhere else. You could buy grain in Australia and other places instead of doing it out of Europe or the U.S. But it definitely has a positive impact on our business.
Operator: [Operator Instructions]. Ning, would you like to ask your question please and unmute yourself?
Unidentified Analyst: Hi Martin, thanks so much for the presentation. I have two questions here. The first one, there's a lot of talks about the IMO meeting that recently happened and there was a conversation about carbon tax being introduced next year. Do you think that this is going to be a major breakthrough to your decision facing dual fuel ships going forward? That's the first. The second, quite related, is on scrapping. We've seen year-to-date scrapping activity still remaining very muted right now. Do you have any additional color about when scrapping activity could actually pick up over the near term? Thank you.
Martin Fruergaard: Yeah, thank you. Of course, we also followed the IMO meeting with great interest. And I don't think we are disappointed. We think the process is going in the right direction. It just takes time. I'm personally not in doubt that they will come up with a tax or levy on CO2 going forward. I would say in our case, looking at low emission vessels, we have actually looked at the regulation as it is today. So it is very much based on EU tariffs in it. So for us, it would probably definitely be a benefit if IMO came with a global levy on CO2. And I think if you ask us, we would also say that they should do that. I think that's the right way if we want to decarbonize our industry and our business. But it is just as always -- in IMO, it does just take time. But we sit with the feeling they are actually moving in the right direction. And there seems to be some consensus being created, but the process is just slower. And we would just respect that and we will follow that with interest. I do actually, as I understand it, I think next year they will have to come to a conclusion. So, let's hope they will do that. In respect to scrapping, we have spoken about it earlier as well. It's true, there is very, very little scrapping going on in our segments. And I think that's just a reflection of the market. In a good market, where you have good earnings and you have actually good positive cash flow on your ship, you would not scrap your ship. You would actually keep investing in it and running through yet another dry dock and take your chances in the market. So I think low scrapping is an indicator of a good market and actually also a positive outlook for the market. So I think in general, the owners, also of the older ships, they are willing to put money after it because they are relatively positive about the future outlook for the vessels and for the market in it. You asked, when will that change? I think there is a deadline. You can probably do that one dry docking cycle, maybe two. But then your ships start getting very old. And when we look at the Handies and Ultras, when we look at the age profile, it's an aging fleet. There's a lot of ships that are older than 20 years. And also, we remind you that there is actually about one-third of the ships are built in the period from 2009 to 2012. So you can say, not next year, but as we go along within the next five years, there will be a lot of old ships in it. A trigger to get scrapping is, of course, if you see a market reduction that you will immediately see people starting selling them for scrap in it. But people are still very positive and they're still making money on the ships. So there is a market for them at the moment.
Unidentified Analyst: Sure. Thank you. Thank you.
Unidentified Company Representative: Just taking one more question from online. An early comment from the first quarter of 2025, can you give us any details in terms of how you see things from the Chinese New Year restart? Are we locking up less cover in the first quarter of 2025? And are we expecting a similar market to what we saw last year? Or do you think things will be slightly different this year, given again, Suez Canal being closed?
Martin Fruergaard: Yes. So, first, the cover. I think one thing we probably learned is that it's easier for us to optimize our overall business if we don't have too much cover. We still like to have cover in it. And then you can say, it's not always because we can decide exactly how much cover it is. We have a lot of customers who come to us. And of course, we like to continue to service our customers. And that's what we do. So we also have to take the cover when the timing is so that the customer wants to do it. But I think the learning from this year is probably we should not be too aggressive on our Supramaxes, but have a little bit of room to maneuver and a little bit of room to optimize our business. I think that's the reflection we have. Of course, we reflect on how the year has gone. And I think that's the learning we have had from this year. But at the right rate level, we would always like to take more cover in it. And we don't have much cover for next year. And that's quite normal. So, there's nothing special about the situation we're in. This is a very normal situation for us.
Operator: [Operator Instructions]. As there's no further questions, we can now begin the closing remark. Please go ahead, Mr. Martin Fruergaard.
Martin Fruergaard: Thank you. I'd like to thank you again for joining us today and for your continued support of Pacific Basin. If you have any further questions, please contact Peter from our Investor Relations Department. Thank you and goodbye.
Operator: This concludes our conference call. Thank you all for attending.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.