1 00:00:07,200 --> 00:00:10,240 Speaker 1: Hi everyone, this is Lee Claska and we're Talking Transports. 2 00:00:10,280 --> 00:00:14,160 Speaker 1: Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host, 3 00:00:14,280 --> 00:00:18,680 Speaker 1: Lee Laskows, senior Freight, transportation and logistics analysts at Bloomberg Intelligence, 4 00:00:18,920 --> 00:00:21,880 Speaker 1: Bloomberg's in house research arm of almost five hundred analysts 5 00:00:21,920 --> 00:00:25,120 Speaker 1: and strategists around the globe. Before diving in little public 6 00:00:25,160 --> 00:00:28,520 Speaker 1: service announcement. Your support is instrumental to keep bringing great 7 00:00:28,560 --> 00:00:31,840 Speaker 1: guests and conversations to you, our listeners, and we need 8 00:00:31,880 --> 00:00:35,279 Speaker 1: your support. So please, if you enjoy this podcast, share it, 9 00:00:35,640 --> 00:00:37,879 Speaker 1: like it and leave a comment. Also, if you have 10 00:00:37,880 --> 00:00:41,080 Speaker 1: any ideas for future episodes or just want to talk transports, 11 00:00:41,320 --> 00:00:44,400 Speaker 1: please hit me up on the Bloomberg terminal, on LinkedIn 12 00:00:44,680 --> 00:00:47,960 Speaker 1: or on Twitter at logistics Lea. Now onto our episode. 13 00:00:48,040 --> 00:00:51,760 Speaker 1: We're delighted to have with us Hamish Norton, Starbulks President, 14 00:00:51,920 --> 00:00:56,360 Speaker 1: as our guest on the podcast today. Prior to twenty twelve, 15 00:00:56,520 --> 00:00:59,279 Speaker 1: he was Managing director and global head of the Maritime 16 00:00:59,280 --> 00:01:02,240 Speaker 1: Group at Jeffrey Company. Prior to joining Jefferies in two 17 00:01:02,240 --> 00:01:05,080 Speaker 1: thousand and seven, mister Norton ran the shipping practice at 18 00:01:05,120 --> 00:01:08,840 Speaker 1: bear Stearns since two thousand. From nineteen eighty four to 19 00:01:09,040 --> 00:01:12,880 Speaker 1: nineteen ninety nine, he worked at Lazard Ferris and from 20 00:01:13,280 --> 00:01:16,800 Speaker 1: nineteen ninety five onward as a general partner and head 21 00:01:16,800 --> 00:01:20,360 Speaker 1: of Shipping. Mister Norton is director of Neptune Lines and 22 00:01:20,440 --> 00:01:25,080 Speaker 1: Cadre Holdings. He holds ab in physics from Harvard and 23 00:01:25,160 --> 00:01:28,399 Speaker 1: a PhD in physics from the University of Chicago, and 24 00:01:28,520 --> 00:01:31,959 Speaker 1: most importantly, he has a distinction of being a second 25 00:01:32,000 --> 00:01:36,000 Speaker 1: time guest on Bloomberg Intelligence Talking Transports podcast. Welcome back 26 00:01:36,040 --> 00:01:37,880 Speaker 1: to the podcast, Hamish. 27 00:01:37,440 --> 00:01:38,880 Speaker 2: Thank you very much. Lee. 28 00:01:39,280 --> 00:01:44,600 Speaker 1: You have quite quite a career both running shipping companies 29 00:01:44,640 --> 00:01:47,880 Speaker 1: and on Wall Street kind of banking them. So your 30 00:01:47,920 --> 00:01:52,200 Speaker 1: insights are really incredible at this critical time given where 31 00:01:52,200 --> 00:01:55,320 Speaker 1: we are with tariffs. You know, before we start talking 32 00:01:55,400 --> 00:01:57,760 Speaker 1: about that for our listeners, can you just give us 33 00:01:57,800 --> 00:01:59,639 Speaker 1: a little more detail about Starbucks fleet. 34 00:02:00,200 --> 00:02:04,640 Speaker 2: Sure. Starbuck has one hundred and fifty three ships. They 35 00:02:04,720 --> 00:02:09,560 Speaker 2: are the largest category of ships we have. Are so 36 00:02:10,040 --> 00:02:13,920 Speaker 2: called supermaxes and ultramaxes, which are ships that have cranes 37 00:02:14,040 --> 00:02:18,000 Speaker 2: that allow them to self load and self discharge, and 38 00:02:18,080 --> 00:02:20,839 Speaker 2: they can carry between fifty two thousand and sixty four 39 00:02:20,880 --> 00:02:26,800 Speaker 2: thousand tons of cargo. Then the next category which we 40 00:02:26,919 --> 00:02:34,120 Speaker 2: have somewhat fewer ships in is the Panamax slash Camcermax class, 41 00:02:34,160 --> 00:02:37,080 Speaker 2: which is about seventy five to eighty five thousand tons 42 00:02:37,120 --> 00:02:41,280 Speaker 2: of cargo, and a Panamax ship will go through the 43 00:02:41,800 --> 00:02:46,160 Speaker 2: Old Panama Canal. Camcer Max will also go through the 44 00:02:46,160 --> 00:02:48,880 Speaker 2: Old Panama Canal, but not if it's fully loaded with 45 00:02:49,000 --> 00:02:52,720 Speaker 2: heavy cargo. It can go if it's fully loaded with grain, 46 00:02:53,040 --> 00:02:55,720 Speaker 2: which weighs a bit less and so it sits a 47 00:02:55,720 --> 00:02:59,880 Speaker 2: bit higher in the water. And then we have a 48 00:03:00,480 --> 00:03:04,240 Speaker 2: large number of Cape size and so called Newcastle Max ships, 49 00:03:04,760 --> 00:03:06,920 Speaker 2: which are about one hundred and eighty thousand tons of 50 00:03:06,960 --> 00:03:09,800 Speaker 2: cargo to about two hundred nine thousand tons of cargo. 51 00:03:11,520 --> 00:03:16,880 Speaker 2: And you know, the camp campcer Max and the Cape 52 00:03:16,919 --> 00:03:21,000 Speaker 2: size do not have cranes and rely on poured infrastructure. 53 00:03:21,800 --> 00:03:27,639 Speaker 2: And you know, all of these ships are pretty simple ships. 54 00:03:29,080 --> 00:03:32,240 Speaker 2: You know, the captain has to be very talented, but 55 00:03:32,720 --> 00:03:35,880 Speaker 2: the shipyard that builds these ships doesn't have to do 56 00:03:36,160 --> 00:03:39,280 Speaker 2: very much with the steel. There's less value add to 57 00:03:39,480 --> 00:03:42,520 Speaker 2: dry bulk ships than to any other class of ship, 58 00:03:44,320 --> 00:03:48,800 Speaker 2: which which means that it is very hard, for example, 59 00:03:49,520 --> 00:03:52,920 Speaker 2: to make money in dry bulk shipping. If you buy 60 00:03:53,000 --> 00:03:57,480 Speaker 2: your ships at the wrong time, you know, because the 61 00:03:59,080 --> 00:04:02,520 Speaker 2: ship is is basically a pure commodity, right. 62 00:04:03,280 --> 00:04:05,760 Speaker 1: So you know, there's so much we could talk about, 63 00:04:05,920 --> 00:04:08,800 Speaker 1: and you know, I guess you started talking about the 64 00:04:08,840 --> 00:04:12,520 Speaker 1: actual ships themselves. So you know, there was some recent 65 00:04:12,640 --> 00:04:17,760 Speaker 1: noise with the US Trade Representative announcing fees on Chinese 66 00:04:17,800 --> 00:04:21,800 Speaker 1: built ships. Are you guys exposed to that? Where do 67 00:04:21,839 --> 00:04:23,880 Speaker 1: you think that ends up playing out with the new 68 00:04:24,000 --> 00:04:25,680 Speaker 1: rules that were released a couple of weeks ago. 69 00:04:25,880 --> 00:04:29,719 Speaker 2: Well, I wish, I wish I knew lee where it 70 00:04:29,839 --> 00:04:33,640 Speaker 2: ends up, because it's it's really you know, still a 71 00:04:33,680 --> 00:04:36,120 Speaker 2: lot of it up in the air. But the US 72 00:04:36,200 --> 00:04:45,600 Speaker 2: Trade Representative's latest paper Levy's fines on Chinese ships calling 73 00:04:45,640 --> 00:04:51,800 Speaker 2: on the US but not on ships built elsewhere, even 74 00:04:51,880 --> 00:04:54,840 Speaker 2: if those ships are owned by a company that also 75 00:04:55,000 --> 00:04:57,919 Speaker 2: has Chinese built ships. So about a third of our 76 00:04:58,000 --> 00:05:02,920 Speaker 2: fleet is built in Japan, which is very convenient, and 77 00:05:03,839 --> 00:05:07,279 Speaker 2: we're probably going to maintain those ships that were built 78 00:05:07,279 --> 00:05:11,080 Speaker 2: in Japan to a higher level than we might otherwise 79 00:05:11,080 --> 00:05:13,200 Speaker 2: have done to try to get them to last a 80 00:05:13,200 --> 00:05:20,480 Speaker 2: little longer. Ships Act appears to have a provision that 81 00:05:20,600 --> 00:05:26,880 Speaker 2: would levy a fine on Chinese companies that have Chinese 82 00:05:27,320 --> 00:05:31,200 Speaker 2: ships that come to the US with a non Chinese ship, 83 00:05:32,080 --> 00:05:35,680 Speaker 2: so that would make our Japanese ships less valuable. But 84 00:05:36,520 --> 00:05:40,240 Speaker 2: it appears, at least to my reading, that the Ships 85 00:05:40,240 --> 00:05:46,120 Speaker 2: Act provides an opportunity for the President to remove that 86 00:05:46,240 --> 00:05:47,560 Speaker 2: fine at his discretion. 87 00:05:48,400 --> 00:05:50,719 Speaker 1: And one of these finds expected to go into place 88 00:05:50,839 --> 00:05:52,279 Speaker 1: or are they in place already. 89 00:05:52,800 --> 00:05:57,039 Speaker 2: They're not in place yet. The US Trade Representative has 90 00:05:57,120 --> 00:06:04,040 Speaker 2: a a sort of phase in over a period of months, 91 00:06:04,040 --> 00:06:07,159 Speaker 2: and I believe it doesn't start for six months. And 92 00:06:07,200 --> 00:06:10,839 Speaker 2: I believe that the US Trade Representative paper is not final. 93 00:06:11,520 --> 00:06:14,120 Speaker 2: And of course the Ships Act is legislation that hasn't 94 00:06:14,160 --> 00:06:17,680 Speaker 2: been passed yet, so we don't know. 95 00:06:18,120 --> 00:06:21,560 Speaker 1: And if this gets passed and it is as it stands, 96 00:06:22,080 --> 00:06:24,919 Speaker 1: are the ships in your fleet that are Chinese built? 97 00:06:25,200 --> 00:06:27,440 Speaker 1: I mean, are they just twenty like worth twenty twenty 98 00:06:27,440 --> 00:06:28,839 Speaker 1: five percent less than they used to be? 99 00:06:29,279 --> 00:06:32,600 Speaker 2: Well, I don't think it's it's that big a deal, actually, 100 00:06:32,800 --> 00:06:37,240 Speaker 2: because if the US Trade Representatives paper goes through as 101 00:06:37,960 --> 00:06:43,520 Speaker 2: planned so far, you know, there are enough Japanese and 102 00:06:43,720 --> 00:06:48,320 Speaker 2: Korean ships in the fleet to satisfy all the needs 103 00:06:48,360 --> 00:06:52,800 Speaker 2: of the United States. You know, the US is under 104 00:06:52,880 --> 00:07:01,320 Speaker 2: ten percent of the dry bulk trade worldwide. You know, basically, 105 00:07:01,360 --> 00:07:05,040 Speaker 2: the US exports grain, it exports coal to some extent, 106 00:07:05,640 --> 00:07:09,240 Speaker 2: it imports very little in dry bulk. 107 00:07:09,680 --> 00:07:13,720 Speaker 1: And then you know, I guess just as it sits today. 108 00:07:14,320 --> 00:07:17,920 Speaker 1: You know, if you were to buy a cape sized vessel, like, 109 00:07:17,960 --> 00:07:20,000 Speaker 1: how much cheaper would it be buying it from a 110 00:07:20,080 --> 00:07:22,640 Speaker 1: Chinese shipyard versus a Japanese shipyard. 111 00:07:24,000 --> 00:07:27,520 Speaker 2: It's ten to fifteen percent more at a Japanese shipyard. 112 00:07:27,840 --> 00:07:37,040 Speaker 2: And you know, historically Japanese ships maintained their premium value. 113 00:07:37,200 --> 00:07:39,520 Speaker 2: You know, I think to some extent they still maintain 114 00:07:39,560 --> 00:07:47,080 Speaker 2: their premium value. But you know, in his historically Japanese 115 00:07:47,120 --> 00:07:51,800 Speaker 2: ships burned less fuel than Chinese ships. Good Chinese ships 116 00:07:52,000 --> 00:07:56,800 Speaker 2: are just as efficient as good Japanese ships now, so 117 00:07:57,840 --> 00:08:00,600 Speaker 2: you know, the Japanese ship is a little little nicer. 118 00:08:01,960 --> 00:08:06,800 Speaker 2: It is. You can't order you know, custom changes to 119 00:08:06,880 --> 00:08:12,040 Speaker 2: the Japanese ship design. They are very automated, and which 120 00:08:12,040 --> 00:08:15,560 Speaker 2: is the only way they can compete in Japan. So 121 00:08:15,800 --> 00:08:19,280 Speaker 2: they build a standard design. That standard design is typically 122 00:08:19,520 --> 00:08:23,880 Speaker 2: thought to be very good. People people order them, you know, 123 00:08:24,040 --> 00:08:27,120 Speaker 2: but in China you can get anything you want. 124 00:08:27,560 --> 00:08:31,760 Speaker 1: Okay, and then you know, I guess you know, so 125 00:08:32,120 --> 00:08:34,600 Speaker 1: the ships act. The real I guess crux of it 126 00:08:34,720 --> 00:08:39,160 Speaker 1: is the president and the Trump administration wants more manufacturing 127 00:08:39,240 --> 00:08:42,600 Speaker 1: brought to the US. You know, the fact that we 128 00:08:42,679 --> 00:08:45,640 Speaker 1: don't have the capability is building ships here in the 129 00:08:45,760 --> 00:08:50,240 Speaker 1: US is you know, not a great thing? Is that 130 00:08:50,320 --> 00:08:52,080 Speaker 1: ever going to come back? Are we ever going to 131 00:08:52,080 --> 00:08:54,480 Speaker 1: build dry bulk ships here in the US? Again? 132 00:08:54,760 --> 00:08:58,360 Speaker 2: Well, I doubt that the US will build dry ball 133 00:08:58,520 --> 00:09:03,120 Speaker 2: ships because dry bulk ships are, as I said, the 134 00:09:04,760 --> 00:09:10,120 Speaker 2: lowest value added product that shipyards make and the least sophisticated. 135 00:09:12,480 --> 00:09:16,280 Speaker 2: So I would expect that if shipbuilding comes back to 136 00:09:16,360 --> 00:09:18,839 Speaker 2: the US in a big way, that the US will 137 00:09:18,840 --> 00:09:24,120 Speaker 2: build sophisticated ships you know, roll on roll off ships, 138 00:09:24,640 --> 00:09:33,559 Speaker 2: container ships, LNG carriers, LPG carriers, and you know, ships 139 00:09:33,600 --> 00:09:39,840 Speaker 2: where high technology, you know, can can contribute perhaps more 140 00:09:39,880 --> 00:09:41,400 Speaker 2: than it can in dry bulk. 141 00:09:42,800 --> 00:09:45,240 Speaker 1: And going back to you know, a lot of our 142 00:09:45,280 --> 00:09:47,600 Speaker 1: listeners might really not even know what dry bulk is. 143 00:09:47,679 --> 00:09:51,079 Speaker 1: So what are the main kind of commodity categories that 144 00:09:51,120 --> 00:09:53,720 Speaker 1: you guys haul uh within your ships? 145 00:09:53,880 --> 00:10:00,000 Speaker 2: Sure we our biggest cargo is iron ore, next biggest 146 00:10:00,160 --> 00:10:06,880 Speaker 2: would be coal, and then grain, and after iron ore, 147 00:10:06,920 --> 00:10:10,920 Speaker 2: coal and grain, which in aggregate account for a majority 148 00:10:11,000 --> 00:10:14,280 Speaker 2: of total cargo, there are what you call minor bulks, 149 00:10:14,360 --> 00:10:20,680 Speaker 2: which are things like nickel, nickel or copper concentrates, baux 150 00:10:20,720 --> 00:10:26,400 Speaker 2: site that mostly tend to travel in small parcels and 151 00:10:26,559 --> 00:10:34,120 Speaker 2: go in the so called supermax and ultramax ships. And 152 00:10:36,040 --> 00:10:38,400 Speaker 2: something like eighty five percent of the iron ore we 153 00:10:38,480 --> 00:10:42,560 Speaker 2: carry ends up in China, and a lot of the 154 00:10:42,600 --> 00:10:47,920 Speaker 2: coal ends up in China, also also Vietnam in India. 155 00:10:48,200 --> 00:10:51,040 Speaker 1: So for the most part, China really dictates where the 156 00:10:51,160 --> 00:10:54,400 Speaker 1: dry bulk market heads from a demand standpoint and therefore 157 00:10:54,480 --> 00:10:55,200 Speaker 1: rate standpoint. 158 00:10:55,240 --> 00:10:58,280 Speaker 2: That is true, China accounts for forty percent of the 159 00:10:58,360 --> 00:11:01,760 Speaker 2: tons of dry ball right on the ocean, and fifty 160 00:11:01,800 --> 00:11:06,040 Speaker 2: percent of the so called ton miles. What we care 161 00:11:06,120 --> 00:11:08,640 Speaker 2: about are not how many tons we carry, but how 162 00:11:08,679 --> 00:11:12,719 Speaker 2: many miles we carry each ton times the number of tons. 163 00:11:12,760 --> 00:11:14,800 Speaker 1: And so the things that are going on in the 164 00:11:14,840 --> 00:11:18,000 Speaker 1: Suez Canal, those are good things for a ton miles 165 00:11:18,040 --> 00:11:20,679 Speaker 1: because you have to go around the Cape of Good Hope, right. 166 00:11:20,840 --> 00:11:24,760 Speaker 2: Yes, well not just we have to, but everybody else 167 00:11:24,800 --> 00:11:32,040 Speaker 2: has to. So you know, while I never want the 168 00:11:32,080 --> 00:11:35,800 Speaker 2: houthis to shoot at ships going through the Red Sea. 169 00:11:37,040 --> 00:11:39,120 Speaker 2: When the houthies we're shooting at ships going through the 170 00:11:39,120 --> 00:11:41,120 Speaker 2: Red Sea. That was very good for rates. 171 00:11:41,040 --> 00:11:44,400 Speaker 1: Right, And speaking of rates, rates aren't very good anymore. 172 00:11:44,440 --> 00:11:47,679 Speaker 1: That the Baltic Dry index is down something like twenty 173 00:11:47,720 --> 00:11:51,600 Speaker 1: percent from last year. Why is that what's driving the 174 00:11:51,600 --> 00:11:52,679 Speaker 1: weakness and rates? 175 00:11:53,200 --> 00:11:59,080 Speaker 2: Well, you know, despite the fact that China's imports of 176 00:11:59,160 --> 00:12:02,720 Speaker 2: dry bulk up like nineteen percent from the beginning of 177 00:12:02,720 --> 00:12:05,480 Speaker 2: twenty twenty two to the end of twenty twenty four, 178 00:12:06,800 --> 00:12:10,360 Speaker 2: you know, in the first quarter of twenty twenty five 179 00:12:11,280 --> 00:12:14,480 Speaker 2: they're down, you know, something like nine percent from Q 180 00:12:14,559 --> 00:12:19,120 Speaker 2: one twenty twenty four. So you know, the number of 181 00:12:19,120 --> 00:12:22,120 Speaker 2: ships has increased by about three percent in that in 182 00:12:22,200 --> 00:12:27,200 Speaker 2: that time. And you know, if the ships increase in 183 00:12:27,280 --> 00:12:31,600 Speaker 2: number and carrying capacity and the cargo shrinks, you know, 184 00:12:31,679 --> 00:12:36,160 Speaker 2: it's supply and demand, right, rates drop, And. 185 00:12:36,080 --> 00:12:38,360 Speaker 1: If the Suez Canal opened up, obviously it's I don't 186 00:12:38,400 --> 00:12:40,800 Speaker 1: have any time soon, but it seems like it could 187 00:12:40,800 --> 00:12:42,439 Speaker 1: happen sooner than rather than later. 188 00:12:42,559 --> 00:12:48,000 Speaker 2: It might happen soon. I read some stories yesterday evening 189 00:12:48,040 --> 00:12:52,320 Speaker 2: and this morning that at least the President has stated 190 00:12:52,360 --> 00:12:57,400 Speaker 2: that the whothies are packing it in. Right, we'll see 191 00:12:57,400 --> 00:12:58,559 Speaker 2: if that holds. 192 00:12:58,800 --> 00:13:01,400 Speaker 1: What what would that do to capacity? How much capacity 193 00:13:01,440 --> 00:13:02,160 Speaker 1: would that add? 194 00:13:02,559 --> 00:13:06,120 Speaker 2: For dry bulk it only adds about two percent? Ok, 195 00:13:07,679 --> 00:13:13,000 Speaker 2: you know the the for container ships it's quite a 196 00:13:13,080 --> 00:13:14,520 Speaker 2: bit more. 197 00:13:14,559 --> 00:13:17,000 Speaker 1: Are any ships going through the Suez? 198 00:13:17,200 --> 00:13:19,920 Speaker 2: Yes, I mean not now, but they did? 199 00:13:20,200 --> 00:13:21,120 Speaker 1: Yeah, I mean now? 200 00:13:21,240 --> 00:13:22,440 Speaker 2: Yeah, no, no, not now? 201 00:13:22,960 --> 00:13:25,800 Speaker 1: Not now? So you're not I guess you're not carrying 202 00:13:25,800 --> 00:13:27,439 Speaker 1: any Russian cargoes or. 203 00:13:28,480 --> 00:13:34,760 Speaker 2: Well, we carry Russian cargoes that are not sanctioned, of 204 00:13:34,800 --> 00:13:39,040 Speaker 2: which there are some, and you know, I mean if 205 00:13:39,080 --> 00:13:42,320 Speaker 2: they're not sanctioned, they're not sanctioned for a reason. The 206 00:13:42,360 --> 00:13:44,160 Speaker 2: government wants us to carry them. 207 00:13:44,440 --> 00:13:46,920 Speaker 1: And that's probably like grain and things of that nature. 208 00:13:47,080 --> 00:13:51,360 Speaker 2: Well, it's grain if it's clear that it is from 209 00:13:51,400 --> 00:13:58,640 Speaker 2: a Russian source. Grain that is from a Ukrainian source, 210 00:13:58,679 --> 00:14:02,319 Speaker 2: that is, you know, it by Russians is a problem 211 00:14:02,440 --> 00:14:03,680 Speaker 2: and we don't carry that. 212 00:14:06,520 --> 00:14:08,559 Speaker 1: And so the decline in demand that we're seeing is 213 00:14:08,600 --> 00:14:11,959 Speaker 1: that all tariff related. Is that, like you know, China's 214 00:14:12,000 --> 00:14:16,880 Speaker 1: economy decelerating because you know, the US is not importing 215 00:14:16,920 --> 00:14:19,800 Speaker 1: as much and the kind of disruptions created by other 216 00:14:19,880 --> 00:14:22,920 Speaker 1: trade wars that the US is having with its partners. 217 00:14:23,080 --> 00:14:29,160 Speaker 2: Well, it's not tariffs, because it started happening before the 218 00:14:29,240 --> 00:14:34,360 Speaker 2: tariffs went in and before they were announced. You know, 219 00:14:34,520 --> 00:14:41,480 Speaker 2: it is probably a combination of grain being a bit lower, 220 00:14:41,720 --> 00:14:48,200 Speaker 2: and you know, it's it seems to be you know, 221 00:14:48,280 --> 00:14:55,760 Speaker 2: across the across the the spectrum. And I said nine percent, 222 00:14:55,840 --> 00:14:59,520 Speaker 2: it's it's eight point three percent. When I look at 223 00:14:59,520 --> 00:15:03,760 Speaker 2: my note that it dropped. Yeah, I mean it obviously 224 00:15:03,840 --> 00:15:07,480 Speaker 2: has something to do with the Chinese economy slowing down. 225 00:15:08,000 --> 00:15:12,720 Speaker 2: You know, it's obviously very hard to get a firm 226 00:15:13,120 --> 00:15:17,080 Speaker 2: handle on what the economic statistics really are. 227 00:15:17,400 --> 00:15:19,880 Speaker 1: Yeah. So you know, I know, we're not going to 228 00:15:19,920 --> 00:15:22,200 Speaker 1: talk specifics about the quarter because you guys are going 229 00:15:22,280 --> 00:15:25,680 Speaker 1: to announce soon your results, you know, a couple of 230 00:15:25,720 --> 00:15:29,040 Speaker 1: days after recording this, you know, but twenty twenty four 231 00:15:29,160 --> 00:15:31,120 Speaker 1: was a fantastic year for dry Bulk. It was a 232 00:15:31,120 --> 00:15:34,520 Speaker 1: good year for Starbuck. You know, I saw your revenues 233 00:15:34,520 --> 00:15:38,080 Speaker 1: increase thirty four percent, your EBIT increase sixty one percent. 234 00:15:38,760 --> 00:15:42,760 Speaker 1: Fast forward to this year, consensus has revenue increasing by 235 00:15:42,760 --> 00:15:46,240 Speaker 1: about five percent and EBIT going down thirty seven percent. 236 00:15:47,200 --> 00:15:50,600 Speaker 1: Can you just talk about you know, the economics of 237 00:15:51,040 --> 00:15:55,480 Speaker 1: of the dry ball industry, and why are your revenues 238 00:15:55,520 --> 00:15:58,120 Speaker 1: going up mid single digits but your ebit is going 239 00:15:58,160 --> 00:15:59,960 Speaker 1: down by pretty large double digits. 240 00:16:00,400 --> 00:16:12,040 Speaker 2: Sure, you know, So we have voyage revenue. Voyage revenue 241 00:16:12,360 --> 00:16:17,640 Speaker 2: is when we contract with cargo owner to move a 242 00:16:17,640 --> 00:16:20,160 Speaker 2: certain amount of cargo from point A to point B, 243 00:16:20,240 --> 00:16:22,160 Speaker 2: and we take all the risk on the weather and 244 00:16:22,280 --> 00:16:25,320 Speaker 2: port charges and so on, and we pay for. 245 00:16:25,240 --> 00:16:26,240 Speaker 1: The fuel, okay. 246 00:16:28,280 --> 00:16:32,200 Speaker 2: And then if you subtract from voyage revenue voyage expenses, 247 00:16:34,240 --> 00:16:38,160 Speaker 2: which is fuel, port charges, canal fees and so on, 248 00:16:38,920 --> 00:16:42,480 Speaker 2: you get something called net revenue, which is also time 249 00:16:42,600 --> 00:16:46,840 Speaker 2: charter equivalent revenue. And we have a bunch of ships 250 00:16:46,840 --> 00:16:49,400 Speaker 2: on time charter and a bunch of ships on voyage charter. 251 00:16:50,800 --> 00:16:53,280 Speaker 2: In the time charter, the charter tells us where to go, 252 00:16:53,600 --> 00:16:55,840 Speaker 2: and so he pays for the fuel, he pays the 253 00:16:55,880 --> 00:17:00,400 Speaker 2: canal fees and the port charges. And then you know, 254 00:17:01,120 --> 00:17:07,840 Speaker 2: we subtract from time charter equivalent revenue operating expense, which 255 00:17:07,880 --> 00:17:12,880 Speaker 2: is the direct cost of operating the vessel, crew, wages, insurance, 256 00:17:13,680 --> 00:17:17,080 Speaker 2: and crucially lubricating oil, which you might have thought was 257 00:17:17,119 --> 00:17:21,120 Speaker 2: a voyage expense, but since it is a very important 258 00:17:21,119 --> 00:17:23,720 Speaker 2: thing to get right for the owner of the ship. 259 00:17:23,840 --> 00:17:25,960 Speaker 2: It is for the owner's account in a time charter, 260 00:17:28,000 --> 00:17:33,960 Speaker 2: and then we subtract overhead. And we have in the 261 00:17:34,000 --> 00:17:37,679 Speaker 2: dry ball industry some of the lowest operating costs and 262 00:17:37,760 --> 00:17:43,640 Speaker 2: overheads there are. Our operating cost is on the order 263 00:17:43,680 --> 00:17:46,800 Speaker 2: of five thousand dollars a day. Our overheads are on 264 00:17:46,840 --> 00:17:50,840 Speaker 2: the order of one thousand dollars a day. Now, you know, 265 00:17:50,960 --> 00:17:56,920 Speaker 2: charter rates are eleven to seventeen thousand a day, depending 266 00:17:56,960 --> 00:18:01,480 Speaker 2: on the size of the ship. And of course we 267 00:18:01,560 --> 00:18:06,639 Speaker 2: have debt on you know, secure debt on most of 268 00:18:06,680 --> 00:18:12,000 Speaker 2: the ships. So you know, our break even, our cash 269 00:18:12,080 --> 00:18:16,800 Speaker 2: break even, including mandatory debt repayments, is on the order 270 00:18:16,840 --> 00:18:21,600 Speaker 2: of twelve thousand dollars time charter equivalent revenue per day. 271 00:18:22,760 --> 00:18:26,439 Speaker 2: And you know that's not far off from where the 272 00:18:26,480 --> 00:18:27,480 Speaker 2: market is right now. 273 00:18:29,119 --> 00:18:31,760 Speaker 1: And so I so, I guess it really has to 274 00:18:31,800 --> 00:18:35,200 Speaker 1: be on the demand side, and I guess the demand 275 00:18:35,280 --> 00:18:38,280 Speaker 1: picture is not is getting worse every day? Is that 276 00:18:38,400 --> 00:18:38,960 Speaker 1: is that fair? 277 00:18:39,440 --> 00:18:42,400 Speaker 2: Well, the demand picture is not getting better. It's it's 278 00:18:42,560 --> 00:18:44,520 Speaker 2: I mean, it has been getting worse for the last 279 00:18:44,560 --> 00:18:47,640 Speaker 2: two days. But you know, I mean, it's very volatile, 280 00:18:51,320 --> 00:18:55,960 Speaker 2: and you know, the supply picture is actually not not 281 00:18:56,200 --> 00:19:02,600 Speaker 2: that bad. Ship ship numbers are probably going up about 282 00:19:02,600 --> 00:19:05,000 Speaker 2: three point one percent this year and about three point 283 00:19:05,000 --> 00:19:08,679 Speaker 2: one percent next year, but nobody is ordering dryball ships 284 00:19:08,680 --> 00:19:14,720 Speaker 2: at the moment. And you know, I think orders at 285 00:19:14,840 --> 00:19:19,520 Speaker 2: Chinese yards of any type of ship are slower than 286 00:19:19,560 --> 00:19:24,240 Speaker 2: they would have been without the US trade representatives. 287 00:19:25,320 --> 00:19:28,440 Speaker 1: How hard Like if I ordered a Chinese ship six 288 00:19:28,480 --> 00:19:30,920 Speaker 1: months ago and all of a sudden this new rule 289 00:19:30,960 --> 00:19:33,840 Speaker 1: came out, and I'm afraid that the implications How easy 290 00:19:33,840 --> 00:19:35,040 Speaker 1: it is to cancel an order. 291 00:19:37,080 --> 00:19:40,720 Speaker 2: It depends whether you have gotten a so called refund 292 00:19:40,720 --> 00:19:44,800 Speaker 2: guarantee and the contract has been you know, locked in stone. 293 00:19:46,440 --> 00:19:51,639 Speaker 2: Typically a shipyard will negotiate a contract with a credit 294 00:19:51,680 --> 00:19:58,360 Speaker 2: worthy entity and a good shipyard. Anyway, there are good 295 00:19:58,359 --> 00:20:00,280 Speaker 2: shipyards and less good shipyard ards. 296 00:20:00,280 --> 00:20:02,159 Speaker 1: And I don't think I want to ship from a 297 00:20:02,200 --> 00:20:02,960 Speaker 1: bad shipyard. 298 00:20:03,040 --> 00:20:08,600 Speaker 2: Well, I think you have a very correct point. But 299 00:20:09,280 --> 00:20:12,440 Speaker 2: there are shipyards that in a hot market will take 300 00:20:12,480 --> 00:20:16,840 Speaker 2: an order from an entity without a good credit puts 301 00:20:16,880 --> 00:20:22,040 Speaker 2: down a deposit, and in that situation, if the party 302 00:20:22,040 --> 00:20:24,760 Speaker 2: that ordered the ship walks away, the shipyard, as a 303 00:20:24,760 --> 00:20:28,040 Speaker 2: practical matter, just has what was paid to that date. 304 00:20:28,840 --> 00:20:33,440 Speaker 2: But the shipyards we typically deal with, you know, would 305 00:20:33,520 --> 00:20:36,480 Speaker 2: would get a guarantee and we would be on the 306 00:20:36,520 --> 00:20:39,200 Speaker 2: hook for the full amount of the contract. 307 00:20:39,440 --> 00:20:43,800 Speaker 1: And with this depressed market, do you see the M 308 00:20:43,880 --> 00:20:46,560 Speaker 1: and A activity picking up within drybook? I know, you 309 00:20:46,560 --> 00:20:48,960 Speaker 1: guys did a big deal yeah, last year. 310 00:20:49,080 --> 00:20:56,000 Speaker 2: Last year it closed April ninth of last year, and 311 00:20:56,320 --> 00:21:00,399 Speaker 2: that was an Eagle Bulk Shipping, which is a company 312 00:21:00,440 --> 00:21:07,719 Speaker 2: that owned a fleet of handy Max, Supermax and Ultramax ships. 313 00:21:08,720 --> 00:21:14,640 Speaker 2: And you know, it was a very interesting situation. They 314 00:21:16,160 --> 00:21:23,040 Speaker 2: had a more sophisticated, more intensive chartering operation, doing many 315 00:21:23,080 --> 00:21:26,879 Speaker 2: more voyage charters which are a little bit more work, 316 00:21:27,520 --> 00:21:32,040 Speaker 2: and fewer time charters, and they got higher revenue per 317 00:21:32,880 --> 00:21:36,480 Speaker 2: Supermax and Ultramax ship than we did. Our costs were lower, 318 00:21:36,520 --> 00:21:39,800 Speaker 2: and I think our profitability and aggregate was higher. But 319 00:21:40,320 --> 00:21:44,119 Speaker 2: by buying or merging with Eagle, we were able to 320 00:21:44,160 --> 00:21:54,600 Speaker 2: get their chartering sophistication and our cost levels and the 321 00:21:55,520 --> 00:22:00,520 Speaker 2: star fleet of supers and ultras also got their Eagles 322 00:22:01,480 --> 00:22:05,119 Speaker 2: chartering income, and so you know, it was it was 323 00:22:05,160 --> 00:22:10,000 Speaker 2: a win win, And at the moment it looks actually 324 00:22:10,160 --> 00:22:16,080 Speaker 2: like the operating costs and overhead for that that would 325 00:22:16,080 --> 00:22:20,480 Speaker 2: be allocated to the Eagle fleet is actually lower than 326 00:22:20,520 --> 00:22:24,000 Speaker 2: the than the that which is allocated to the Star fleet. Now, 327 00:22:24,040 --> 00:22:27,000 Speaker 2: I mean it's that's not an apples to apples comparison 328 00:22:27,080 --> 00:22:31,879 Speaker 2: because the former Eagle ships are smaller than the average starbullship. 329 00:22:32,000 --> 00:22:36,720 Speaker 2: But you know, it just goes to show that we 330 00:22:36,720 --> 00:22:41,119 Speaker 2: were successful in getting the synergies that we expected to get. 331 00:22:41,400 --> 00:22:43,520 Speaker 1: And do you expect more m and A activity in 332 00:22:43,520 --> 00:22:46,080 Speaker 1: the market, because I'm assuming you know, assets are getting 333 00:22:46,080 --> 00:22:48,840 Speaker 1: a little are coming down in value just because where 334 00:22:48,920 --> 00:22:49,440 Speaker 1: rates are. 335 00:22:50,960 --> 00:22:54,200 Speaker 2: You know, I expect that there should be more m 336 00:22:54,280 --> 00:22:57,359 Speaker 2: and A activity. You know, it is It is a 337 00:22:57,359 --> 00:23:03,720 Speaker 2: bit tricky right now because is starbulk and frankly, all 338 00:23:03,800 --> 00:23:09,560 Speaker 2: of the public comparables are trading below the net liquidation 339 00:23:09,760 --> 00:23:14,600 Speaker 2: value of hard assets, and in Star's case, is substantially below. 340 00:23:15,200 --> 00:23:20,400 Speaker 2: Not that we're an outlier, you know, maybe sixty percent 341 00:23:21,320 --> 00:23:25,720 Speaker 2: of or seventy percent of net liquidation value of hard assets. 342 00:23:26,560 --> 00:23:30,200 Speaker 2: And you know, we are making more money with each 343 00:23:30,240 --> 00:23:35,360 Speaker 2: ship than the typical ship owner. So you know, it's 344 00:23:35,400 --> 00:23:39,760 Speaker 2: not a reflection of poor management of assets. It's a 345 00:23:39,960 --> 00:23:42,719 Speaker 2: I think a reflection of the fact that the public 346 00:23:42,720 --> 00:23:49,359 Speaker 2: equity markets are not incentivized to take the time to 347 00:23:49,520 --> 00:23:55,080 Speaker 2: analyze what is a somewhat quirky industry, small market cap, 348 00:23:56,480 --> 00:24:01,119 Speaker 2: and it's hard for an investor to make a substantial investment. 349 00:24:02,359 --> 00:24:04,520 Speaker 1: I guess provides you, guys, with an opportunity to buy 350 00:24:04,520 --> 00:24:05,160 Speaker 1: back shares. 351 00:24:05,920 --> 00:24:08,600 Speaker 2: It does provide us with an opportunity to take the 352 00:24:08,720 --> 00:24:11,600 Speaker 2: arbitrage between the value of the ships and the value 353 00:24:11,600 --> 00:24:12,240 Speaker 2: of the shares. 354 00:24:12,480 --> 00:24:16,560 Speaker 1: Can you talk about your capital allocation policy at Starbull Yes. 355 00:24:18,280 --> 00:24:25,280 Speaker 2: For several years, we basically decided to pay essentially all 356 00:24:25,320 --> 00:24:31,800 Speaker 2: of our operating cash flow after mandatory debt service and 357 00:24:31,840 --> 00:24:35,640 Speaker 2: after building up a cash reserve that was two point 358 00:24:35,720 --> 00:24:38,480 Speaker 2: one million per vessel that was set by our board 359 00:24:38,760 --> 00:24:41,040 Speaker 2: in order to basically make sure that we were in 360 00:24:41,080 --> 00:24:45,880 Speaker 2: good shape if the market had a week period and 361 00:24:46,280 --> 00:24:49,680 Speaker 2: we paid very large dividends. We paid well over a 362 00:24:49,720 --> 00:24:58,080 Speaker 2: billion dollars in dividends since twenty nineteen. But then as 363 00:24:58,400 --> 00:25:03,440 Speaker 2: our share and the share ayers of our peers dropped 364 00:25:03,520 --> 00:25:10,600 Speaker 2: well below liquidation value, our shareholders basically said, you know, 365 00:25:10,760 --> 00:25:15,560 Speaker 2: stop paying that dividend, please take the money and repurchase shares. 366 00:25:16,280 --> 00:25:20,520 Speaker 2: So our new policy is that no more than sixty 367 00:25:20,560 --> 00:25:24,080 Speaker 2: percent of our operating cash flow, we'll go to dividends 368 00:25:24,119 --> 00:25:29,720 Speaker 2: and possibly less, and the rest will go either to 369 00:25:29,760 --> 00:25:35,040 Speaker 2: repay debt, buy back shares, or possibly go in our 370 00:25:35,080 --> 00:25:38,040 Speaker 2: balance sheet to take what might be an even better 371 00:25:38,080 --> 00:25:41,680 Speaker 2: opportunity later in the cycles. 372 00:25:42,000 --> 00:25:44,439 Speaker 1: What's your debt level, what's your leverage? Turns? 373 00:25:44,840 --> 00:25:49,040 Speaker 2: Well, turns are the wrong metric for dry bulk because 374 00:25:49,080 --> 00:25:52,760 Speaker 2: nobody knows what the cash flow is. The cash flow 375 00:25:52,840 --> 00:25:57,399 Speaker 2: is incredibly volatile. So the metric people look at is 376 00:25:57,560 --> 00:26:01,560 Speaker 2: basically net debt to asset value, okay, And by that 377 00:26:01,680 --> 00:26:06,639 Speaker 2: metric we're about twenty five percent, so very low debt. Actually, 378 00:26:06,920 --> 00:26:10,439 Speaker 2: our debt is less than the scrap value okay, of 379 00:26:10,480 --> 00:26:11,040 Speaker 2: our ships. 380 00:26:11,080 --> 00:26:13,240 Speaker 1: And that's that's kind of like, is that a target 381 00:26:13,240 --> 00:26:15,080 Speaker 1: twenty five percent or that's just where you happen to be. 382 00:26:15,160 --> 00:26:17,680 Speaker 2: That's where we happen to be, and we're reducing debt 383 00:26:17,760 --> 00:26:18,320 Speaker 2: as we go. 384 00:26:18,840 --> 00:26:22,560 Speaker 1: Okay, So let's let's talk a little bit more about tariffs. 385 00:26:22,560 --> 00:26:25,359 Speaker 1: So you mentioned earlier that you know, it may not 386 00:26:25,440 --> 00:26:28,240 Speaker 1: really be impacting us that much because the US is 387 00:26:28,280 --> 00:26:30,919 Speaker 1: only ten percent of the dry bulk market. 388 00:26:31,200 --> 00:26:34,560 Speaker 2: Yes, and the US is ten percent of the dry 389 00:26:34,600 --> 00:26:38,400 Speaker 2: bulk market, largely because of what it exports. Yeah, it's 390 00:26:38,600 --> 00:26:41,720 Speaker 2: much smaller than ten percent. You know, when you look 391 00:26:41,760 --> 00:26:46,240 Speaker 2: at the discharge into US ports. 392 00:26:45,920 --> 00:26:48,320 Speaker 1: And the tit for tat with the tariffs between the 393 00:26:48,400 --> 00:26:51,120 Speaker 1: US and China. So I'm sure China is putting tariffs 394 00:26:51,119 --> 00:26:56,399 Speaker 1: on US exports. So are you seeing a change in 395 00:26:56,440 --> 00:27:01,080 Speaker 1: trading patterns like they're substituting US AG for somebody else? 396 00:27:01,640 --> 00:27:02,000 Speaker 2: Yes? 397 00:27:02,320 --> 00:27:03,080 Speaker 1: Can you talk about that? 398 00:27:03,600 --> 00:27:08,800 Speaker 2: Yeah? I mean basically, the US historically has exported soybeans 399 00:27:09,359 --> 00:27:15,520 Speaker 2: and corn to China, has exported coal to China, particularly 400 00:27:15,600 --> 00:27:22,679 Speaker 2: metallurgical coal, and you know that's basically stopped. And China 401 00:27:22,720 --> 00:27:26,679 Speaker 2: seems to be not importing so much corn from anybody 402 00:27:27,080 --> 00:27:33,359 Speaker 2: because they've increased their domestic harvest. They're importing soybeans, but 403 00:27:33,800 --> 00:27:36,600 Speaker 2: largely from Brazil and to some extent Argentina. 404 00:27:37,160 --> 00:27:39,119 Speaker 1: Do those have longer ton miles? Is that like a 405 00:27:39,160 --> 00:27:39,760 Speaker 1: net positive? 406 00:27:39,840 --> 00:27:46,240 Speaker 2: That is a net positive? Actually? Yes? And and and frankly, 407 00:27:46,320 --> 00:27:50,480 Speaker 2: China is importing a lot of coal, and you know, 408 00:27:50,520 --> 00:27:56,840 Speaker 2: the US may have been a longer, longer route than 409 00:27:57,080 --> 00:28:05,639 Speaker 2: than you know, Australia for example, But you know, the tariffs, 410 00:28:07,480 --> 00:28:11,080 Speaker 2: I think net don't have. Even the Chinese tariffs on 411 00:28:11,600 --> 00:28:18,440 Speaker 2: US products don't have a big impact directly run dry bulk. 412 00:28:18,960 --> 00:28:23,480 Speaker 2: The impact would come from the effect of the tariffs 413 00:28:23,480 --> 00:28:31,440 Speaker 2: on the world economy. You know, dry bulk dry bulk 414 00:28:31,480 --> 00:28:36,560 Speaker 2: traffic tends to be more or less proportional to world GDP, 415 00:28:37,640 --> 00:28:40,600 Speaker 2: and anything that's bad for the world's GDP is bad 416 00:28:40,680 --> 00:28:46,600 Speaker 2: for dry bulk. The other thing that is, you know, 417 00:28:46,680 --> 00:28:49,800 Speaker 2: not going as well as it might is the price 418 00:28:49,840 --> 00:28:54,560 Speaker 2: of oil. And you might think that we favored low 419 00:28:54,600 --> 00:28:58,520 Speaker 2: priced oil because we pay for oil to move our ships, right, 420 00:28:59,320 --> 00:29:06,280 Speaker 2: but actually we do better in higher with higher oil prices. Frankly, 421 00:29:06,320 --> 00:29:09,520 Speaker 2: the higher the better, within some sort of reasonable limits, 422 00:29:11,440 --> 00:29:17,160 Speaker 2: because everybody who owns a dry ball ship wants to 423 00:29:17,160 --> 00:29:21,240 Speaker 2: go at the profit maximizing speed, and the higher the 424 00:29:21,320 --> 00:29:26,080 Speaker 2: charter rate, the faster the profit maximizing speed. But the 425 00:29:26,160 --> 00:29:30,760 Speaker 2: higher the bunker oil price, the slower profit maximizing speed. 426 00:29:32,040 --> 00:29:35,560 Speaker 2: And you know, ships burn fuel in rough proportion to 427 00:29:35,640 --> 00:29:39,040 Speaker 2: the cube of the ship's speed, So a little bit 428 00:29:39,080 --> 00:29:42,880 Speaker 2: of increase in the oil price, basically you can very 429 00:29:42,920 --> 00:29:45,640 Speaker 2: small change in speed can make up for a big 430 00:29:45,720 --> 00:29:51,600 Speaker 2: change in oil price. But all things being equal, if 431 00:29:51,800 --> 00:29:55,600 Speaker 2: the oil price goes up and the fleet slows down. 432 00:29:56,000 --> 00:29:59,160 Speaker 2: There's not enough capacity to carry the cargo that was 433 00:29:59,200 --> 00:30:03,440 Speaker 2: carried before. So in fact, what happens is charter rates 434 00:30:03,520 --> 00:30:07,800 Speaker 2: go up in proportion to the oil price in order 435 00:30:07,880 --> 00:30:10,880 Speaker 2: to have the ships continue to run at the same speed. 436 00:30:11,200 --> 00:30:11,440 Speaker 1: Right. 437 00:30:12,520 --> 00:30:15,720 Speaker 2: And this is not true of container shipping, where the 438 00:30:15,840 --> 00:30:20,000 Speaker 2: container lines have to negotiate prices with their customers, and 439 00:30:20,040 --> 00:30:24,200 Speaker 2: it's not completely true of tankers where they're carrying the fuel. 440 00:30:24,800 --> 00:30:28,880 Speaker 2: And so it's never sort of, you know, all things 441 00:30:28,960 --> 00:30:33,680 Speaker 2: equal with tankers, whereas with dry ball it's basically a 442 00:30:33,680 --> 00:30:37,480 Speaker 2: pretty simple relationship. And we just want high bunker prices. 443 00:30:37,280 --> 00:30:40,280 Speaker 1: Right, and at this low bunker fuel environment, I guess 444 00:30:40,320 --> 00:30:43,480 Speaker 1: you're just I mean, you're not running necessarily faster, are you, 445 00:30:43,560 --> 00:30:45,800 Speaker 1: because there's so much slack capacity in the market. 446 00:30:45,920 --> 00:30:50,040 Speaker 2: Well, I mean we're running faster than we otherwise would, right, Okay, 447 00:30:50,800 --> 00:30:52,240 Speaker 2: it's not very fast. 448 00:30:52,720 --> 00:30:55,120 Speaker 1: But you don't necessarily the lower it goes, you don't 449 00:30:55,120 --> 00:30:58,560 Speaker 1: speed up. You just maintain a certain fast speed. 450 00:30:59,040 --> 00:31:03,200 Speaker 2: The lower it goes, ohs, normally the faster we would go. 451 00:31:03,560 --> 00:31:10,800 Speaker 2: But now there are climate change rules to take to 452 00:31:10,960 --> 00:31:14,080 Speaker 2: take into account, and so I think the climate change 453 00:31:14,160 --> 00:31:19,040 Speaker 2: rules are inhibiting many people in driveball from going as 454 00:31:19,080 --> 00:31:23,080 Speaker 2: fast as they otherwise would, and that's that's a good thing. 455 00:31:23,160 --> 00:31:25,240 Speaker 1: What kind of what kind of rules are you talking about? 456 00:31:25,640 --> 00:31:32,360 Speaker 2: The IMO has got rules on so called carbon carbon 457 00:31:34,560 --> 00:31:39,200 Speaker 2: Carbon Intensity Indicator, which is basically a measure of how 458 00:31:39,280 --> 00:31:44,680 Speaker 2: much carbon you emit per unit of transportation work. And 459 00:31:44,720 --> 00:31:49,440 Speaker 2: it's a sort of a strange metric because it, for example, 460 00:31:49,520 --> 00:31:54,320 Speaker 2: incentivizes cruise lines to not dock their cruise ship but 461 00:31:54,480 --> 00:31:57,400 Speaker 2: to run it in circles outside the port, because if 462 00:31:57,400 --> 00:32:00,160 Speaker 2: they're just docked and they burn fuel to keep the 463 00:32:01,080 --> 00:32:05,440 Speaker 2: ship lit, they're not doing any transportation work at all. Right, 464 00:32:07,600 --> 00:32:11,760 Speaker 2: But nevertheless, that is a measure that we have to 465 00:32:11,800 --> 00:32:15,800 Speaker 2: disclose and our charters pay some attention to it. There's 466 00:32:15,920 --> 00:32:21,040 Speaker 2: no specific financial penalty. And then you know, the IMO 467 00:32:21,440 --> 00:32:28,160 Speaker 2: has in principle decided to adopt what are essentially global 468 00:32:28,280 --> 00:32:32,040 Speaker 2: carbon taxes, and you know it's going to be a 469 00:32:32,160 --> 00:32:36,560 Speaker 2: very complicated process to get those implemented. And let's see 470 00:32:36,560 --> 00:32:37,160 Speaker 2: what happens. 471 00:32:37,600 --> 00:32:40,120 Speaker 1: So a little bit about your career, so you know, 472 00:32:40,200 --> 00:32:43,160 Speaker 1: your transition from Wall Street to you know, an operator, 473 00:32:43,200 --> 00:32:48,200 Speaker 1: what was the biggest change for you when you made 474 00:32:48,240 --> 00:32:49,560 Speaker 1: that change. 475 00:32:49,760 --> 00:32:53,160 Speaker 2: Well, I think everything changed in a fairly dramatic way. 476 00:32:53,320 --> 00:32:55,520 Speaker 2: And it was, by the way, in twenty fourteen that 477 00:32:55,560 --> 00:32:59,720 Speaker 2: I became president of Starbuck. I went to work for 478 00:33:00,400 --> 00:33:04,520 Speaker 2: one of the predecessors of Starbulk in twenty twelve, a 479 00:33:04,640 --> 00:33:08,160 Speaker 2: joint venture between the Papas family and oak Tree in 480 00:33:08,240 --> 00:33:11,600 Speaker 2: dry Bulk, which was merged into Starbulk in twenty fourteen. 481 00:33:13,080 --> 00:33:16,920 Speaker 2: But you know, I think you know, for example, our 482 00:33:16,960 --> 00:33:22,200 Speaker 2: offices in Marusi, which is a suburb of Athens, cost 483 00:33:22,240 --> 00:33:25,800 Speaker 2: US about five dollars per square foot per year, and 484 00:33:26,240 --> 00:33:29,959 Speaker 2: that's we paid more than that for real estate in 485 00:33:30,040 --> 00:33:34,920 Speaker 2: Manhattan when I was an investment investment banker, and you know, 486 00:33:35,000 --> 00:33:40,560 Speaker 2: so the surroundings were very different. The job has its 487 00:33:40,560 --> 00:33:48,520 Speaker 2: hair raising moments, but mostly I think deeply about a 488 00:33:48,560 --> 00:33:52,800 Speaker 2: small number of problems instead of thinking much less deeply 489 00:33:52,880 --> 00:33:54,840 Speaker 2: about a much larger set of problems. 490 00:33:56,120 --> 00:33:59,160 Speaker 1: So in what would you characterize the biggest problem that 491 00:33:59,200 --> 00:34:00,480 Speaker 1: you're thinking about right now? 492 00:34:01,600 --> 00:34:04,360 Speaker 2: The biggest problem I'm thinking about right now is how 493 00:34:04,400 --> 00:34:10,200 Speaker 2: to get our share to trade above the net liquidation 494 00:34:10,400 --> 00:34:13,960 Speaker 2: value of hard assets. Okay, because you know that's really 495 00:34:14,040 --> 00:34:19,000 Speaker 2: annoying when management is in effect deemed to be subtracting 496 00:34:19,080 --> 00:34:23,480 Speaker 2: value from assets, even though we do a really good 497 00:34:23,560 --> 00:34:24,640 Speaker 2: job of managing them. 498 00:34:25,000 --> 00:34:27,239 Speaker 1: Right, I'm assuming it's very frustrating, But at the end 499 00:34:27,280 --> 00:34:29,279 Speaker 1: of the day, it's really going to depend on the market. Right, 500 00:34:29,320 --> 00:34:31,680 Speaker 1: It's it's well, but I mean, while you guys have 501 00:34:31,760 --> 00:34:35,440 Speaker 1: a good profitability margin versus your peers, it's a lot 502 00:34:35,480 --> 00:34:36,879 Speaker 1: of it is the macro. 503 00:34:36,920 --> 00:34:39,280 Speaker 2: Yes, but I mean the value of the ships depends 504 00:34:39,320 --> 00:34:43,239 Speaker 2: on the macro. Two. You know, this is comparing the 505 00:34:43,280 --> 00:34:46,680 Speaker 2: liquidation value of the ships in the private market for ships, 506 00:34:46,680 --> 00:34:50,240 Speaker 2: which is presumably dominated by people who know what they're doing, 507 00:34:51,160 --> 00:34:56,040 Speaker 2: versus the public market for shipping companies, which is valuing 508 00:34:56,080 --> 00:34:58,800 Speaker 2: these same ships at a much lower number. 509 00:35:00,840 --> 00:35:04,560 Speaker 1: Yeah, why why does why don't like during these times, 510 00:35:04,600 --> 00:35:08,120 Speaker 1: like why aren't we seeing shipping companies taking their companies private? 511 00:35:08,320 --> 00:35:08,680 Speaker 1: Like what? 512 00:35:09,920 --> 00:35:14,799 Speaker 2: Well, I think to some extent you will see that. 513 00:35:17,040 --> 00:35:23,280 Speaker 2: But you know, you also have to look at the incentives. 514 00:35:24,880 --> 00:35:32,920 Speaker 2: We are a you know, basically totally self managed company. 515 00:35:33,120 --> 00:35:35,960 Speaker 2: You know, the people who manage our ships are employees 516 00:35:36,000 --> 00:35:40,640 Speaker 2: of Starbulk. Are all of our executives are employees of Starbulk. 517 00:35:41,760 --> 00:35:45,239 Speaker 2: That's not always the case even in public shipping companies. 518 00:35:46,000 --> 00:35:49,720 Speaker 2: You you, you have many companies that just own ships 519 00:35:50,280 --> 00:35:55,480 Speaker 2: and contract in management services from companies that may be 520 00:35:55,560 --> 00:36:00,719 Speaker 2: affiliated with the executives. And you know, in a situation 521 00:36:00,880 --> 00:36:04,440 Speaker 2: like that, the incentive might be to keep the company 522 00:36:05,400 --> 00:36:06,520 Speaker 2: as large as possible. 523 00:36:06,840 --> 00:36:09,440 Speaker 1: Right Well, hey, Misha, I think we're running out of 524 00:36:09,480 --> 00:36:11,640 Speaker 1: time right now. I want to thank you for your 525 00:36:11,680 --> 00:36:13,759 Speaker 1: time and your insights. It's always a pleasure to talk 526 00:36:13,800 --> 00:36:16,719 Speaker 1: to you always come away learning a little more about 527 00:36:16,719 --> 00:36:17,800 Speaker 1: the dry bulk industry. 528 00:36:18,560 --> 00:36:21,520 Speaker 2: Thanks very much, Lee, thanks for having me on, and. 529 00:36:21,480 --> 00:36:23,040 Speaker 1: I want to thank you for tuning in. If you 530 00:36:23,120 --> 00:36:26,399 Speaker 1: liked the episode, please subscribe and leave a review. We've 531 00:36:26,400 --> 00:36:28,600 Speaker 1: lined up a number of great guests for the podcast, 532 00:36:28,640 --> 00:36:33,839 Speaker 1: so please check back to hear conversations with C suite executives, shippers, regulators, 533 00:36:33,840 --> 00:36:37,040 Speaker 1: and decision makers within the freight markets. Also, if you 534 00:36:37,120 --> 00:36:40,839 Speaker 1: want to learn more about the freight transportation markets, check 535 00:36:40,840 --> 00:36:44,440 Speaker 1: out our work on the Bloomberg Terminal at BIGO and 536 00:36:44,600 --> 00:36:48,239 Speaker 1: on social media. This is Lee Clasgal signing off and 537 00:36:48,280 --> 00:36:49,880 Speaker 1: thanks for talking transports with me.