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Operator
Thank you for standing by, ladies and gentlemen, and welcome to the Starbuck Carriers Conference Call on the third quarter 2021 and nine months financial results. We have with us Mr. Petros Papas, Chief Executive Officer, Mr. Hamish Norton, President, Mr. Nikos Reskos, Chief Operating Officer, Mr. Simos Spiro, and Mr. Christos Berglaris, Co-Chief Financial Officers of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. We now pass the floor to one of your speakers today, Mr. Spiro. Please go ahead, sir.
Petros Papas
Thank you, operator. I'm Simo Spiro, Co-Chief Financial Officer of Starball Carriers. and I would like to welcome you to our conference call regarding our financial results for the third quarter of 2021. Before we begin, I kindly ask you to take a moment to read the Safe Harbor Statement on slide number two of our presentation. In today's presentation, we will go through our Q3 results, cash evolution during the quarter, a walkthrough of our dividend policy, an overview of our balance sheet, an operational and ESG update, and the latest industry fundamentals before opening up for questions. Let us now turn to slide number three of the presentation for a summary of our third quarter 2021 highlights. The company reported a record performance this quarter. Net income for the third quarter amounted to 220.4 million and adjusted net income of 224.7 million or 2.20 cents earnings per share. Adjusted EBITDA was at 277.8 million for the quarter. On the bottom of the page, you can see the evolution of our adjusted net income and adjusted EBITDA performance. For the third quarter, we declare a dividend per share of $1.25, payable on or about December 22nd, 2021. During Q3 2021, our company prepaid in full the 50 million outstanding 8.3% senior notes, which were due in November 2022. In addition, as part of the authorized share buyback program, we repurchased 466,268 of our shares in open market transactions at an average price of $22.01 per share for aggregate consideration of $10.3 million. In November 2021, we hedged 75,000 tons for Q1 2022 of the VLSFO-HSFO spread at an average price of $134.8 per ton. In November 2021, we released our third annual environmental, social, and government report, which records our ongoing efforts to further strengthen the company's environmental stewardship, social contribution, and corporate governance, and provides a transparent account of our ESG strategy and performance. On the top right of the page, you will see our daily figures per vessel for the quarter. Our TCE rate was $30,626 per vessel per day. Our combined daily OPEX and net cash GNA expenses per vessel per day amounted to $5,291 per day per vessel. Therefore, our test TCE, less OPEX and GNA, is at $25,335 per day per vessel. Finally, for the fourth quarter of 2021, we have covered 71% of our fleet's available days at a daily rate of $38,250 per vessel. Slide number four graphically illustrates the changes in the company's cash balance during the third quarter. We started the quarter with $242.8 million in cash and generated meaningful positive cash flow from operating activities of $251 million due to the strong freight market. After including debt proceeds and repayments, our notes prepayment, capex payments for ballast water treatment installation, as well as the second quarter dividend payment, we arrived at a cash balance of 371.7 million at the end of the third quarter. Slide five has a walkthrough of our dividend policy with an example for the dividend calculation for third quarter 2021. As of September 30th, 2021, we owned 128 vessels and our total cash balance was at 371.7 million. With a minimum cash balance per vessel as of September 30th of 1.90 million, on November 16th, 2021, pursuant to our dividend policy, our board of directors declared the quarterly dividend of $1.25 per share payable on or about December 22nd, 2021 to all shareholders of record as of December 10th, and the ex-dividend date is expected to be on December 9th, 2021. Please turn now to slide number six, where we highlight the continued strength of our balance sheet. Our total cash today stands at 531.7 million, including a 30 million revolving facility, which is currently undrawn. Meanwhile, Our total debt stands at approximately 1.6 billion. Our working capital stands at approximately 80 million. We have completed four refinancings which will raise 400 million in senior debt and result in interest saving of about 5 million per annum. Our annual amortization is 207 million per annum and our performer average margin at approximately 2.4%. Finally, by the end of the year, we will have five unlevered vessels and no debt maturities until the third quarter of 2023. In slide number seven, we demonstrate the inherent operating leverage and cash flow potential of the company and the illustrative free cash flow per share, as well as the potential cash flow yield. For example, With approximately 46,700 fleet available days per year, based on the current 2022 FFA curve, Starbuck would produce $3.8 of precast flow and yield of approximately 20%. I will now pass the floor to our COO, Nikos Reskos, for an update on our operational performance.
Simo Spiro
Thank you, Simo. Please turn to slide A, where we provide an operational update. Operating expenses, excluding non-incurring expenses, was $4,288 per day per vessel for the nine months ending in 2021. Netcast GMA expenses were $1,053 per vessel per day for the same period. Despite continued adverse COVID-related restrictions, which have a direct impact on operating expenses, The combination of our in-house management and the scale of the group enable us to maintain very competitive costs, being the lowest cost operator amongst our peers, and continuing to rate at number one among our least peers in terms of rideship rating. Slide number nine provides a sleek snapshot and some guidance around our future dry dock and ballast water system installation expenses for the next 15 months, and the relevance total of five days. StarBulk operates one of the largest dry-bulk fleets with 128 vessels geared towards larger sizes. Our expected dry-bulk expense for the next 15 months is estimated at $32.9 million for the dry-ducking of 31 vessels, with another $26.3 million towards unbalanced water installation capacity. In total, we expect to have approximately 950 off-hide days for the forward 15-month period. We anticipate that 97% of our fleet will be fitted with balanced water systems by the end of 2022. The above numbers are based on current estimates around right of retrofit planning, vessel employment, and yard capacity. These figures incorporate our current understanding of present and future shipyard congestion. On the scrubber front, high-five fuel spreads have recently been increasing due to an upward momentum of fuel prices, a pickup in jet fuel demand, and increased production of HSFOs. With an estimated annual life consumption of 800,000 tons of HSFO across the startup fleet, we expect to have recouped our scrubber investment by the end of Q2 2022. Given that 94% of our vessels are fitted with scrubbers, a continued increase in HIFI spread can have a significant value generation for our company. I will now ask our Chief Strategy Officer, Haris Plakantonaki, to provide an update on the latest ESG development.
Simo
Thank you, Niko. Please turn to slide 10, where we provide an update on Starbuck ESG activities. The third annual Starbuck Environmental, Social, and Governance Report has been published and is available on the company's website. The report has been developed following rigorous global reporting standards the disclosures of which have been assured by wide climate change and sustainability services. During Q3 2021, Starbucks joined the Maritime Anti-Corruption Network, a global business network with more than 160 companies which works with governments, NGOs, and civil society to eliminate maritime corruption. On the decarbonization front, we have participated actively in and sponsored the next wave green corridors report presented at COP26 last week, a multi-stakeholder project which analyzed the feasibility of specific trade routes between major port hubs where zero-emission solutions could be demonstrated. We have participated in the development of the Poseidon Principles for Marine Insurance, an initiative by the Global Maritime Forum, which serves as a framework to better align hull and machinery portfolios with responsible environmental impacts. StarBalt has become a signatory to the call to action for shipping decarbonization, an initiative by the Getting to Zero Coalition, which publicly calls on governments and international regulators to take action in support of shipping decarbonization. Within the scope of the call, Starbuck has made specific climate commitments on greenhouse gas transparency, on international collaboration, and on pilot and demonstration R&D projects on green energy. I will now pass the floor to our CEO, Petros Papas, for a market update and his closing remarks.
Niko
Thank you, Haris. Please turn to slide 11 for a brief update of supply. During the first 10 months of 2021, a total of 32.9 million dead weight was delivered and 4.9 million dead weight was sent to demolition for a net fleet growth of 28 million dead weight or 3.1% since the beginning of the year. Despite the 31.4 million dead weight, thermal orders reported year-to-date compared to 15.8 million dead weight, of the corresponding period of 2020, the order book still stands at the historical low level of 6.8% of the fleet, including options that have been declared. The strong increase in container ship orders during the last year has filled up CPI capacity until the end of 2023. Uncertainty on future propulsion as a result of upcoming environmental regulations combined with increased shipbuilding costs, has helped keep new orders under relative control. Furthermore, the surge of global steel prices has pushed scrap prices to record levels and may make demolition of overage tonnage an attractive option during seasonal downturns. Average steaming speed of the dry bulk fleet currently stands at 11.9 knots. and despite the improved freight rate environment, it has only increased by 2.5% year-over-year. Quarantines related to COVID-19 pushed port congestion to record levels during the third quarter and helped rates to hit 14-year highs. Congestion at Pacific ports has corrected during the last month but still remains at inflated levels, and combined with political tensions between China and Australia, trade strong inefficiencies for trade with a positive effect on vessel utilization. As a result of the above trends, net slip growth is projected to end up at approximately 10.5% during 2021 and average out at 2% per annum during 2022 and 2023. Let's now turn to slide 12 for a brief update of demand. According to Clarkson's total dry bag trade during 2021 is projected to expand by 4.8% in ton miles. During the first three quarters of the year, dry bag volumes have experienced a strong recovery following the synchronized global economic stimulus and the gradual reopening of economies supported by vaccination programs against COVID-19. Record high commodity prices during 2021 have provided a strong incentive to major producers of dry bulk cargos to expand output and exports during 2022. Having said that, China has experienced a strong slowdown during the third quarter of 2021 in response to high energy and raw material costs and stricter lending requirements affecting the real estate market. We're still at the early stages of the global recovery from COVID-19, with the IMF projecting global GDP growth of 4.9% in 2022. According to Clarkson's dry bulk trade, it's projected to expand 2.4% during 2022, while increased Atlantic exports and political tensions between China and Australia are expected to support on-mile growth and vessel requirements over the next years. Iron ore trade is expected to expand by 2.2% during 2021 and 1.5% in 2022. During the first half of 2021, Chinese steel production expanded by 11.5%, but since July, the government imposed strict production curbs, resulting in a 13.2% year-on-year decline during the third quarter. The Chinese restrictions should help ease energy shortages and are expected to last until the end of the Winter Olympics. On the other hand, steelmakers from the rest of the world have increased production by 16.6% year-to-date and are still unable to meet regional demands. Brazil iron ore exports are slowly recovering from the 2019 disaster and have increased by 7% year-on-year. Coal trade is expected to expand by 7.8% during 2021 and 2% in 2022. During the first three quarters of 2021, China and India thermal electricity output increased at a higher pace than domestic coal production, and the combination created a shortage of supply that pushed stocks lower and prices to record high during the third quarter. China and India have increased domestic production during the last months in an effort to to increase stocks ahead of this winter. Nevertheless, due to the La Nina phenomenon, a colder-than-average winter is expected to boost power demand from households and to affect domestic production of coal. Moreover, the Chinese ban on Australian coal has forced power utilities and steelmakers to diversify and seek coal cargoes from longer-distance sources such as South Africa, Colombia, the US, and Canada, but also increased imports from Indonesia that experience long delays due to quarantine measures. Grain trade is expected to expand by 2.9% during 2021 and 3% in 2022. China's demand for grains is projected to remain strong due to the five-year plan focusing on food security. U.S. corn exports have experienced a record high season while sales for the current marketing year stand at elevated levels. The U.S. soybean export season started with delays, but is catching up and is projected to remain strong over the next months in the wake of the Phase I trade deal. Looking into the next marketing year, Brazil's coarse grain and soybean exports are projected to experience record high shipments and generate significant tonnage for smaller-sized vessels. Minor bulk trade is expected to expand by 6.4% during 2021 and 3.1% in 2022. Minor bulk trade has the strongest correlation to global GDP growth, and smaller geared vessels will continue to benefit significantly from resynchronized consumption recovery. Shortages of steel products and positive price arbitrage should continue to incentivize Pacific exports to the Atlantic, while the container sector strength has had a positive spillover effect for dry bulk. Moreover, West Africa bauxite exports are projected to generate strong ton miles for cape-sized vessels during the next years. Finally, our outlook for the market during 2022 and 2023 remains positive. The very low order book combined with the lack of yard space and certainty on future vessel propulsions and increased inefficiencies, create a favorable supply-side picture for our industry, and support our optimistic view on the future prospects of the dry bulk markets. Back to you, operator.
Operator
Thank you. As a reminder, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star 2 Once again, if you would like to ask a question today, please press star and 1. Your first question today comes from the line of Ben Nolan from Stifle. Please go ahead. Your line is open. Yeah.
2 Once
Hi. Thanks. So let's see. Where to start? First of all, I guess just the easy one. Could you maybe, is it possible to break down the 71% of days fixed by segment at all?
Niko
Yes. Hi, Ben. We have covered 62.5% of our CAPE charges at $46,600. 74% over Panamax. at 35,100, and 77% of our Supramax at 35,000. Perfect. Right. Perfect. No, my next question is related to just a few things that were –
2 Once
A little different than I expected. First of all, the dry docking days for the fourth quarter were a lot higher than they looked like that they were in the or projected to be. And when you reported last quarter, it was curious where that stands. And also the GNA was a little bit higher, too. And I know that in the release you called out stock based comp. But how should we think what's the right run rate for GNA going forward?
Simo Spiro
Ben, hi, this is Simos.
Petros Papas
The increase of the cash GNA expenses for the third quarter versus the third quarter of 2020 was entirely due to the Euro-USD effect. So basically, you know, an absolute number. we should expect that basically the change and the strengthening of the dollar in the fourth quarter is going to assist. But you have to subtract basically the non-cash item, which was on the third quarter, the share-based compensation, which is non-recurring. On the dry dock days, I will pass it to Nikos.
Simo Spiro
Hi, Ben. For Q3... Five out of the six RIDOCs we carried out also involved ballast water installations, which take a bit longer, and, of course, we have the additional costs. So that's where you see the difference in days and costs.
2 Once
Okay, so those were pushed back from the third quarter or something? Is that what happened?
Simo Spiro
These are the ones that took place during the third quarter.
2 Once
Okay, yeah. Well, in the last release, you'd said that you expected 46 days in the fourth quarter, and now it's 194.
Simo Spiro
Well, that's basically we have six ships in Q4. We have also the out-ballast water installations. So that's why you see more days than previously expected that were supposed to happen earlier in the year. Okay.
2 Once
And then last for me, and I'll turn it over, I've seen a little noise about you guys putting a handful of vessels on time charter. Just curious where that stands in terms of how much maybe of the fleet is contracted for next year as well and how you're thinking about the combination of spot versus contract.
Niko
Well, our coverage for Q1 basically is – around 17%. Basically, we have three CAPEs worth, nine Panamax worth, and nine SupraMax worth covered for Q1 at just below $32,000. Wow.
2 Once
That's pretty good. Nice work on that. I appreciate the color. Thanks. Thanks, all. Thank you, Ben.
Operator
Thank you. And your next question comes from one of Amit Marotra from Deutsche Bank. Please go ahead. Your line is open.
Petros
Thanks, operator. Hi, everyone. Hopefully you can hear me. I wanted to add a couple questions. First, maybe just a market-related question. We've obviously seen a pretty significant step down in spot rates. I think, Petros, you mentioned the congestion issue. I was wondering if you'd give us a little bit of an overview of what you're seeing on end market demand growth in China. I mean, obviously, there's some emission mandates. There's the Olympics coming up. What are you seeing in terms of risks associated with demand there? And then also just talk about how the psychology of the market is changing, whether from the owners' or charters' perspective, because clearly we're a very hot market earlier this year. Things have cooled down. I wonder if there's any psychological impact that may be driving it or could drive it even further. If you can talk about that as well.
Niko
Thank you, Amit. It may take me a little bit longer to answer your question. First of all, the market is down for three reasons. These are China, China, and China. And to explain further than that, we had a strong steel-making reduction to the tune of 20% almost in the last couple of months, which is obviously negative for imports. And of course, it also affects congestion. It reduces congestion. We saw China increase their local coal production and capping prices. So therefore less imports, actually imported coal is more expensive than local coal. Before that, higher commodity prices basically led to a certain demand destruction, at least in the short term. And China, basically wanted clear skies for the Olympic Games. So, I mean, it's a combination of clear skies and reduction of commodity prices from China. That's what their goal was. But let me make a side comment here, which I think is important. I was going through the imports of China earlier today, and I realized that in 2022, China... sorry, 2021, in the last, in the 10 months of 2021, China actually imported 2 million tons less than last year. And you remember what we all used to say, that if China sneezes, we will catch pneumonia, the market will catch pneumonia, right? Well, China sneezed and we didn't catch exactly pneumonia. So I think that happened because the rest of the world came up and when we're talking about 4% increase in import in trade in 2021, actually that's about 180 million tons of additional trade. All of it came from countries other than China. I consider this as extremely important, and especially for the future. Now, talking about the future, we are very positive, actually. We remain very positive. We think there's going to be a slowdown during Q1 for the reasons already explained. We think that the market will start moving after the Winter Olympics. We foresee very strong grain trade coming from Brazil and to a lesser degree from Argentina. We think that coal prospects are pretty good, especially from India, but China will also. China, having achieved their goal, will probably turn to more imports. As I said before, international prices are cheaper. Iron ore, you know, China imported 38 million tons less of iron ore this year in total. We think that will change going forward. And we think that most, a lot of it is going to come from Brazil. So we expect more ton miles, which is going to be positive, very positive. Actually, ton miles are more important than tons. Sorry, go ahead, Petros. Sorry. Yeah, another couple of minutes. Then China, we're positive about China. We think that after February, March, it will have to start a new easing cycle and will stimulate the economy and infrastructure. Let's also not forget supply. I mean, supply. Next year, we have 28 million tons of If we have 8 million scrap, that's 2.2% increase in supply. In 2023, we have 20 million tons orders. If there's 6 million scrap, that's going to be 1.5% supply. So the supply situation is very positive. We also believe that the strong Chinese currency is going to help imports. It will make freight cheaper for them. We think that inefficiencies will continue to exist. We don't think that China will change their COVID-19 rules for a long while. And finally, we also think that oil prices will remain strong and that will be a disincentive towards increasing speed, not to mention environmental regulations that will kick in later on in time, and they will help as well. So, you know, I try to make a general comment. Let me just say very quickly that on specific vessels, we think the Supras will do very well next year as well because we think container market is going to be good and there will be an overflow of cargoes from the containers to the bulk side. And we also believe that there's going to be a strong minor bulk market. On the Panamax side, we think grains are going to be very strong. And never forget that grains are long-distance cargoes. And coal will be relatively strong as well, as I previously said. And capes, we see weak during Q1. But then we count on Brazil imports and West African bauxite imports to increase. And we think that the market is going to... to improve after Q1.
Petros
So I hope I didn't tire you, but I tried to... No, that was very comprehensive, and I apologize for interrupting prematurely earlier. If I could, my follow-up question is less macro and more micro-focused. You know, Starbulk has a break-even of a little bit under $11,000 per day, which means given that you guys are at your cash threshold levels Anything above even that level will translate into dividends. Year-to-date, we've had about 23,000 per day average time charter equivalent, which is not a wonderful number. It's an okay number. It's kind of a mid-cycle number, and you've still been able to pay out over $2 per share in dividends for the first nine months of the year, which I think speaks to the micro aspects of the capital structure in the model. My question is, after that big preamble, my question is that, you know, I assume you guys are just incredibly frustrated by the way the equity value of the company has reacted to these payments, which is something like 15% yield maybe annually, which is just really the outcome so far at least is not clearly the intended outcome of this strategy. And the question I have is that how committed are you to this strategy in the context of of how the market is taking it now. Now, keep in mind we've had 10 years of a bad market, so it might take more than nine months of a good market to change people's minds. But talk about how patient you guys are, because I've got to imagine the level of frustration is pretty high at the moment.
Niko
First of all, I will turn part of the question to Hamish, but let me say that we don't get easily frustrated to begin with. Let me also say the following. I was doing another calculation earlier today. I like math. And I was looking at FFA rates. And average FFA rates were around $17,500. And if you calculate that, $17,500 less than $11,000 cost, as you mentioned, that would actually give us a 15% yield over next year. And every $1,000 above 11 would give us about 2.4% yield. Like if we made $12,000, it would be 2.4%. If we made $13,000, it would be 4.8%, etc., which I consider actually... pretty good in view of our very low cost. But I'll turn the rest to Hamish.
Hamish
Yeah. So, Amit, you know, basically it gives us a warm and fuzzy feeling to distribute cash to needy shareholders around Christmas. And, you know, our dividend policy remains in effect.
Petros
Yeah, but that's not really the answer to my question, Hamish. The question is, was really around you have many options for distributing excess cash. You certainly have share buybacks, which I've been very much against, but there are a lot of other people that are not against that, and certainly on paper it makes sense. There's vessel acquisitions, which certainly don't make sense with equity for sure, but may make sense with cash. But just talk about at what point do you guys say that, listen, this strategy is not giving us the intended consequence, the intended outcome, and so you pivot to something else. I mean... Are you close to that point? Do you want to give it another year? Where is your collective thinking on that?
Hamish
We, you know, have no other thoughts in our head at this point. We're not planning on buying ships in the near term. We are planning on finishing up You know, the authorized amount of share buybacks probably financed by, you know, selling a couple of vessels as long as we can do that without too much disruption in the market. And we would hope to finish that up, you know, in the next quarter or so. But, you know, we're continuing on this path.
Petros
Right. Okay, very good. Thank you very much. Congrats on the results, and hope you guys have a nice holiday. Thank you. Thank you.
Operator
Thank you. Your next question comes from the line of Randy Givens from Jefferies. Please go ahead. Your line is open.
Randy Givens
Howdy, Team Starbuck. How's it going? Great. Great, Randy. All right. Great to see the dividend, obviously above expectations at $1.25. clearly making some steps with the accretive share purchases there. You kind of answered the question a little bit there, Hamish, in terms of the remaining $40 million. So I guess glad to hear that's going to be finished here in the next few months. I guess just looking at the dividend, obviously the 4Q quarter-to-date rate guidance is very strong. You already have some bookings into the first quarter. So just kind of sequentially from here, obviously there's changes in working capital and others. But how should we think about the 4Q dividend compared to the $1.25 announced for 3Q?
Hamish
Well, I mean, as I've told you in the past, Randy, you're the securities analyst. We just run the shipping company. We don't try to make forecasts about the future, especially not in public. So, you know, I'm sure you will be pretty accurate.
Randy Givens
Oh, I was just seeing if there was any nuanced changes to working capital or debt repayments that we need to factor in for the fourth quarter that maybe weren't there in the third quarter. But that's fine. I'll ask you offline for that. And then I guess looking into the first quarter for the hedge of the fuel, 75,000 metric tons. Is the quarterly fuel burn about 250,000 tons still? So how meaningful is that hedge for the first quarter?
spk01
This is Christos. Hi, Randy. Essentially, we have around 200,000 tons approximately per quarter, and we have hedged 75,000, so 38%. If we see the spread jumping, it's not unreasonable to assume that we may increase the hedge. But so far, the hedge has proven to be profitable.
Randy Givens
Yep. And then just following up on that, what does that translate to on a CAPE size, for example, in a dollar per day?
spk01
Sorry, can you repeat the question?
Randy Givens
Yep. What is the $30 a ton spread? What is the savings or premium, whatever term you want to use for a CAPE size?
spk01
For a cake-sized vessel at levels of around 135, it's approximately at $3,500 per day, the saving that we would generate, $3,500 to $4,000 per day.
Hamish
Perfect.
Randy Givens
All right, that's what we're having as well. All right, that's it for me. Thanks, fellas.
Niko
Thank you, Randy.
Operator
Thank you. Your next question comes from the line of Omar Noctar from Clarkson Security. Please go ahead. Your line is open.
Omar Noctar
Hi, guys. Good afternoon. You've addressed pretty much most of the questions I had, but I did want to ask, since, Hamish, you brought it up, the way you're kind of viewing the secondhand market today in terms of valuations, this is probably, I would say, perhaps a good test to gauge the overall resilience of vessel values since they've shot up so much this year with all the volatility we're seeing in the spot market now. Just wanted to ask kind of how you, from your perspective, are seeing the secondhand market shaping up here. Has there been any indication that values are softening as a result of what we're seeing, or are things still fairly firm?
Niko
Hi, Omar. It's Petros. We think that secondhand values have gone down by about 10%, perhaps, That's our estimate at this point in time.
Omar Noctar
Okay, thank you. And that would be, I guess, Petrus for typical 5- to 10-year-old secondhand ships?
spk07
Yeah, yes.
Omar Noctar
Okay, and then I know it's probably sensitive to an extent, but in terms of, as you said, financing the buyback with some vessel sales, Any particular sort of part of the fleet you would look to monetize in this environment today?
Hamish
You know, I think we'll basically look at, you know, what we get good value for, what's, you know, easy to sell without disturbing the market. You know, I mean, I think it will – It will change from day to day, and we'll be very careful about it.
spk07
Got it. Yeah, we wouldn't put the market down. That's what the HEMIS means, I think.
Omar Noctar
Yeah, I understand. Cool. Well, thank you, and thanks, Petros. Thank you, Omar.
Operator
Thank you. Your next question comes up from the line of Magnus from HC Wainwright. Please go ahead. Your line is open.
spk11
Thank you. Good afternoon. Just one question to follow up on bookings for first quarter. I know you were talking a few months ago about securing more days for the first half as there was some uncertainty there with China slowing down. With rates, you know, with booking, you know, very attractive rates for 17% of the fleet, would you book at a lower rate as well, or do you think you're going to stay spot for the rest of this weakness?
Niko
First of all, we actually didn't expect the market to go down that fast, to be honest, between mid-October, because this is – This is hedging we did two, three weeks ago. It was up to two, three weeks ago. We didn't expect to go down that quickly. We are expecting a rebound somewhere in the next two weeks or so. If that happens, then we will increase our coverage for Q1.
spk11
Okay. I like your example there of 15% yield at current SFA rates. Is that something that you guys are thinking about just to kind of provide some visibility of the dividend?
Hamish
Sorry, Magnus, I'm not sure I completely understood the question.
spk11
No, I was just, you know, there's a lot of talks about, you know, sustainability and visibility of dividends. Would you consider booking more ships at these lower rates? I mean, since the returns would be very attractive, or would you just stay spot?
Niko
Well, actually, we're positive about next year. It is only Q1, and mainly on capes that we think it's going to be slower. So if we fix, we would fix for Q1 mostly, and that's it.
spk11
No, that's great. I like your charting strategy, so keep it up. Thank you. Thank you, Magnus.
Operator
Thank you. I will now hand the call back for closing remarks.
Niko
Thank you, operator. Just two quick reminders. the 15% yield at present FFA at the low market, and that this market that we've seen during 2021 has been without China being in the picture. And that, in our view, means that once China reenters at some point next year, it will show a much stronger market. So thank you very much, and Merry Christmas and Happy New Year, and we'll talk to you again in February.
Operator
Thank you. That does conclude today's conference. Thank you for participating. You may all disconnect.
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