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spk01: Thank you for joining us for NAVRU's Maritime Partners Second Quarter 2023 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frambu, Chief Operating Officer, Mr. Stratos Tsipris, Chief Financial Officer, Ms. Eri Tsironi, and Vice Chairman, Mr. Ted Petron. As a reminder, this conference call is minwebcast. To access the webcast, please go to the investor section of Navios Partners website at www.navios-mlp.com. You'll see the webcast link in the middle of the page and a copy of the presentation reference in today's earnings conference call will also be found there. Now, I will review the safe harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navier's partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navier's partners' management and are subject to risks and uncertainties which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows. First, Ms. Fang will offer opening remarks. Next, Mr. De Cipris will give an overview of Navios Partners segment data. Next, Ms. Tironi will give an overview of Navios Partners financial results. Then, Mr. Petron will provide an industry overview. And lastly, we'll open the call to take questions. Now, I turn the call over to Navios Partners Chairwoman and CEO, Ms. Angeliki Frangos. Angeliki?
spk02: Good morning to all of you joining us on today's call. I am pleased with the results for the second quarter of 2023, in which we reported revenue of $346.9 million and net income of $112.3 million. We are pleased to report a net earnings per common unit of $3.65 for the quarter. Navios Partners is a leading publicly listed shipping company diversified in 15 asset classes in three sectors with an average vessel age of about 9.8 years. We have 175 vessels split roughly equally into three sectors based on a charter-adjusted value. The macro environment is challenging. Trade patterns continue to be impacted by the war in Ukraine, China has experienced anemic economic growth since it exited the pandemic and currently appears to be addressing potential deflation. The West, while relatively healthy, is dealing with inflation while fearing recession. Whether dry, container, or tanker, there is a great deal of uncertainty about future prospects. We continue to focus on things that we can control, such as reducing our leverage rate. Our stated goal is to reduce leverage so that our net LTV falls within the range of 20-25%. This past quarter, net LTV ticked up slightly because of some deterioration in still value. However, our accumulated cash offset most of this decline. I mention this probably so that you can understand how important with you this single metric. Please turn to slide seven. As you can see, we have 270 million of cash on our balance sheet, an increase of approximately 57 million per last quarter. We are investing our net cash through our treasuring function and earning about 5% on an annualized base in the second quarter of 2023. We secured 350 million of new financing in the second quarter of 2023. About $288 million was used to refinance 36 vessels at an average margin of 2.4%. The remaining $62 million was used to finance two additional MR2 new building vessels at an implied fixed interest rate of 7%. Overall, our current weighted average interest rate is 7%. This consists of 5.6% average interest on our fixed rate debt, representing 36% of our debt, and 7.8% average interest on floating rate debt, representing 64% of our debt. As announced, in the fourth quarter of 2022, we purchased two MR2 vessels for a total of $80 million. We expect to take delivery of these vessels in the second half of 2025 and the first half of 2026. We recently chartered these vessels out for five-year periods at a net rate of $22,959 a day per vessel. The overall economics of the purchase and charter can be summed up as follows. At the end of the five years, we expect to have earned aggregated a debt of $52.3 million, while having only 20% residual value exposure with 20 years of remaining useful life. During the charter, we will enjoy 13% annual yield. Fleet update. In 2023, here today, we saw 13 vessels generating an aggregate sales proceeds of $242 million. We offset those sales with purchase of three vessels, including two additional MR2 new building vessels for $80.4 million. The two vessels are expected to be delivered in 2026 and 2027. Our operating cash flow is strong. For the remaining six months of 2023, our contracted revenue is expected to exceed total cash expense by $64.8 million. We have 8,146 open index days, so we expect to generate significant additional cash in the second half of 2023. Please turn to slide A. Since our transformation in 2020, our financial performance has been strong. Our second quarter 2023 adjusted EBITDA is 17% higher than the second quarter of 2022 and 112% higher than the second quarter of 2021. Looking backwards, 2022 was 57% higher than 2021 and almost 570% higher than 2020. We believe that our diversified business model can continue to perform in difficult markets. I now turn the presentation over to Mr. Stratos Desipris, Navios Partners Chief Operating Officer. Stratos.
spk06: Thank you, Angeliki, and good morning, all. Listen to slide 9, which details our strong operating free cash flow for the second half of 2023. We fixed 71% of available days at an average rate of $25,459 net per day. Our contracted revenue exceeds expected total cash expense for the remaining six months of 2023 by about $65 million. We have 8,146 open and index-linked days that will provide additional profitability. Slide 10 demonstrates our diversified platform in action. We aim to benefit from countercyclicality by redeploying cash flows from well-performing segments into assets in underperforming segments. We believe a diversified asset base mutes volatility in our financial statements. You can see this dynamic playing itself out in our asset base. As of the second quarter of 2023, container values dropped by 4%, and dry bulk and tanker values decreased by 1%, respectively, compared to the fourth quarter values. In sum, the net change to our fleet value is a decrease of approximately 2%. Multiple segments also allow us to optimize staffing. In segments with attractive returns, we can enter into period startups. In other segments, we can be patient. Our container ships are 100% fixed at $38,200 net per day, Our tankers are 89% fixed at $26,088 net per day, and our dry bulk fleet is 66% fixed at $14,620 net per day. As you can see from the chart on the bottom, overall we fixed 80% of our 13,779 total available days for the third quarter of 2023 at a net average rate of $24,543 net per day. Listen to slide 11. We are always renewing the fleet so that we maintain a young profile benefiting from newer technologies and more carbon efficient vessels. We have 1.4 billion remaining investment in 22 new building vessels delivering to our fleet through 2027. In container ships, we acquired 12 vessels for a total of $860 million, which we hedged by entering into long-term credit warfare charters, generating about $1.1 billion in contracted revenue for about six and a half years' average duration of the related charters. In the tanker space, we entered the LR2 Aframax subsector by ordering six vessels for a total price of approximately $380 million. These vessels have been chartered out for five years, at an average net rate of $26,580 per day, generating revenues of approximately $290 million. We also ordered four high-spec MR2 vessels for about $160 million. Two of the vessels have been chartered out for five years at an average net daily rate of $22,959, generating revenues of approximately $85 million. The dry bulk new building program of 8 vessels was completed in June 2023 with the delivery of a cape size vessel. We have also been active in opportunistically selling older vessels based on segment fundamentals. Year to date we have sold 13 vessels with an average age of approximately 14.5 years for 242.2 million. We sold 7 tanker vessels for about 160 million taking advantage of strong tanker market. Also, we sold six dry-bag vessels for a total price of 82.4 million. Moving to slide 12, we continue to secure long-term employment for our fleet. As Angeliki mentioned earlier, in the second quarter, we have created over 150 million additional contracted revenue. Approximately 85 million relates to five-year charters of $22,959 net per day on two new-building MR2s, and about 47 million relates to three existing tanker vessels. Our total contracted revenue amounts to 3.3 billion, of which 0.9 billion relates to our tanker fleet, 0.3 billion relates to our dry bulk fleet, and 2.1 billion relates to our container ships. Charters are extending through 2037 with a diverse group of quality counterparties. About 55% of our contracted revenue will be earned in the next 20 and a half years. I will now pass the call to Eric Cironi, our CFO, who will take you through the financial highlights.
spk03: Thank you, Stratos, and good morning, all. I will briefly review our unaudited financial results for the second quarter and first half year ended June 30, 2023. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Moving to the earnings highlights in slide 13, total revenue for the second quarter of 2023 increased by 24% to $346.9 million compared to $280.7 million for the same period in 2022. Time charter revenue for the period is understated by $7.5 million because U.S. GAAP rules require the recognition of revenue for our charters with de-escalating rates on a straight line basis. Available days increased by 20.4% to 13,572 compared to 11,269 for the same quarter last year. Our average time charted equivalent rate was 23,900 per day in line with Q2 2022 levels. In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. TCE rates for our tankers increased by 89% to 30,947 and for our containers by 12% to 35,466 per day. In contracts, our dry bag TCE rate was 36% lower compared to the same period last year at 15,715 per day. EBITDA for Q2 2023 increased by 23% to 201.6 million compared to 163.5 million for the same period last year. Our EBITDA includes a 10.2 million gain related to the sale of four vessels. Net income for Q2 2023 decreased by 5% to 112.3 million compared to 118.2 million in Q2 2022 mainly as a result of a 16.3 million increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from 4.27% in Q2 2022 to 7.44% in Q2 2023. In addition, net income has been negatively affected by a $15.4 million increase in depreciation and amortization expense and a $12.3 million reduction in the positive impact of the amortization of unfavorable leases. Earnings per common unit for Q2 2023 were $3.65. Total revenue for the first half of 2023 increased by 27% to $656.5 million compared to $517.3 million for the same period in 2022. Time charter revenue for the period is understated by $20.5 million because U.S. GAAP rules require the recognition of revenue for our charters with de-escalating rates on a straight-line basis. The increase in revenue was a result of a 22% increase in our available days to 27,480 compared to 22,497 for the same period in 2022. Our fleet time chart equivalent rate showed a slight improvement to 22,337 per day. In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. TCE rates for our tankers increased by 87% to 29,664 and for our containers by 20% to 35,226 per day. In contrast, our dry bulk TCE rate was 40% lower compared to the same period last year at 13,346 per day. EBITDA for the first half of 2023 increased by 35% to 390.4 million compared to 289.6 million for the same period in 2022. Our EBITDA includes a 43.6 million gain related to the sale of 12 vessels. Net income for the first half of 2023 increased by 4% to $211.5 million compared to $203.8 million for the same period last year. Our net income was negatively affected by a $37.1 million increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from 3.98% in the first half of 2022 to 7.2% in the first half of 2023. In addition, net income has been negatively affected by a 29.5 million increase in depreciation and amortization expense and a 26.5 million reduction in the positive impact of the amortization of unfavorable leases. Earnings per common unit for the first half of 2023 were $6.87. Turning to slide 14, I will briefly discuss some key balance sheet data. As of June 30, 2023, cash and cash equivalents were $270.1 million. In the first half of 23, we paid $113.6 million of pre-delivery installments and other capitalized expenses under a new building program and $70.6 million for vessel acquisitions and improvements. We sold 12 vessels for $215.8 million net, adding $137 million cash after the repayment of their respective debts. Our other current assets decreased mainly due to the decrease in accounts receivable from charters, which were settled post-year end, while our other current liabilities decreased mainly following the payments made in accordance with the management agreement. Long-term borrowings, including the current portion net of deferred fees, slightly reduced to $1.92 billion. Net debt to book capitalization decreased to 37%. Slide 15 highlights our debt profile. We continue to diversify our funding sources between bank debt and leasing structures, while 36% of our debt has fixed interest at an average rate of 5.6%. We also try to mitigate part of the increased interest rate cost, having reduced the average margin for our floating rate debt by approximately 30 basis points to 2.4% from 2.7% compared to 2022 year end. our maturity profile is tagged with no significant balloons due in any single year. Slide 16 gives an update of the Q2 2023 debt developments. In terms of our new building program, approximately 95% of our new building financing is already concluded or in documentation phase at an average margin of 1.8%. We have used the opportunity to expand our financing resources, adding new banks and resources, while we have also concluded our first export credit agency-backed facilities in China and South Korea. During the quarter, we have arranged a total of 250.2 million of new financings. 287.8 million relates to refinancing of existing facilities where we manage to decrease respective margins and extend maturities. Turning to slide 17, you can see our ESG initiatives. We continue to invest in new energy-efficient vessels and reduce emissions through energy-saving devices and efficient vessel operations. NAVIOS is a socially conscious group whose core values include diversity, inclusion, and safety. We have very strong corporate governance and clear code of ethics. Our board is composed by majority independent directors and independent committees that oversee our management and operations. I now pass the call to Ted Petrone to take you through the industry section. Ted?
spk04: Thank you, Ari. Please turn to slide 20 for the review of the tanker industry. Well, GDP is expected to grow 3% in both 2023 and 2024 based on the IMF's July forecast. There is an 85% correlation of world oil demand to global GDP growth. In spite of economic uncertainties and the Ukraine crisis, the IEA projects a 2.2 million barrels per day or 2.2% increase in world oil demand for 2023 to 102.2 million barrels per day and a 1 million barrels per day increase in 2024. Chinese crude imports continue to rise, averaging 11%. 0.3 million barrels per day through July, a 12% increase over the same period last year, assisted by a record 12.7 million barrels per day imported in June. Following a very strong Q1 across all asset classes, tanker rates softened only slightly in Q2, but remained well above long-term averages on the back of strong supply and demand fundamentals. Minimal fleet growth and shifting trading patterns resulting in longer haul routes, especially for Sealy's Max and Afromax. The recent OPEC cut, although less than the headline numbers, and seasonality have put downward pressure on VLCC rates, particularly out of the Middle East Gulf. Turning to Site 21, as previously mentioned, both crude and product rates remain strong across the board due to previously mentioned supply and demand fundamentals. Product tankers are also aided by healthy refinery margin and discounted Russian crude exported to the Indian Ocean and the Far East, returning to the Atlantic as clean product. 2023 crude and product ton-mile growth is expected to increase by 6.6% and 11.9%, respectively, with continued ton-mile growth in 2024. Turn to slide 22. The LCC net fleet growth is projected at 2.2% for 2023 and negative fleet growth of 0.9% for 2024. This decline can be partially attributed to owners' hesitance to order expensive long-lived assets in light of macroeconomic uncertainty and engine technology concerns due to CO2 restrictions enforced since the beginning of this year. The current record low order book is only 2.1% of the fleet or only 19 vessels, the lowest in 30 years. Five VLCCs were delivered during the balance of this year, one each in 24 and 25. Vessels over 20 years of age are about 14% of the fleet or 128 vessels, which is about seven times the order book. Turn to slide 23. Product tanker net fleet growth is projected at 2.1% for 2023 and only 1.1% for 2024. The current product tanker order book is 9.7% of the fleet, one of the lowest on record, and it's approximately equal to the 9.8% of the fleet, which is 20 years of age or older. In concluding the tanker sector review, tanker rates across the board continue at strong levels. The combination of below-average global inventories growth in global oil demand, new longer trading routes for both crude and products, as well as the lowest order book in three decades, and the IMO 2022 regulations should provide for healthy tanker earnings going forward. Please turn to slide 25 for the review of the dry bulk industry. Chinese dry bulk import volumes held up well in the first half, while the net fleet growth slightly outpaced trade growth. That and the unwinding of congestion continue to put a cap on rates. For Q2, the BDI averaged 1313, a 30% increase over Q1, with CAPES providing the majority of that increase. As of yesterday, the BDI stood at 1194. While Chinese economic indicators continue to disappoint, it remains to be seen if the government will address these issues sufficiently to revive economic growth with past levels. Going forward, supply and demand fundamentals remain intact. A normally seasonal stronger second half, the historically low order book, declining net fleet growth, softening U.S. dollar, and tightening DHD emission regulations remain positive factors which are reflected in the FFA market. Overall dry bulk trade in the second half of 23 is projected to increase by about 3% over the first half of this year. Please turn to slide 26. With regard to iron ore, China's GDP grew at 6.3% in Q2 of this year. Should China implement stimulus measures, this should maintain already healthy iron ore demand. Global iron ore trade is expected to increase by 3.6% in the second half of 2023 over the first half of this year. Coal trade continues to be impacted by the war in Ukraine as a ban on Russian coal shifted trading patterns towards longer haul routes. Seaborne coal trade is expected to decrease by 2.7% in the second half of this year over the first half of 2023. As with coal, the global grain trade is also impacted by the war in Ukraine, shifting trading patterns toward longer haul routes. Seaborne grain trade volume is expected to grow by 2.5% in 2023, aided by ton-mile growth of 3.7%. Russia recently abandoned the Black Sea grain export deal. Additional grain volumes from Brazil, Europe, and Russia are expected to make up the shortfall and further add to ton miles. Let's turn to slide 27. The current order book stands at 7.8% of the fleet, one of the lowest since the early 1980s. Net fleet growth for 2023 is expected at 2.9% and only 1.9% in 2024, as owners remove tonnage that has become uneconomical due to the IML 2023-02 rules enforced since the beginning of this year. Vessels over 20 years of age are about 8.5% of the total fleet, which compares favorably with a historically low order book. Concluding the dry bulk sector review, continuing demand for natural resources, congestion at the Panama Canal, war and sanction-related long haul routes combined with a slowing pace of new building deliveries all support freight rates going forward. Please turn to slide 29. Container rates, although well down from the first half of 2022 historic levels continue to surprise in 2023 with the Shanghai Container Freight Index, or SCFI, currently at 1031, which is only slightly lower than it opened the year at 1061. Overall, 2023 trade growth is projected to increase slightly at 0.3%. The outlook noticeably improved compared to the initial 2023 growth projection of negative 1.6%. Global container trade is expected to remain challenging in 2023 for macroeconomic issues, including inflation, the war on Ukraine, and elevated deliveries. As you'll note in the graph on the lower right, the U.S. retail inventory to sales ratio is off the recent low, but still well below the long-term average. The graph on the lower left shows continuing growth in U.S. consumer purchases of goods, which is still above pre-pandemic levels. Imports to the U.S. have slowed, easing port takeaway, bottlenecks, and port congestion. Turn to the slide 30. Net fleet growth is expected to be 7.3% for 2023 and 6.6% for 2024. The current order book stands at 28.5% against the 10.9% of the fleet 20 years of age or older. About 73% of the order book is for 10,000 TEU vessels or larger. Concluding the container sector review, supply and demand fundamentals remain challenged due to economic and geopolitical uncertainties and an elevated order book. However, the prospect of Chinese stimulus and world GDP growth at 3% for both 2023 and 2024 provide a counterpoint to a challenging 2023. This concludes our presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?
spk02: Thank you, Ben. This is a complete performance presentation. We open the call to questions.
spk00: At this time, if you would like to ask a question, please press the star and one keys on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. And our first question will come from Omar Naqta with Jefferies.
spk05: Thank you. Hi, good afternoon. Thanks for the update. Always very detailed across the business and the industry. I did want to ask just about kind of, you know, clearly you guys have been very active in terms of deploying your capital, I would say wisely. You've been selling ships on the older end and you've been investing in your new buildings. We wanted to ask you, you highlighted, and you've talked about this for several quarters, is the net LTV, trying to get that down to the 20% to 25% range. Given you're a bit above that at the moment, and we can see visibly the path to get there over the next couple of years, but in the interim, how are you thinking about deploying the capital today, forgetting the new buildings that you've got and forgetting, say, selling shifts? How are you thinking about deploying capital for secondhand ships on the water today? Do you see opportunities there, given the pullback we've seen, definitely dry bulk and containers, and as you mentioned, some uncertainty ahead just overall? Do you think there's opportunities to deploy capital in acquiring secondhand tonnage at discounted prices?
spk02: Good morning, Omar. I think you have seen how we are looking. I mean, the macro environment, you know, we see the challenges. And they can be from Ukraine, the continued war in Ukraine, the Chinese, the unexpected Chinese dynamic growth, and Western countries that are between inflation and recession. Nobody knows exactly if and when. We try to be conservative. We see on the container segment, we have done a renewal of our fleet. We're 100% fixed, so we are sitting in a position to watch the market. On the tanker segment, as you very well said, we are optimistic on the market. We see that longer-term miles both on crew and product to be here and remain. And what we have done, We sold all the vessels. We sold about 25% of our fleet, replaced it with high-quality vessels, which we also chartered out on quality counterparties, providing a 12%, 13% return, and basically limiting our residual value risk. This is on... And then... So this is a position where we continue and we charter out our vessels at very attractive rates. Now, on the dry, we have done a replacement of our fleet. We are opportunistically fixing our vessel on strength, and we are working. On any year, we will have a 10% of our fleet replaced, more or less. depending on the position and the replacement. Our guidelines on what we are trying to achieve, you can see very clearly from our actions. Now, looking on our target, we have been articulating what is liquidity we want to have per vessel, in about 2 million per vessel, and our target LPV, net LPV. And this is two areas where I think it's fundamental to us. As we never know what will happen in next year, this is very fundamental on how we focus on this.
spk05: Thanks, Angelique. And just the – you mentioned $2 million per vessel of cash on hand or liquidity is the target?
spk02: Yes, and this is something you have heard that previously from us is a very – it is
spk05: basically calculated on your metal degree so yeah okay and then uh maybe just on a follow-up you you highlighted the mr uh new buildings uh you ordered two late last year you just ordered the another two you fixed um the initial one on a five-year charter where your residuals really come down uh your residual risk is really low and just in thinking about the latest two orders um Do you think it's a plan or is a thought process to also secure those two new buildings similar to the first two on these five-year charters? And also, can you give a sense of whether the charter of the first two has given indications of interest on wanting more?
spk02: I mean, we see quality counterparties. I mean, we see top end users that they like this kind of vessels. We are talking about by replacing these, getting the older vessels out and getting these newer models, you have substantially reduced the carbon footprint, less consumption. So this is, we see a high demand for quality vessels. And securing this specification, I mean, we think that we will be able to fix on
spk05: on these vessels the second two vessels in attractive charters and not necessarily to the same counterpart but we are not eliminating that possibility okay got it and then maybe just finally on just the overall um you have the new buildings in the container ships and then the tankers uh you just took delivery of your final cape new building um in terms of further new buildings as opportunities arise do you think there's something to do in dry bulk um or do you look maybe to perhaps balance out the the portfolio that given that is where your biggest footprint is at least in terms of vessel count um or is dry bulk also an opportunity for um in new buildings if there's if you see things that that makes sense you know uh
spk02: Trappist always had this nice graph in the past where, basically, where new building prices are on a dry bank and where earnings come for a period that's only in March at this point. But they're always open on possibilities, on vessels, investing in the water. We are looking and we are doing our math all along on every segment. You know, we are trying to be a disciplined buyer. Don't forget, we bought over 10 drive-by vessels, which we already have completed and put them on charters, five-year charters. And that was done, the last one was in this quarter, I think. So basically, this is the position we already have taken and we did it, we had those vessels in 2020 or so, sometime ago, 2021.
spk05: Yep. Okay. Well, very good.
spk02: There will always be an opportunity.
spk05: Yeah. Yeah. Definitely. Okay. Well, thanks, Angeliki. I'll turn it over.
spk00: Thank you. Thank you. As a reminder, that is star 1 to ask a question. And our next question will come from Chris Weatherby with Citi.
spk05: Good morning, good afternoon. It's Rob on for Chris this morning. Could you give us an update? Good morning. We've seen a nice uptick in terms of the freight as pricing mainland China to U.S. West Coast in the past couple months. We've also seen a little bit of an improvement off some lows in terms of mainland China to Europe. Could you give us an update in terms of what you're seeing – within your customer base as we think about peak and looking out to next year for the container market?
spk04: Right. So our view is a bit more macro. We're watching the different routes. You know, it's a summer up, summer down. You can see the average from the SCFI that we talked about has been pretty good. The U.S. consumer continues to surprise a bit. um remember we're leasing out these ships to the uh other charters who are looking at the end users um we see a lot of you know there's some um new building overhang right but on this on the lower sizes below 13 000 dead weight i think the uh order book is probably half of what it is of 28 so we're very confident going forward that the charters will be looking at uh taking on ships you know it's like the housing market does not most of the ships have been taken And if you're looking to get some, there's not much out there. So some of the time shutter rates have been going up, and so has the duration, which is a very good sign for us. But it's a challenging year for us and for the market. But I do think you'll see some surprise numbers. And of course, you know, being 100% fixed, we can sit back and watch it objectively.
spk05: No, that makes sense. And as we're thinking about next year, kind of how fixed are you guys in the time chart? It can just kind of remind us, you know, where you are with regard to charters coming off the next couple years.
spk06: Yeah, in the next year, we only have around 80% of our vessels contained as fixed. And we are starting to get also delivery of the new building vessels coming from the end of this year. So, you know, we will have also the replacement of the customers of the vessels that are coming up. But I would say that we are pretty much covered for, you know, at least 24 in our fleet in the containers sector.
spk05: That's helpful. Obviously, there's been a lot of noise about climate change and the impact in terms of certain key trade routes. You know, we're seeing very, very low levels in the Panama Canal, which is causing kind of backlogs. Are you seeing that in other trade routes? And maybe you could just kind of talk higher level kind of what the impact you're seeing from congestion and from low water levels is having on just broader demand across the different vessels that you guys operate in.
spk02: Yes, and that's a very good and very topical. Ted will go through, but a big picture you should think of the following. I mean, we saw the pickup on the waiting for Panama Canal. That is basically a 50% increase from what usually was there. And that is, it is actually going to be affecting, it's like congestion, you know, it affects the It creates longer time at sea, longer dawn miles that they have to divert. That is one joking point, and it is basically like congestion.
spk04: Yeah, it's such a big topic, climate change. I think, you know, you're going to El Nino now, you're going to have some better grain out of South America, less out of Australia. You have water issues in Europe, which would... sort of eliminate some of the takeaway from the bigger ships as the barges go inland. There is the yin and the yang of it also. I think China was having rain in the wrong places. So every year you're going to be looking at different issues that affect. But I do, as Angeliki said, you know, the Panama Canal is definitely a freshwater issue, which is related or not to climate change, but it's going to run through the winter. That could bringing congestion for bulkers that are going with grain, the containers coming back, some of the capes coming back from the Pacific. There's a lot of issues here. But really, you know, the macroeconomics ones that we think are more instrumental in driving the market, but it's certainly an issue that we're all watching on the climate change side.
spk05: And Ted, on the bulker, with regard to the Panama Canal, are you getting inbound inquiries from some of the the container, you know, the vessel operators to really kind of extend trade route, i.e. kind of go around Africa as opposed to through the Panama Canal, given where the backlog is of getting through the Panama Canal, or is that not yet? something we're seeing.
spk04: Yeah, no, not yet. I think you're going to see some more congestion as the Gulf grain season opens and clogs the canal more. You'll be seeing some grain vessels going through the Suez, going out to the Far East. So even if congestion stays where it is, I think, as Angelique said, we're probably at about 80 ships normally or about 130 now on the canal, four days, not so much. But if that goes up, that may stay there, those numbers. But what you'll be seeing is other ships doing longer routes. which you don't calculate into the canal congestion, right? But it's going to be affecting the routes, and it makes the fleet more inefficient, which obviously brings the rates up.
spk05: Yeah, that makes a lot of sense. Really appreciate the call. Sure, thank you.
spk00: Thank you. At this time, there are no further questions, so I would like to turn the call back over to Angeliki for any closing remarks.
spk02: Thank you. This completes our second quarter. Thank you.
spk00: Thank you, ladies and gentlemen. This does conclude today's program, and we appreciate your participation. You may disconnect at any time.
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