May 13, 2025 • 36 mins
Tensions between the US and its trading partners are weighing on dry-bulk demand as economic-growth expectations recede. The global economy could expand 2.6%, based on consensus, down 40 bps from the start of the year and 70 bps below 2024. The US accounts for about 10% of the dry-bulk market, making the sector less tied to protectionist policies out of Washington. Agriculture and metallurgical coal comprise the majority of exports. In this Talking Transports podcast, Hamish Norton, president of Star Bulk Carriers, joins Lee Klaskow, Bloomberg Intelligence’s senior transportation and logistics analyst, to share his insights about the state of the global dry-bulk industry. Norton also discusses tariffs, USTR fees, dry-bulk economics, fuel prices, shipbuilding, asset values and rates.
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Speaker 1 (00:07):
Hi everyone, this is Lee Claska and we're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Laskows, senior Freight, transportation and logistics analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in little public
service announcement. Your support is instrumental to keep bringing great
(00:28):
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your support. So please, if you enjoy this podcast, share it,
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any ideas for future episodes or just want to talk transports,
please hit me up on the Bloomberg terminal, on LinkedIn
or on Twitter at logistics Lea. Now onto our episode.
We're delighted to have with us Hamish Norton, Starbulks President,
(00:51):
as our guest on the podcast today. Prior to twenty twelve,
he was Managing director and global head of the Maritime
Group at Jeffrey Company. Prior to joining Jefferies in two
thousand and seven, mister Norton ran the shipping practice at
bear Stearns since two thousand. From nineteen eighty four to
nineteen ninety nine, he worked at Lazard Ferris and from
(01:13):
nineteen ninety five onward as a general partner and head
of Shipping. Mister Norton is director of Neptune Lines and
Cadre Holdings. He holds ab in physics from Harvard and
a PhD in physics from the University of Chicago, and
most importantly, he has a distinction of being a second
time guest on Bloomberg Intelligence Talking Transports podcast. Welcome back
(01:36):
to the podcast, Hamish.
Speaker 2 (01:37):
Thank you very much. Lee.
Speaker 1 (01:39):
You have quite quite a career both running shipping companies
and on Wall Street kind of banking them. So your
insights are really incredible at this critical time given where
we are with tariffs. You know, before we start talking
about that for our listeners, can you just give us
a little more detail about Starbucks fleet.
Speaker 2 (02:00):
Sure. Starbuck has one hundred and fifty three ships. They
are the largest category of ships we have. Are so
called supermaxes and ultramaxes, which are ships that have cranes
that allow them to self load and self discharge, and
they can carry between fifty two thousand and sixty four
(02:20):
thousand tons of cargo. Then the next category which we
have somewhat fewer ships in is the Panamax slash Camcermax class,
which is about seventy five to eighty five thousand tons
of cargo, and a Panamax ship will go through the
(02:41):
Old Panama Canal. Camcer Max will also go through the
Old Panama Canal, but not if it's fully loaded with
heavy cargo. It can go if it's fully loaded with grain,
which weighs a bit less and so it sits a
bit higher in the water. And then we have a
large number of Cape size and so called Newcastle Max ships,
(03:04):
which are about one hundred and eighty thousand tons of
cargo to about two hundred nine thousand tons of cargo.
And you know, the camp campcer Max and the Cape
size do not have cranes and rely on poured infrastructure.
And you know, all of these ships are pretty simple ships.
(03:29):
You know, the captain has to be very talented, but
the shipyard that builds these ships doesn't have to do
very much with the steel. There's less value add to
dry bulk ships than to any other class of ship,
which which means that it is very hard, for example,
(03:49):
to make money in dry bulk shipping. If you buy
your ships at the wrong time, you know, because the
ship is is basically a pure commodity, right.
Speaker 1 (04:03):
So you know, there's so much we could talk about,
and you know, I guess you started talking about the
actual ships themselves. So you know, there was some recent
noise with the US Trade Representative announcing fees on Chinese
built ships. Are you guys exposed to that? Where do
you think that ends up playing out with the new
(04:24):
rules that were released a couple of weeks ago.
Speaker 2 (04:25):
Well, I wish, I wish I knew lee where it
ends up, because it's it's really you know, still a
lot of it up in the air. But the US
Trade Representative's latest paper Levy's fines on Chinese ships calling
on the US but not on ships built elsewhere, even
(04:51):
if those ships are owned by a company that also
has Chinese built ships. So about a third of our
fleet is built in Japan, which is very convenient, and
we're probably going to maintain those ships that were built
in Japan to a higher level than we might otherwise
have done to try to get them to last a
(05:13):
little longer. Ships Act appears to have a provision that
would levy a fine on Chinese companies that have Chinese
ships that come to the US with a non Chinese ship,
so that would make our Japanese ships less valuable. But
(05:36):
it appears, at least to my reading, that the Ships
Act provides an opportunity for the President to remove that
fine at his discretion.
Speaker 1 (05:48):
And one of these finds expected to go into place
or are they in place already.
Speaker 2 (05:52):
They're not in place yet. The US Trade Representative has
a a sort of phase in over a period of months,
and I believe it doesn't start for six months. And
I believe that the US Trade Representative paper is not final.
And of course the Ships Act is legislation that hasn't
(06:14):
been passed yet, so we don't know.
Speaker 1 (06:18):
And if this gets passed and it is as it stands,
are the ships in your fleet that are Chinese built?
I mean, are they just twenty like worth twenty twenty
five percent less than they used to be?
Speaker 2 (06:29):
Well, I don't think it's it's that big a deal, actually,
because if the US Trade Representatives paper goes through as
planned so far, you know, there are enough Japanese and
Korean ships in the fleet to satisfy all the needs
of the United States. You know, the US is under
(06:52):
ten percent of the dry bulk trade worldwide. You know, basically,
the US exports grain, it exports coal to some extent,
it imports very little in dry bulk.
Speaker 1 (07:09):
And then you know, I guess just as it sits today.
You know, if you were to buy a cape sized vessel, like,
how much cheaper would it be buying it from a
Chinese shipyard versus a Japanese shipyard.
Speaker 2 (07:24):
It's ten to fifteen percent more at a Japanese shipyard.
And you know, historically Japanese ships maintained their premium value.
You know, I think to some extent they still maintain
their premium value. But you know, in his historically Japanese
(07:47):
ships burned less fuel than Chinese ships. Good Chinese ships
are just as efficient as good Japanese ships now, so
you know, the Japanese ship is a little little nicer.
It is. You can't order you know, custom changes to
the Japanese ship design. They are very automated, and which
(08:12):
is the only way they can compete in Japan. So
they build a standard design. That standard design is typically
thought to be very good. People people order them, you know,
but in China you can get anything you want.
Speaker 1 (08:27):
Okay, and then you know, I guess you know, so
the ships act. The real I guess crux of it
is the president and the Trump administration wants more manufacturing
brought to the US. You know, the fact that we
don't have the capability is building ships here in the
US is you know, not a great thing? Is that
(08:50):
ever going to come back? Are we ever going to
build dry bulk ships here in the US? Again?
Speaker 2 (08:54):
Well, I doubt that the US will build dry ball
ships because dry bulk ships are, as I said, the
lowest value added product that shipyards make and the least sophisticated.
So I would expect that if shipbuilding comes back to
(09:16):
the US in a big way, that the US will
build sophisticated ships you know, roll on roll off ships,
container ships, LNG carriers, LPG carriers, and you know, ships
where high technology, you know, can can contribute perhaps more
(09:39):
than it can in dry bulk.
Speaker 1 (09:42):
And going back to you know, a lot of our
listeners might really not even know what dry bulk is.
So what are the main kind of commodity categories that
you guys haul uh within your ships?
Speaker 2 (09:53):
Sure we our biggest cargo is iron ore, next biggest
would be coal, and then grain, and after iron ore,
coal and grain, which in aggregate account for a majority
of total cargo, there are what you call minor bulks,
(10:14):
which are things like nickel, nickel or copper concentrates, baux
site that mostly tend to travel in small parcels and
go in the so called supermax and ultramax ships. And
(10:36):
something like eighty five percent of the iron ore we
carry ends up in China, and a lot of the
coal ends up in China, also also Vietnam in India.
Speaker 1 (10:48):
So for the most part, China really dictates where the
dry bulk market heads from a demand standpoint and therefore
rate standpoint.
Speaker 2 (10:55):
That is true, China accounts for forty percent of the
tons of dry ball right on the ocean, and fifty
percent of the so called ton miles. What we care
about are not how many tons we carry, but how
many miles we carry each ton times the number of tons.
Speaker 1 (11:12):
And so the things that are going on in the
Suez Canal, those are good things for a ton miles
because you have to go around the Cape of Good Hope, right.
Speaker 2 (11:20):
Yes, well not just we have to, but everybody else
has to. So you know, while I never want the
houthis to shoot at ships going through the Red Sea.
When the houthies we're shooting at ships going through the
Red Sea. That was very good for rates.
Speaker 1 (11:41):
Right, And speaking of rates, rates aren't very good anymore.
That the Baltic Dry index is down something like twenty
percent from last year. Why is that what's driving the
weakness and rates?
Speaker 2 (11:53):
Well, you know, despite the fact that China's imports of
dry bulk up like nineteen percent from the beginning of
twenty twenty two to the end of twenty twenty four,
you know, in the first quarter of twenty twenty five
they're down, you know, something like nine percent from Q
(12:14):
one twenty twenty four. So you know, the number of
ships has increased by about three percent in that in
that time. And you know, if the ships increase in
number and carrying capacity and the cargo shrinks, you know,
it's supply and demand, right, rates drop, And.
Speaker 1 (12:36):
If the Suez Canal opened up, obviously it's I don't
have any time soon, but it seems like it could
happen sooner than rather than later.
Speaker 2 (12:42):
It might happen soon. I read some stories yesterday evening
and this morning that at least the President has stated
that the whothies are packing it in. Right, we'll see
if that holds.
Speaker 1 (12:58):
What what would that do to capacity? How much capacity
would that add?
Speaker 2 (13:02):
For dry bulk it only adds about two percent? Ok,
you know the the for container ships it's quite a
bit more.
Speaker 1 (13:14):
Are any ships going through the Suez?
Speaker 2 (13:17):
Yes, I mean not now, but they did?
Speaker 1 (13:20):
Yeah, I mean now?
Speaker 2 (13:21):
Yeah, no, no, not now?
Speaker 1 (13:22):
Not now? So you're not I guess you're not carrying
any Russian cargoes or.
Speaker 2 (13:28):
Well, we carry Russian cargoes that are not sanctioned, of
which there are some, and you know, I mean if
they're not sanctioned, they're not sanctioned for a reason. The
government wants us to carry them.
Speaker 1 (13:44):
And that's probably like grain and things of that nature.
Speaker 2 (13:47):
Well, it's grain if it's clear that it is from
a Russian source. Grain that is from a Ukrainian source,
that is, you know, it by Russians is a problem
and we don't carry that.
Speaker 1 (14:06):
And so the decline in demand that we're seeing is
that all tariff related. Is that, like you know, China's
economy decelerating because you know, the US is not importing
as much and the kind of disruptions created by other
trade wars that the US is having with its partners.
Speaker 2 (14:23):
Well, it's not tariffs, because it started happening before the
tariffs went in and before they were announced. You know,
it is probably a combination of grain being a bit lower,
and you know, it's it seems to be you know,
(14:48):
across the across the the spectrum. And I said nine percent,
it's it's eight point three percent. When I look at
my note that it dropped. Yeah, I mean it obviously
has something to do with the Chinese economy slowing down.
You know, it's obviously very hard to get a firm
(15:13):
handle on what the economic statistics really are.
Speaker 1 (15:17):
Yeah. So you know, I know, we're not going to
talk specifics about the quarter because you guys are going
to announce soon your results, you know, a couple of
days after recording this, you know, but twenty twenty four
was a fantastic year for dry Bulk. It was a
good year for Starbuck. You know, I saw your revenues
increase thirty four percent, your EBIT increase sixty one percent.
(15:38):
Fast forward to this year, consensus has revenue increasing by
about five percent and EBIT going down thirty seven percent.
Can you just talk about you know, the economics of
of the dry ball industry, and why are your revenues
going up mid single digits but your ebit is going
down by pretty large double digits.
Speaker 2 (16:00):
Sure, you know, So we have voyage revenue. Voyage revenue
is when we contract with cargo owner to move a
certain amount of cargo from point A to point B,
and we take all the risk on the weather and
(16:22):
port charges and so on, and we pay for.
Speaker 1 (16:25):
The fuel, okay.
Speaker 2 (16:28):
And then if you subtract from voyage revenue voyage expenses,
which is fuel, port charges, canal fees and so on,
you get something called net revenue, which is also time
charter equivalent revenue. And we have a bunch of ships
on time charter and a bunch of ships on voyage charter.
(16:50):
In the time charter, the charter tells us where to go,
and so he pays for the fuel, he pays the
canal fees and the port charges. And then you know,
we subtract from time charter equivalent revenue operating expense, which
is the direct cost of operating the vessel, crew, wages, insurance,
(17:13):
and crucially lubricating oil, which you might have thought was
a voyage expense, but since it is a very important
thing to get right for the owner of the ship.
It is for the owner's account in a time charter,
and then we subtract overhead. And we have in the
(17:34):
dry ball industry some of the lowest operating costs and
overheads there are. Our operating cost is on the order
of five thousand dollars a day. Our overheads are on
the order of one thousand dollars a day. Now, you know,
charter rates are eleven to seventeen thousand a day, depending
(17:56):
on the size of the ship. And of course we
have debt on you know, secure debt on most of
the ships. So you know, our break even, our cash
break even, including mandatory debt repayments, is on the order
of twelve thousand dollars time charter equivalent revenue per day.
(18:22):
And you know that's not far off from where the
market is right now.
Speaker 1 (18:29):
And so I so, I guess it really has to
be on the demand side, and I guess the demand
picture is not is getting worse every day? Is that
is that fair?
Speaker 2 (18:39):
Well, the demand picture is not getting better. It's it's
I mean, it has been getting worse for the last
two days. But you know, I mean, it's very volatile,
and you know, the supply picture is actually not not
that bad. Ship ship numbers are probably going up about
(19:02):
three point one percent this year and about three point
one percent next year, but nobody is ordering dryball ships
at the moment. And you know, I think orders at
Chinese yards of any type of ship are slower than
they would have been without the US trade representatives.
Speaker 1 (19:25):
How hard Like if I ordered a Chinese ship six
months ago and all of a sudden this new rule
came out, and I'm afraid that the implications How easy
it is to cancel an order.
Speaker 2 (19:37):
It depends whether you have gotten a so called refund
guarantee and the contract has been you know, locked in stone.
Typically a shipyard will negotiate a contract with a credit
worthy entity and a good shipyard. Anyway, there are good
(19:58):
shipyards and less good shipyard ards.
Speaker 1 (20:00):
And I don't think I want to ship from a
bad shipyard.
Speaker 2 (20:03):
Well, I think you have a very correct point. But
there are shipyards that in a hot market will take
an order from an entity without a good credit puts
down a deposit, and in that situation, if the party
that ordered the ship walks away, the shipyard, as a
(20:24):
practical matter, just has what was paid to that date.
But the shipyards we typically deal with, you know, would
would get a guarantee and we would be on the
hook for the full amount of the contract.
Speaker 1 (20:39):
And with this depressed market, do you see the M
and A activity picking up within drybook? I know, you
guys did a big deal yeah, last year.
Speaker 2 (20:49):
Last year it closed April ninth of last year, and
that was an Eagle Bulk Shipping, which is a company
that owned a fleet of handy Max, Supermax and Ultramax ships.
And you know, it was a very interesting situation. They
(21:16):
had a more sophisticated, more intensive chartering operation, doing many
more voyage charters which are a little bit more work,
and fewer time charters, and they got higher revenue per
Supermax and Ultramax ship than we did. Our costs were lower,
(21:36):
and I think our profitability and aggregate was higher. But
by buying or merging with Eagle, we were able to
get their chartering sophistication and our cost levels and the
star fleet of supers and ultras also got their Eagles
(22:01):
chartering income, and so you know, it was it was
a win win, And at the moment it looks actually
like the operating costs and overhead for that that would
be allocated to the Eagle fleet is actually lower than
the than the that which is allocated to the Star fleet. Now,
(22:24):
I mean it's that's not an apples to apples comparison
because the former Eagle ships are smaller than the average starbullship.
But you know, it just goes to show that we
were successful in getting the synergies that we expected to get.
Speaker 1 (22:41):
And do you expect more m and A activity in
the market, because I'm assuming you know, assets are getting
a little are coming down in value just because where
rates are.
Speaker 2 (22:50):
You know, I expect that there should be more m
and A activity. You know, it is It is a
bit tricky right now because is starbulk and frankly, all
of the public comparables are trading below the net liquidation
value of hard assets, and in Star's case, is substantially below.
(23:15):
Not that we're an outlier, you know, maybe sixty percent
of or seventy percent of net liquidation value of hard assets.
And you know, we are making more money with each
ship than the typical ship owner. So you know, it's
(23:35):
not a reflection of poor management of assets. It's a
I think a reflection of the fact that the public
equity markets are not incentivized to take the time to
analyze what is a somewhat quirky industry, small market cap,
(23:56):
and it's hard for an investor to make a substantial investment.
Speaker 1 (24:02):
I guess provides you, guys, with an opportunity to buy
back shares.
Speaker 2 (24:05):
It does provide us with an opportunity to take the
arbitrage between the value of the ships and the value
of the shares.
Speaker 1 (24:12):
Can you talk about your capital allocation policy at Starbull Yes.
Speaker 2 (24:18):
For several years, we basically decided to pay essentially all
of our operating cash flow after mandatory debt service and
after building up a cash reserve that was two point
one million per vessel that was set by our board
(24:38):
in order to basically make sure that we were in
good shape if the market had a week period and
we paid very large dividends. We paid well over a
billion dollars in dividends since twenty nineteen. But then as
our share and the share ayers of our peers dropped
(25:03):
well below liquidation value, our shareholders basically said, you know,
stop paying that dividend, please take the money and repurchase shares.
So our new policy is that no more than sixty
percent of our operating cash flow, we'll go to dividends
(25:24):
and possibly less, and the rest will go either to
repay debt, buy back shares, or possibly go in our
balance sheet to take what might be an even better
opportunity later in the cycles.
Speaker 1 (25:42):
What's your debt level, what's your leverage? Turns?
Speaker 2 (25:44):
Well, turns are the wrong metric for dry bulk because
nobody knows what the cash flow is. The cash flow
is incredibly volatile. So the metric people look at is
basically net debt to asset value, okay, And by that
metric we're about twenty five percent, so very low debt. Actually,
(26:06):
our debt is less than the scrap value okay, of
our ships.
Speaker 1 (26:11):
And that's that's kind of like, is that a target
twenty five percent or that's just where you happen to be.
Speaker 2 (26:15):
That's where we happen to be, and we're reducing debt
as we go.
Speaker 1 (26:18):
Okay, So let's let's talk a little bit more about tariffs.
So you mentioned earlier that you know, it may not
really be impacting us that much because the US is
only ten percent of the dry bulk market.
Speaker 2 (26:31):
Yes, and the US is ten percent of the dry
bulk market, largely because of what it exports. Yeah, it's
much smaller than ten percent. You know, when you look
at the discharge into US ports.
Speaker 1 (26:45):
And the tit for tat with the tariffs between the
US and China. So I'm sure China is putting tariffs
on US exports. So are you seeing a change in
trading patterns like they're substituting US AG for somebody else?
Speaker 2 (27:01):
Yes?
Speaker 1 (27:02):
Can you talk about that?
Speaker 2 (27:03):
Yeah? I mean basically, the US historically has exported soybeans
and corn to China, has exported coal to China, particularly
metallurgical coal, and you know that's basically stopped. And China
seems to be not importing so much corn from anybody
(27:27):
because they've increased their domestic harvest. They're importing soybeans, but
largely from Brazil and to some extent Argentina.
Speaker 1 (27:37):
Do those have longer ton miles? Is that like a
net positive?
Speaker 2 (27:39):
That is a net positive? Actually? Yes? And and and frankly,
China is importing a lot of coal, and you know,
the US may have been a longer, longer route than
than you know, Australia for example, But you know, the tariffs,
(28:07):
I think net don't have. Even the Chinese tariffs on
US products don't have a big impact directly run dry bulk.
The impact would come from the effect of the tariffs
on the world economy. You know, dry bulk dry bulk
(28:31):
traffic tends to be more or less proportional to world GDP,
and anything that's bad for the world's GDP is bad
for dry bulk. The other thing that is, you know,
not going as well as it might is the price
of oil. And you might think that we favored low
(28:54):
priced oil because we pay for oil to move our ships, right,
but actually we do better in higher with higher oil prices. Frankly,
the higher the better, within some sort of reasonable limits,
because everybody who owns a dry ball ship wants to
(29:17):
go at the profit maximizing speed, and the higher the
charter rate, the faster the profit maximizing speed. But the
higher the bunker oil price, the slower profit maximizing speed.
And you know, ships burn fuel in rough proportion to
the cube of the ship's speed, So a little bit
(29:39):
of increase in the oil price, basically you can very
small change in speed can make up for a big
change in oil price. But all things being equal, if
the oil price goes up and the fleet slows down.
There's not enough capacity to carry the cargo that was
(29:59):
carried before. So in fact, what happens is charter rates
go up in proportion to the oil price in order
to have the ships continue to run at the same speed.
Speaker 1 (30:11):
Right.
Speaker 2 (30:12):
And this is not true of container shipping, where the
container lines have to negotiate prices with their customers, and
it's not completely true of tankers where they're carrying the fuel.
And so it's never sort of, you know, all things
equal with tankers, whereas with dry ball it's basically a
(30:33):
pretty simple relationship. And we just want high bunker prices.
Speaker 1 (30:37):
Right, and at this low bunker fuel environment, I guess
you're just I mean, you're not running necessarily faster, are you,
because there's so much slack capacity in the market.
Speaker 2 (30:45):
Well, I mean we're running faster than we otherwise would, right, Okay,
it's not very fast.
Speaker 1 (30:52):
But you don't necessarily the lower it goes, you don't
speed up. You just maintain a certain fast speed.
Speaker 2 (30:59):
The lower it goes, ohs, normally the faster we would go.
But now there are climate change rules to take to
take into account, and so I think the climate change
rules are inhibiting many people in driveball from going as
(31:19):
fast as they otherwise would, and that's that's a good thing.
Speaker 1 (31:23):
What kind of what kind of rules are you talking about?
Speaker 2 (31:25):
The IMO has got rules on so called carbon carbon
Carbon Intensity Indicator, which is basically a measure of how
much carbon you emit per unit of transportation work. And
it's a sort of a strange metric because it, for example,
(31:49):
incentivizes cruise lines to not dock their cruise ship but
to run it in circles outside the port, because if
they're just docked and they burn fuel to keep the
ship lit, they're not doing any transportation work at all. Right,
But nevertheless, that is a measure that we have to
(32:11):
disclose and our charters pay some attention to it. There's
no specific financial penalty. And then you know, the IMO
has in principle decided to adopt what are essentially global
carbon taxes, and you know it's going to be a
(32:32):
very complicated process to get those implemented. And let's see
what happens.
Speaker 1 (32:37):
So a little bit about your career, so you know,
your transition from Wall Street to you know, an operator,
what was the biggest change for you when you made
that change.
Speaker 2 (32:49):
Well, I think everything changed in a fairly dramatic way.
And it was, by the way, in twenty fourteen that
I became president of Starbuck. I went to work for
one of the predecessors of Starbulk in twenty twelve, a
joint venture between the Papas family and oak Tree in
dry Bulk, which was merged into Starbulk in twenty fourteen.
(33:13):
But you know, I think you know, for example, our
offices in Marusi, which is a suburb of Athens, cost
US about five dollars per square foot per year, and
that's we paid more than that for real estate in
Manhattan when I was an investment investment banker, and you know,
(33:35):
so the surroundings were very different. The job has its
hair raising moments, but mostly I think deeply about a
small number of problems instead of thinking much less deeply
about a much larger set of problems.
Speaker 1 (33:56):
So in what would you characterize the biggest problem that
you're thinking about right now?
Speaker 2 (34:01):
The biggest problem I'm thinking about right now is how
to get our share to trade above the net liquidation
value of hard assets. Okay, because you know that's really
annoying when management is in effect deemed to be subtracting
value from assets, even though we do a really good
(34:23):
job of managing them.
Speaker 1 (34:25):
Right, I'm assuming it's very frustrating, But at the end
of the day, it's really going to depend on the market. Right,
It's it's well, but I mean, while you guys have
a good profitability margin versus your peers, it's a lot
of it is the macro.
Speaker 2 (34:36):
Yes, but I mean the value of the ships depends
on the macro. Two. You know, this is comparing the
liquidation value of the ships in the private market for ships,
which is presumably dominated by people who know what they're doing,
versus the public market for shipping companies, which is valuing
these same ships at a much lower number.
Speaker 1 (35:00):
Yeah, why why does why don't like during these times,
like why aren't we seeing shipping companies taking their companies private?
Like what?
Speaker 2 (35:09):
Well, I think to some extent you will see that.
But you know, you also have to look at the incentives.
We are a you know, basically totally self managed company.
(35:33):
You know, the people who manage our ships are employees
of Starbulk. Are all of our executives are employees of Starbulk.
That's not always the case even in public shipping companies.
You you, you have many companies that just own ships
and contract in management services from companies that may be
(35:55):
affiliated with the executives. And you know, in a situation
like that, the incentive might be to keep the company
as large as possible.
Speaker 1 (36:06):
Right Well, hey, Misha, I think we're running out of
time right now. I want to thank you for your
time and your insights. It's always a pleasure to talk
to you always come away learning a little more about
the dry bulk industry.
Speaker 2 (36:18):
Thanks very much, Lee, thanks for having me on, and.
Speaker 1 (36:21):
I want to thank you for tuning in. If you
liked the episode, please subscribe and leave a review. We've
lined up a number of great guests for the podcast,
so please check back to hear conversations with C suite executives, shippers, regulators,
and decision makers within the freight markets. Also, if you
want to learn more about the freight transportation markets, check
out our work on the Bloomberg Terminal at BIGO and
(36:44):
on social media. This is Lee Clasgal signing off and
thanks for talking transports with me.
Hi everyone, this is Lee Claska and we're Talking Transports.
Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Laskows, senior Freight, transportation and logistics analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in little public
service announcement. Your support is instrumental to keep bringing great
(00:28):
guests and conversations to you, our listeners, and we need
your support. So please, if you enjoy this podcast, share it,
like it and leave a comment. Also, if you have
any ideas for future episodes or just want to talk transports,
please hit me up on the Bloomberg terminal, on LinkedIn
or on Twitter at logistics Lea. Now onto our episode.
We're delighted to have with us Hamish Norton, Starbulks President,
(00:51):
as our guest on the podcast today. Prior to twenty twelve,
he was Managing director and global head of the Maritime
Group at Jeffrey Company. Prior to joining Jefferies in two
thousand and seven, mister Norton ran the shipping practice at
bear Stearns since two thousand. From nineteen eighty four to
nineteen ninety nine, he worked at Lazard Ferris and from
(01:13):
nineteen ninety five onward as a general partner and head
of Shipping. Mister Norton is director of Neptune Lines and
Cadre Holdings. He holds ab in physics from Harvard and
a PhD in physics from the University of Chicago, and
most importantly, he has a distinction of being a second
time guest on Bloomberg Intelligence Talking Transports podcast. Welcome back
(01:36):
to the podcast, Hamish.
Speaker 2 (01:37):
Thank you very much. Lee.
Speaker 1 (01:39):
You have quite quite a career both running shipping companies
and on Wall Street kind of banking them. So your
insights are really incredible at this critical time given where
we are with tariffs. You know, before we start talking
about that for our listeners, can you just give us
a little more detail about Starbucks fleet.
Speaker 2 (02:00):
Sure. Starbuck has one hundred and fifty three ships. They
are the largest category of ships we have. Are so
called supermaxes and ultramaxes, which are ships that have cranes
that allow them to self load and self discharge, and
they can carry between fifty two thousand and sixty four
(02:20):
thousand tons of cargo. Then the next category which we
have somewhat fewer ships in is the Panamax slash Camcermax class,
which is about seventy five to eighty five thousand tons
of cargo, and a Panamax ship will go through the
(02:41):
Old Panama Canal. Camcer Max will also go through the
Old Panama Canal, but not if it's fully loaded with
heavy cargo. It can go if it's fully loaded with grain,
which weighs a bit less and so it sits a
bit higher in the water. And then we have a
large number of Cape size and so called Newcastle Max ships,
(03:04):
which are about one hundred and eighty thousand tons of
cargo to about two hundred nine thousand tons of cargo.
And you know, the camp campcer Max and the Cape
size do not have cranes and rely on poured infrastructure.
And you know, all of these ships are pretty simple ships.
(03:29):
You know, the captain has to be very talented, but
the shipyard that builds these ships doesn't have to do
very much with the steel. There's less value add to
dry bulk ships than to any other class of ship,
which which means that it is very hard, for example,
(03:49):
to make money in dry bulk shipping. If you buy
your ships at the wrong time, you know, because the
ship is is basically a pure commodity, right.
Speaker 1 (04:03):
So you know, there's so much we could talk about,
and you know, I guess you started talking about the
actual ships themselves. So you know, there was some recent
noise with the US Trade Representative announcing fees on Chinese
built ships. Are you guys exposed to that? Where do
you think that ends up playing out with the new
(04:24):
rules that were released a couple of weeks ago.
Speaker 2 (04:25):
Well, I wish, I wish I knew lee where it
ends up, because it's it's really you know, still a
lot of it up in the air. But the US
Trade Representative's latest paper Levy's fines on Chinese ships calling
on the US but not on ships built elsewhere, even
(04:51):
if those ships are owned by a company that also
has Chinese built ships. So about a third of our
fleet is built in Japan, which is very convenient, and
we're probably going to maintain those ships that were built
in Japan to a higher level than we might otherwise
have done to try to get them to last a
(05:13):
little longer. Ships Act appears to have a provision that
would levy a fine on Chinese companies that have Chinese
ships that come to the US with a non Chinese ship,
so that would make our Japanese ships less valuable. But
(05:36):
it appears, at least to my reading, that the Ships
Act provides an opportunity for the President to remove that
fine at his discretion.
Speaker 1 (05:48):
And one of these finds expected to go into place
or are they in place already.
Speaker 2 (05:52):
They're not in place yet. The US Trade Representative has
a a sort of phase in over a period of months,
and I believe it doesn't start for six months. And
I believe that the US Trade Representative paper is not final.
And of course the Ships Act is legislation that hasn't
(06:14):
been passed yet, so we don't know.
Speaker 1 (06:18):
And if this gets passed and it is as it stands,
are the ships in your fleet that are Chinese built?
I mean, are they just twenty like worth twenty twenty
five percent less than they used to be?
Speaker 2 (06:29):
Well, I don't think it's it's that big a deal, actually,
because if the US Trade Representatives paper goes through as
planned so far, you know, there are enough Japanese and
Korean ships in the fleet to satisfy all the needs
of the United States. You know, the US is under
(06:52):
ten percent of the dry bulk trade worldwide. You know, basically,
the US exports grain, it exports coal to some extent,
it imports very little in dry bulk.
Speaker 1 (07:09):
And then you know, I guess just as it sits today.
You know, if you were to buy a cape sized vessel, like,
how much cheaper would it be buying it from a
Chinese shipyard versus a Japanese shipyard.
Speaker 2 (07:24):
It's ten to fifteen percent more at a Japanese shipyard.
And you know, historically Japanese ships maintained their premium value.
You know, I think to some extent they still maintain
their premium value. But you know, in his historically Japanese
(07:47):
ships burned less fuel than Chinese ships. Good Chinese ships
are just as efficient as good Japanese ships now, so
you know, the Japanese ship is a little little nicer.
It is. You can't order you know, custom changes to
the Japanese ship design. They are very automated, and which
(08:12):
is the only way they can compete in Japan. So
they build a standard design. That standard design is typically
thought to be very good. People people order them, you know,
but in China you can get anything you want.
Speaker 1 (08:27):
Okay, and then you know, I guess you know, so
the ships act. The real I guess crux of it
is the president and the Trump administration wants more manufacturing
brought to the US. You know, the fact that we
don't have the capability is building ships here in the
US is you know, not a great thing? Is that
(08:50):
ever going to come back? Are we ever going to
build dry bulk ships here in the US? Again?
Speaker 2 (08:54):
Well, I doubt that the US will build dry ball
ships because dry bulk ships are, as I said, the
lowest value added product that shipyards make and the least sophisticated.
So I would expect that if shipbuilding comes back to
(09:16):
the US in a big way, that the US will
build sophisticated ships you know, roll on roll off ships,
container ships, LNG carriers, LPG carriers, and you know, ships
where high technology, you know, can can contribute perhaps more
(09:39):
than it can in dry bulk.
Speaker 1 (09:42):
And going back to you know, a lot of our
listeners might really not even know what dry bulk is.
So what are the main kind of commodity categories that
you guys haul uh within your ships?
Speaker 2 (09:53):
Sure we our biggest cargo is iron ore, next biggest
would be coal, and then grain, and after iron ore,
coal and grain, which in aggregate account for a majority
of total cargo, there are what you call minor bulks,
(10:14):
which are things like nickel, nickel or copper concentrates, baux
site that mostly tend to travel in small parcels and
go in the so called supermax and ultramax ships. And
(10:36):
something like eighty five percent of the iron ore we
carry ends up in China, and a lot of the
coal ends up in China, also also Vietnam in India.
Speaker 1 (10:48):
So for the most part, China really dictates where the
dry bulk market heads from a demand standpoint and therefore
rate standpoint.
Speaker 2 (10:55):
That is true, China accounts for forty percent of the
tons of dry ball right on the ocean, and fifty
percent of the so called ton miles. What we care
about are not how many tons we carry, but how
many miles we carry each ton times the number of tons.
Speaker 1 (11:12):
And so the things that are going on in the
Suez Canal, those are good things for a ton miles
because you have to go around the Cape of Good Hope, right.
Speaker 2 (11:20):
Yes, well not just we have to, but everybody else
has to. So you know, while I never want the
houthis to shoot at ships going through the Red Sea.
When the houthies we're shooting at ships going through the
Red Sea. That was very good for rates.
Speaker 1 (11:41):
Right, And speaking of rates, rates aren't very good anymore.
That the Baltic Dry index is down something like twenty
percent from last year. Why is that what's driving the
weakness and rates?
Speaker 2 (11:53):
Well, you know, despite the fact that China's imports of
dry bulk up like nineteen percent from the beginning of
twenty twenty two to the end of twenty twenty four,
you know, in the first quarter of twenty twenty five
they're down, you know, something like nine percent from Q
(12:14):
one twenty twenty four. So you know, the number of
ships has increased by about three percent in that in
that time. And you know, if the ships increase in
number and carrying capacity and the cargo shrinks, you know,
it's supply and demand, right, rates drop, And.
Speaker 1 (12:36):
If the Suez Canal opened up, obviously it's I don't
have any time soon, but it seems like it could
happen sooner than rather than later.
Speaker 2 (12:42):
It might happen soon. I read some stories yesterday evening
and this morning that at least the President has stated
that the whothies are packing it in. Right, we'll see
if that holds.
Speaker 1 (12:58):
What what would that do to capacity? How much capacity
would that add?
Speaker 2 (13:02):
For dry bulk it only adds about two percent? Ok,
you know the the for container ships it's quite a
bit more.
Speaker 1 (13:14):
Are any ships going through the Suez?
Speaker 2 (13:17):
Yes, I mean not now, but they did?
Speaker 1 (13:20):
Yeah, I mean now?
Speaker 2 (13:21):
Yeah, no, no, not now?
Speaker 1 (13:22):
Not now? So you're not I guess you're not carrying
any Russian cargoes or.
Speaker 2 (13:28):
Well, we carry Russian cargoes that are not sanctioned, of
which there are some, and you know, I mean if
they're not sanctioned, they're not sanctioned for a reason. The
government wants us to carry them.
Speaker 1 (13:44):
And that's probably like grain and things of that nature.
Speaker 2 (13:47):
Well, it's grain if it's clear that it is from
a Russian source. Grain that is from a Ukrainian source,
that is, you know, it by Russians is a problem
and we don't carry that.
Speaker 1 (14:06):
And so the decline in demand that we're seeing is
that all tariff related. Is that, like you know, China's
economy decelerating because you know, the US is not importing
as much and the kind of disruptions created by other
trade wars that the US is having with its partners.
Speaker 2 (14:23):
Well, it's not tariffs, because it started happening before the
tariffs went in and before they were announced. You know,
it is probably a combination of grain being a bit lower,
and you know, it's it seems to be you know,
(14:48):
across the across the the spectrum. And I said nine percent,
it's it's eight point three percent. When I look at
my note that it dropped. Yeah, I mean it obviously
has something to do with the Chinese economy slowing down.
You know, it's obviously very hard to get a firm
(15:13):
handle on what the economic statistics really are.
Speaker 1 (15:17):
Yeah. So you know, I know, we're not going to
talk specifics about the quarter because you guys are going
to announce soon your results, you know, a couple of
days after recording this, you know, but twenty twenty four
was a fantastic year for dry Bulk. It was a
good year for Starbuck. You know, I saw your revenues
increase thirty four percent, your EBIT increase sixty one percent.
(15:38):
Fast forward to this year, consensus has revenue increasing by
about five percent and EBIT going down thirty seven percent.
Can you just talk about you know, the economics of
of the dry ball industry, and why are your revenues
going up mid single digits but your ebit is going
down by pretty large double digits.
Speaker 2 (16:00):
Sure, you know, So we have voyage revenue. Voyage revenue
is when we contract with cargo owner to move a
certain amount of cargo from point A to point B,
and we take all the risk on the weather and
(16:22):
port charges and so on, and we pay for.
Speaker 1 (16:25):
The fuel, okay.
Speaker 2 (16:28):
And then if you subtract from voyage revenue voyage expenses,
which is fuel, port charges, canal fees and so on,
you get something called net revenue, which is also time
charter equivalent revenue. And we have a bunch of ships
on time charter and a bunch of ships on voyage charter.
(16:50):
In the time charter, the charter tells us where to go,
and so he pays for the fuel, he pays the
canal fees and the port charges. And then you know,
we subtract from time charter equivalent revenue operating expense, which
is the direct cost of operating the vessel, crew, wages, insurance,
(17:13):
and crucially lubricating oil, which you might have thought was
a voyage expense, but since it is a very important
thing to get right for the owner of the ship.
It is for the owner's account in a time charter,
and then we subtract overhead. And we have in the
(17:34):
dry ball industry some of the lowest operating costs and
overheads there are. Our operating cost is on the order
of five thousand dollars a day. Our overheads are on
the order of one thousand dollars a day. Now, you know,
charter rates are eleven to seventeen thousand a day, depending
(17:56):
on the size of the ship. And of course we
have debt on you know, secure debt on most of
the ships. So you know, our break even, our cash
break even, including mandatory debt repayments, is on the order
of twelve thousand dollars time charter equivalent revenue per day.
(18:22):
And you know that's not far off from where the
market is right now.
Speaker 1 (18:29):
And so I so, I guess it really has to
be on the demand side, and I guess the demand
picture is not is getting worse every day? Is that
is that fair?
Speaker 2 (18:39):
Well, the demand picture is not getting better. It's it's
I mean, it has been getting worse for the last
two days. But you know, I mean, it's very volatile,
and you know, the supply picture is actually not not
that bad. Ship ship numbers are probably going up about
(19:02):
three point one percent this year and about three point
one percent next year, but nobody is ordering dryball ships
at the moment. And you know, I think orders at
Chinese yards of any type of ship are slower than
they would have been without the US trade representatives.
Speaker 1 (19:25):
How hard Like if I ordered a Chinese ship six
months ago and all of a sudden this new rule
came out, and I'm afraid that the implications How easy
it is to cancel an order.
Speaker 2 (19:37):
It depends whether you have gotten a so called refund
guarantee and the contract has been you know, locked in stone.
Typically a shipyard will negotiate a contract with a credit
worthy entity and a good shipyard. Anyway, there are good
(19:58):
shipyards and less good shipyard ards.
Speaker 1 (20:00):
And I don't think I want to ship from a
bad shipyard.
Speaker 2 (20:03):
Well, I think you have a very correct point. But
there are shipyards that in a hot market will take
an order from an entity without a good credit puts
down a deposit, and in that situation, if the party
that ordered the ship walks away, the shipyard, as a
(20:24):
practical matter, just has what was paid to that date.
But the shipyards we typically deal with, you know, would
would get a guarantee and we would be on the
hook for the full amount of the contract.
Speaker 1 (20:39):
And with this depressed market, do you see the M
and A activity picking up within drybook? I know, you
guys did a big deal yeah, last year.
Speaker 2 (20:49):
Last year it closed April ninth of last year, and
that was an Eagle Bulk Shipping, which is a company
that owned a fleet of handy Max, Supermax and Ultramax ships.
And you know, it was a very interesting situation. They
(21:16):
had a more sophisticated, more intensive chartering operation, doing many
more voyage charters which are a little bit more work,
and fewer time charters, and they got higher revenue per
Supermax and Ultramax ship than we did. Our costs were lower,
(21:36):
and I think our profitability and aggregate was higher. But
by buying or merging with Eagle, we were able to
get their chartering sophistication and our cost levels and the
star fleet of supers and ultras also got their Eagles
(22:01):
chartering income, and so you know, it was it was
a win win, And at the moment it looks actually
like the operating costs and overhead for that that would
be allocated to the Eagle fleet is actually lower than
the than the that which is allocated to the Star fleet. Now,
(22:24):
I mean it's that's not an apples to apples comparison
because the former Eagle ships are smaller than the average starbullship.
But you know, it just goes to show that we
were successful in getting the synergies that we expected to get.
Speaker 1 (22:41):
And do you expect more m and A activity in
the market, because I'm assuming you know, assets are getting
a little are coming down in value just because where
rates are.
Speaker 2 (22:50):
You know, I expect that there should be more m
and A activity. You know, it is It is a
bit tricky right now because is starbulk and frankly, all
of the public comparables are trading below the net liquidation
value of hard assets, and in Star's case, is substantially below.
(23:15):
Not that we're an outlier, you know, maybe sixty percent
of or seventy percent of net liquidation value of hard assets.
And you know, we are making more money with each
ship than the typical ship owner. So you know, it's
(23:35):
not a reflection of poor management of assets. It's a
I think a reflection of the fact that the public
equity markets are not incentivized to take the time to
analyze what is a somewhat quirky industry, small market cap,
(23:56):
and it's hard for an investor to make a substantial investment.
Speaker 1 (24:02):
I guess provides you, guys, with an opportunity to buy
back shares.
Speaker 2 (24:05):
It does provide us with an opportunity to take the
arbitrage between the value of the ships and the value
of the shares.
Speaker 1 (24:12):
Can you talk about your capital allocation policy at Starbull Yes.
Speaker 2 (24:18):
For several years, we basically decided to pay essentially all
of our operating cash flow after mandatory debt service and
after building up a cash reserve that was two point
one million per vessel that was set by our board
(24:38):
in order to basically make sure that we were in
good shape if the market had a week period and
we paid very large dividends. We paid well over a
billion dollars in dividends since twenty nineteen. But then as
our share and the share ayers of our peers dropped
(25:03):
well below liquidation value, our shareholders basically said, you know,
stop paying that dividend, please take the money and repurchase shares.
So our new policy is that no more than sixty
percent of our operating cash flow, we'll go to dividends
(25:24):
and possibly less, and the rest will go either to
repay debt, buy back shares, or possibly go in our
balance sheet to take what might be an even better
opportunity later in the cycles.
Speaker 1 (25:42):
What's your debt level, what's your leverage? Turns?
Speaker 2 (25:44):
Well, turns are the wrong metric for dry bulk because
nobody knows what the cash flow is. The cash flow
is incredibly volatile. So the metric people look at is
basically net debt to asset value, okay, And by that
metric we're about twenty five percent, so very low debt. Actually,
(26:06):
our debt is less than the scrap value okay, of
our ships.
Speaker 1 (26:11):
And that's that's kind of like, is that a target
twenty five percent or that's just where you happen to be.
Speaker 2 (26:15):
That's where we happen to be, and we're reducing debt
as we go.
Speaker 1 (26:18):
Okay, So let's let's talk a little bit more about tariffs.
So you mentioned earlier that you know, it may not
really be impacting us that much because the US is
only ten percent of the dry bulk market.
Speaker 2 (26:31):
Yes, and the US is ten percent of the dry
bulk market, largely because of what it exports. Yeah, it's
much smaller than ten percent. You know, when you look
at the discharge into US ports.
Speaker 1 (26:45):
And the tit for tat with the tariffs between the
US and China. So I'm sure China is putting tariffs
on US exports. So are you seeing a change in
trading patterns like they're substituting US AG for somebody else?
Speaker 2 (27:01):
Yes?
Speaker 1 (27:02):
Can you talk about that?
Speaker 2 (27:03):
Yeah? I mean basically, the US historically has exported soybeans
and corn to China, has exported coal to China, particularly
metallurgical coal, and you know that's basically stopped. And China
seems to be not importing so much corn from anybody
(27:27):
because they've increased their domestic harvest. They're importing soybeans, but
largely from Brazil and to some extent Argentina.
Speaker 1 (27:37):
Do those have longer ton miles? Is that like a
net positive?
Speaker 2 (27:39):
That is a net positive? Actually? Yes? And and and frankly,
China is importing a lot of coal, and you know,
the US may have been a longer, longer route than
than you know, Australia for example, But you know, the tariffs,
(28:07):
I think net don't have. Even the Chinese tariffs on
US products don't have a big impact directly run dry bulk.
The impact would come from the effect of the tariffs
on the world economy. You know, dry bulk dry bulk
(28:31):
traffic tends to be more or less proportional to world GDP,
and anything that's bad for the world's GDP is bad
for dry bulk. The other thing that is, you know,
not going as well as it might is the price
of oil. And you might think that we favored low
(28:54):
priced oil because we pay for oil to move our ships, right,
but actually we do better in higher with higher oil prices. Frankly,
the higher the better, within some sort of reasonable limits,
because everybody who owns a dry ball ship wants to
(29:17):
go at the profit maximizing speed, and the higher the
charter rate, the faster the profit maximizing speed. But the
higher the bunker oil price, the slower profit maximizing speed.
And you know, ships burn fuel in rough proportion to
the cube of the ship's speed, So a little bit
(29:39):
of increase in the oil price, basically you can very
small change in speed can make up for a big
change in oil price. But all things being equal, if
the oil price goes up and the fleet slows down.
There's not enough capacity to carry the cargo that was
(29:59):
carried before. So in fact, what happens is charter rates
go up in proportion to the oil price in order
to have the ships continue to run at the same speed.
Speaker 1 (30:11):
Right.
Speaker 2 (30:12):
And this is not true of container shipping, where the
container lines have to negotiate prices with their customers, and
it's not completely true of tankers where they're carrying the fuel.
And so it's never sort of, you know, all things
equal with tankers, whereas with dry ball it's basically a
(30:33):
pretty simple relationship. And we just want high bunker prices.
Speaker 1 (30:37):
Right, and at this low bunker fuel environment, I guess
you're just I mean, you're not running necessarily faster, are you,
because there's so much slack capacity in the market.
Speaker 2 (30:45):
Well, I mean we're running faster than we otherwise would, right, Okay,
it's not very fast.
Speaker 1 (30:52):
But you don't necessarily the lower it goes, you don't
speed up. You just maintain a certain fast speed.
Speaker 2 (30:59):
The lower it goes, ohs, normally the faster we would go.
But now there are climate change rules to take to
take into account, and so I think the climate change
rules are inhibiting many people in driveball from going as
(31:19):
fast as they otherwise would, and that's that's a good thing.
Speaker 1 (31:23):
What kind of what kind of rules are you talking about?
Speaker 2 (31:25):
The IMO has got rules on so called carbon carbon
Carbon Intensity Indicator, which is basically a measure of how
much carbon you emit per unit of transportation work. And
it's a sort of a strange metric because it, for example,
(31:49):
incentivizes cruise lines to not dock their cruise ship but
to run it in circles outside the port, because if
they're just docked and they burn fuel to keep the
ship lit, they're not doing any transportation work at all. Right,
But nevertheless, that is a measure that we have to
(32:11):
disclose and our charters pay some attention to it. There's
no specific financial penalty. And then you know, the IMO
has in principle decided to adopt what are essentially global
carbon taxes, and you know it's going to be a
(32:32):
very complicated process to get those implemented. And let's see
what happens.
Speaker 1 (32:37):
So a little bit about your career, so you know,
your transition from Wall Street to you know, an operator,
what was the biggest change for you when you made
that change.
Speaker 2 (32:49):
Well, I think everything changed in a fairly dramatic way.
And it was, by the way, in twenty fourteen that
I became president of Starbuck. I went to work for
one of the predecessors of Starbulk in twenty twelve, a
joint venture between the Papas family and oak Tree in
dry Bulk, which was merged into Starbulk in twenty fourteen.
(33:13):
But you know, I think you know, for example, our
offices in Marusi, which is a suburb of Athens, cost
US about five dollars per square foot per year, and
that's we paid more than that for real estate in
Manhattan when I was an investment investment banker, and you know,
(33:35):
so the surroundings were very different. The job has its
hair raising moments, but mostly I think deeply about a
small number of problems instead of thinking much less deeply
about a much larger set of problems.
Speaker 1 (33:56):
So in what would you characterize the biggest problem that
you're thinking about right now?
Speaker 2 (34:01):
The biggest problem I'm thinking about right now is how
to get our share to trade above the net liquidation
value of hard assets. Okay, because you know that's really
annoying when management is in effect deemed to be subtracting
value from assets, even though we do a really good
(34:23):
job of managing them.
Speaker 1 (34:25):
Right, I'm assuming it's very frustrating, But at the end
of the day, it's really going to depend on the market. Right,
It's it's well, but I mean, while you guys have
a good profitability margin versus your peers, it's a lot
of it is the macro.
Speaker 2 (34:36):
Yes, but I mean the value of the ships depends
on the macro. Two. You know, this is comparing the
liquidation value of the ships in the private market for ships,
which is presumably dominated by people who know what they're doing,
versus the public market for shipping companies, which is valuing
these same ships at a much lower number.
Speaker 1 (35:00):
Yeah, why why does why don't like during these times,
like why aren't we seeing shipping companies taking their companies private?
Like what?
Speaker 2 (35:09):
Well, I think to some extent you will see that.
But you know, you also have to look at the incentives.
We are a you know, basically totally self managed company.
(35:33):
You know, the people who manage our ships are employees
of Starbulk. Are all of our executives are employees of Starbulk.
That's not always the case even in public shipping companies.
You you, you have many companies that just own ships
and contract in management services from companies that may be
(35:55):
affiliated with the executives. And you know, in a situation
like that, the incentive might be to keep the company
as large as possible.
Speaker 1 (36:06):
Right Well, hey, Misha, I think we're running out of
time right now. I want to thank you for your
time and your insights. It's always a pleasure to talk
to you always come away learning a little more about
the dry bulk industry.
Speaker 2 (36:18):
Thanks very much, Lee, thanks for having me on, and.
Speaker 1 (36:21):
I want to thank you for tuning in. If you
liked the episode, please subscribe and leave a review. We've
lined up a number of great guests for the podcast,
so please check back to hear conversations with C suite executives, shippers, regulators,
and decision makers within the freight markets. Also, if you
want to learn more about the freight transportation markets, check
out our work on the Bloomberg Terminal at BIGO and
(36:44):
on social media. This is Lee Clasgal signing off and
thanks for talking transports with me.
Host
Lee Klaskow
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