Good afternoon everyone and welcome to the conference call for discussing the results and the markets of Q1 FY 2027. As always, the customary disclaimers apply. We are not forecasting the market. We don't give earnings guidance either. Let's look at the broad highlights. We've had our most profitable quarter ever by a significant margin. The consolidated profit is INR 1,309 crore while the standalone profit is INR 1,157 crore. That's about INR 91- INR 92 a share on consolidated basis.
Our net asset value has also gone up by about INR 100 a share. Standalone is about INR 1,512 and consolidated is just short of INR 1,900. INR 1,900 a share. We also announced our 18th consecutive interim dividend of INR 14.40 per share, again our highest ever quarterly dividend. I won't spend too much time on the numbers except the highlights are, of course, we continue to accumulate cash. While we have done quite a few of the modernizing transactions, the cash continues to build up. I will skip through most of these and let's discuss the markets. [audio distortion] Moderator, I think we need to mute all the participants for now.
Yes, sir, the participants are muted.
Thank you. The big event of the last quarter and of February-March was the events around the Strait of Hormuz, which had a huge impact on tanker markets. We saw freight rates going to all-time highs during the last quarter because of all the disruption which was caused in the Strait of Hormuz . As we mentioned in the last quarter's con call, a lot of oil cargoes come through the Strait of Hormuz , and we, consuming nations needed to look for different sources of this oil. As a result of that, the trade patterns went completely askew, and therefore ton-mile demand picked up hugely. For instance, instead of exporting from, say, the Middle East to Asia.
The Asian countries had to source their oil from, say, the U.S. or Brazil, which is a much longer voyage, and therefore it requires more ships. That tightened the market, and that's what resulted in significant strength in the market. Similarly for product tankers as well. MR earnings in the spot market were close to $50,000 a day last quarter. That's again all-time highs. The asset prices, as a result of this, the asset prices did what is logical and they went up further during the quarter, up about 5%-10%. The order book continues to build tremendously. There's a lot of ordering taking place. Bulk carrier earnings also were fairly strong.
While they were not too affected by the Strait of Hormuz issue, very little, less than 5% of dry bulk cargoes actually go through the Strait of Hormuz, so it wasn't much of an issue for the bulk carrier market. However, we had stronger earnings. Some of it is possibly because LNG was not able to come out of the Strait of Hormuz, and some of the power plants are able to switch from LNG to coal, and therefore some replacement of that demand took place, which means more coal transportation.
What also happened was that the grain trade was quite strong, which led to increased demand for bulk carriers. Bulk carrier markets were slightly better than they were in the corresponding quarter of the previous year. LPG, again, we have our ships in the time charter market, and on time charters, while we have one vessel which has some upside participation in the spot market rates. Our vessels typically are on fixed-rate charters.
Markets were very strong again as importing countries typically went to the U.S. to make up for the shortfall of LPG from the Middle East. Asset prices also went up. Freight rates were in excess of $100,000 a day. I mentioned earlier asset prices all going up across the board, just to varying degrees. The order book is picking up. The order book now for crude tankers is at 27%. The order book for VLGCs is currently at 35%, which is a huge number.
For product tankers, continues to be at about 20%-21%, while bulk carriers are at about 14%, having picked up from about 10%-12%. There has been a huge amount of ordering. You can see the blue line shooting up from below 10% to currently at 27%. A huge number of crude tankers have been ordered in the last one year or so. Coming to the jack-up market, the utilization of jack-up rigs is a global number, remains where it was three to six months ago. The headline news is that rigs which were temporarily suspended during these hostilities by Saudi Aramco are slowly coming back on contract and going back to work.
Coming to what's happening with our fleet, we have mentioned here that three rigs are up for repricing in the second half. We have just received a letter of award for a three year contract on one of those rigs. We will now have two rigs which require to be repriced this year. Apart from that, we have some vessels coming up for repricing all the time. This is just a short overview: 40 ships with an average age of 14.5 years, 19 offshore vessels and four rigs. These are the transactions we did over the last four months. We've sold two MR tankers, replaced with one MR tanker, and we also bought a Kamsarmax Bulk Carrier.
We, in the month of July, we sold the Jag Lokesh, which is an LR2 tanker, and replaced with the Jag Laxman, which is also an LR2 tanker but is six years younger. Is an eco-ship as well. We continue to be on the spot market. About 25%-26% of our capacity is currently on time charter. We are predominantly on the spot market and able to therefore take benefit of the market spike. You can see the TCYs. Crude tankers have produced a TCY of [$90,000] a day.
Product tankers [$ 45], so on, so forth. This is a coverage of the operating days for Q2. Of course, we are almost 40% through the quarter, it makes sense that you would have at least 40% covered. While the vessels have, the supply vessels, you can see in three different categories, have about a 90% cover for Q2. We won't go too much into these financial metrics. The NAV movement, of course, we've seen before, and this is where we stand at a share price to consolidated net asset value with consolidated NAV of just under INR 1,900.
We trade at about a 15%-25% discount to NAV. These are the dividends that we paid out over the last four years plus. Very strong dividend payments over the last four years because the markets have been very, have enabled us to make a lot of profits. This is the debt which gets paid down over the next two years. Our last debt comes off in November 2028. These are the cash flows just showing the picture of how we invest counter-cyclically and then we collect cash. Now we are waiting for the opportunity to invest. To sum up, how are we positioned?
We are predominantly spot market. We are currently at about 25%-26% cover across our fleet of 40 ships + 2 in chartered vessels. Our fleet strategy is to replace, not expand. For capacity expansion, we will wait for prices which we think will enable us to make a good return in the long term. We are willing to wait for those.
We have been net cash for the last almost four years now, more than three years, we will, and we've been paying out some dividends every quarter. We've seen, of course, the NAV growth over the last five years or so. That brings me to the end of the presentation. We are happy to take questions. I also have with me Rahul Sheth from the management team, and we'll be happy to take your questions.
Thank you very much. We will now begin the question- and- answer session. To ask a question, please click on the raise hand icon tab available on your toolbar or the Q&A tab available on your screen. Kindly turn on your mic when the operator announces your name. We request you to please restrict yourselves to three questions per participant. If you have any further questions, you may rejoin the queue. Alternatively, you may also post your text questions. Our first question comes from the line of Dhruv Jain with Ambit Capital. Please go ahead.
Hi, Dean. Thanks for the opportunity. My first question is on the product tankers, right? In your presentation, you mentioned that you saw some switching of product tankers to crude tankers, and that's why the supply was kind of restricted. Just want to understand if you think this is going to be a permanent phenomenon, or do you think that, you know, this will kind of revert back to where it was? To understand, because obviously the supply is rising on both accounts.
Generally what happens is that, you know, this mainly happens on the LR2 tankers because basically an LR2 and Aframax are identical in size. An LR2 is coated so it can carry products and crude, and Aframax just carries crude. We see this happening on the LR2 where if you see the Aframax earnings to be very strong, people switch. The cost of switching is not really there because, you know, if the vessel is clean, she can carry crude, dirty cargoes. If you're carrying dirty cargo, there is a cost to switch back to clean. Having said that, if the markets are sufficiently strong, we can see the vessel category switch back to LR2.
Currently, what we have seen is a substantial number of LR2 switching to Aframax, more than we've seen in the past, but mainly because of the gap in the earnings. We saw the Aframax earnings to be very strong. The LR2 earnings relatively to be much weaker. The additional problem that, you know, because of the issue that we saw in the strait, a lot of LR2 cargoes were not actually even available because the LR2 tankers are really dependent on the Gulf. That's why we saw a large number of vessels switch to the dirty trade. Of course, you know, if this reverses, it is possible for vessels to come back.
Got it. My second question is on buyback. You know, obviously you've accumulated a large sum of cash on your balance sheet. You know, asset prices have risen. Knowing you guys, I don't think you will do a substantial CapEx at these prices. Just want to understand, at say the current valuation, or if you can just help us understand the framework in terms of how you think about buyback, is it price to NAV? If that is, then what's the range that one should look at where you think about a larger buyback?
Hi, this is Shiv here. Yeah, the way we look at a buyback is, it is as another capital allocation. We will treat it exactly the same way. This will be discussed. We don't have a policy as such which is on a target or a target price. A target multiple. It will be discussed at the Board. It will be treated like any other capital allocation decision where we look at the other options available and decide on it. There are no numbers that we have set in our mind.
Okay, got it. Basically, you know, as things stand, I think, or let me put it in another way, right? Are these prices, do you think that buyback is feasible or, you know, you still want or you still wait?
If we haven't announced one, we are waiting.
Okay, thanks. Thanks, Shiv.
Thank you. The next question is from the line of Amit Khetan with Laburnum Capital. Please go ahead.
Hi, am I audible?
Yeah, you are audible. Yeah, yeah.
My question is just a follow-up on the buyback question, right? Historically there used to be a tax on buybacks. Under the new framework of SEBI, which comes in effect from this month, I don't think there are taxes and therefore that leakage is gone. Is it fair to assume that the discount to NAV that we require to conduct a buyback should now be lower than what it was in the past?
Sorry, okay, the tax went last year, the tax has been gone now for some time. Yes, the short answer to the question is the regulatory and tax burdens or disadvantages which existed for buybacks have gone n ow.
Yeah.
You're absolutely right on that. It will only come down to is the price at which we want to do a buyback, and the value that we think whether we think it brings vis-à-vis buying a ship. Broadly, yes, the premium you will have to pay to the market, let's say, assuming you had to pay a premium to compensate for the tax treatment, that is no longer there. That tax premium which you had to pay, that is gone now because of the change in the tax rules.
Understood, understood. That's very clear. Secondly, you know, we've not benefited a lot from the swing in LPG rates because all of our vessels are on time charter. I just wanted to understand when is the repricing due for these tankers, the LPG tankers specifically, and what would be the current market rates on time charter, just to get a sense of what might be the delta there?
Yeah, we have two repricings have happened in the last three months. One of those was a ship that has gone on charter. I mentioned this when I was in the presentation, which has a base rate plus a profit and upside sharing based on the spot market. That's happened. The base rate is around the same as the old charter rate. Plus there is an upside sharing. The second is a time charter which is coming off now and where we've already got the repricing done, which is at about 25%-30% higher than the previous charter rate.
Got it.
Two repricings have gone on. There's 1/3 VLGC which we have which comes off charter early 2027, first quarter
Understood, understood. Thank you, that's it from my side.
Thank you.
Thank you. The next question is from the line of Rajesh Jain, an individual investor. Please go ahead.
Hi, good afternoon, sir. I missed your cash figure, but I guess you have enough cash to increase your capacity, I mean your ship's capacity by 50%, right? Considering ships of 12-13-year-old, which is your preference, right? Considering ships of about 80,000 DWT, right? While I understand that you want to preserve cash for attractive asset prices in future, don't you see merit in at least deploying the incremental cash from here on, let's say from next quarter onwards? You know, the incremental cash itself could probably, you know, buy you about two ships if I'm not wrong. You could preserve your cash and also increase your capacity at the same time. Is my thought process wrong, or like, how do you think about it?
I just wanted to correct on the way you calculated, you know, the number of ships you can buy at a particular DWT. As you can understand, you know, we have ships in different sectors, and depending on the age, the size, the type of sector you buy, the price of the ships vary dramatically. Just as a word of advice, don't just take it as, you know, one number, and I am not sure how you've done that calculation. On your point of whether you should do a certain amount of expansion, of course, I think that warrants some merit in thought. We do constantly go back and look at our decisions or whether our decisions have been right to wait or not.
One of the lessons we have seen in the past is not to get too carried away with the current yields when deciding to buy, which means that when the earnings are the highest, the asset values also become very high. A lot of the returns that you are seeing today are because we have bought ships at a much lower price and therefore benefiting today. If you buy ships at a higher price, of course the yields on those assets tend to reduce.
We have to look at these assets over a very long period of time and then know whether they generate our threshold returns when we are deciding to buy. Having said that, we have undertaken a certain number of transactions which are replenishing our fleet, buying many more years to the fleet. As you can imagine, at these asset values, it costs also a lot more money to replace those ships. There is a certain amount of CapEx that we are undertaking. You will be able to even see that in the cash flow statement.
Yes, sir, the gist of the question, I'll just, you know, rephrase it or break it into parts because I am not clear on one, two points.
Okay.
I'll just break it down. How much cash do you have? Considering the average that you paid for 12-13-year-old ships that you bought, right, three ships you bought in the last quarter, right? The average of that, does it come to INR 300 crore, or how much does it come across all the asset classes? Whatever you have actually paid on an average, you don't need to give the exact figure, but the average.
It varies quite a bit from the assets we have bought, let's just take your example.
Let's start with we have $700 million in cash. In Great Eastern Shipping Company, $600 million net of the debt. Let's say about $600 million net of the debt. Yes, the answer to your question on whether we can do CapEx and whether we can do a significant amount of CapEx, certainly yes. The question is, do we want to increase the chances of the money we invest making a good return for our shareholders, yes, we want to do that. That's why we are waiting.
Sir, may I interrupt you? Because again, I think, you know, the answer is going in a different direction than where I intend to ask. I got that you have around INR 6,000 crore of cash, net of debt, approx, right? I assume that, you know, based on again, whether that assumption is right or not Maybe you can correct me. If I assume that you paid on an average, like you bought three ships, 12, 13-year-old or 14-year-old, and you paid maybe around INR 900 [inaudible] okay? That gives me the calculation that at INR 6,000 crore, probably, you can buy 20 ships, probably, okay? I'm not even suggesting that you buy them today because I understand your philosophy, right?
Yeah.
All I'm saying is, while you can preserve this cash of INR 6,000 crore for future, right, when the asset prices are significantly more attractive. The incremental cash, because looking at the situation, it looks like, you know, even the next quarter or next to next quarter could give you handsome operating cash flows or free cash flows also, right? Even if the next quarter or next to next quarter is not as good as the July quarter, but it could be probably, you know, a good equivalent to March quarter or the December quarter, right?
All I'm saying is the incremental cash flow that you're going to get in each of the upcoming quarters, that itself can probably buy you two ships of, again, 12-13-year-old, around 80,000 DWT. Okay, it could be plus or minus. Why don't you think of, you know, at least deploying the incremental cash? It gives you the best of both worlds. There are forecasts by Morgan Stanley which says that, you know, there the prolonged undersupply of vessels is going to continue for a very long time, right?
If you buy a ship today and if this the elevated freight rates remain for, let's say, around two years, then there is a significant payback already in two years' time. That was my thought process, and I wanted to understand your thought process on deploying the incremental cash flow, not the cash in hand that you have today.
Yeah, just on that last statement on the prolonged undersupply You may have seen the order book data, and the order book has increased very, very dramatically over the last 12- 18 months, especially for crude tankers. Not so much for bulk carriers, but crude tankers, and a little bit in product tankers and LPG as well. As we get further into this cycle, the chances of the market coming off due to oversupply increase. Having said that, we don't know what's going to happen to the market because these kind of disruptions seem to be keeping the market at pretty high levels.
Your point is very valid that a ship bought today, especially a tanker, where the assets are at higher points in the cycle, and earnings are also at very high levels, will write down significantly. Unfortunately, the write-down is not enough to take the ship's price back to long-term averages, nowhere near those numbers. That is why we believe your point is valid that if you don't know what the market is going to do, you invest a little bit of money.
How we are taking it is we are investing last year we invested about INR 1,200 crore in changing the fleet mix. We have invested INR 1,200 crore. This year in the first quarter, we invested INR 300 crore in doing those transactions. Last month already we have invested between INR 250 crore and INR 300 crore. It's just a question of degree, how much money additional do we invest just in additional capacity. We believe that we'll be best served by holding on to the majority of the money rather than investing it in ships today.
Again, there is no right or wrong in this. This is the approach that has served us well, that has served us well over these past decades, and that's why we are sticking with it for now. Again, the only way to do it is to take a market call. We don't think that we can take that market call because there's so much uncertainty around it, and you have left yourself no margin of safety by buying at today's prices. We do invest incrementally, maybe one or two ships, as you say, but that's again going to be on the margin. But one or two ships, you're absolutely right, it doesn't make that much of a difference to the overall picture.
That was my first question. So far we have been dwelling on the first question itself, I just want to ask you two more questions. One is on the offshore side. The government has announced a Samudra Manthan program, right? There could be a significant government focus and even like, you know, on the oil exploration and the offshore side, right? How does GE Shipping benefit from that, your offshore business? How does it benefit? And once you see the activity on the ground, once you see it taking off, do you plan any acquisition or CapEx in your offshore business?
Firstly, I think it is too soon to decide on a CapEx plan based on what the government is going to do. While they have showed intention, we have not seen on the ground any more further tenders coming from the government for rigs or offshore vessels. I think just let it, you know, translate into on-ground demand before, you know, we share any plans or speculate on how this will all develop.
Yes, it's, it should be positive, but we don't know what kind of assets will be required, etc. We will certainly, we'll keep it in mind when we are making our plans for the future.
Okay, my third question is, so the switch trades that you have been doing are the newer ships, the relatively newer ships, are you able to save significant amount of fuel per day? Because I read somewhere that, you know, this switch trades itself can give you a savings of TCE equivalent of $1,000 per day.
I'm not from the industry, so I don't know whether that figure is far-fetched or not. I just wanted to hear from you, what are the savings like in the switch trade in terms of fuel and the operational savings? Okay. Related to that, will this sale of ships continue over the next few quarters? Because you have been selling two to three ships, I mean, these switch trades, right? Will it continue over the next few quarters if you get the opportunity?
Just to answer the first question on the fuel savings, that is true, there are fuel savings on these newer ships. Of course, it depends on how newer ship you buy. Just to give you some dates, vessels built prior to 2013 were defined as non-eco ships. In 2013, you know, more fuel-efficient vessels came about. As the years have progressed, ships have become increasingly more fuel-efficient. If you compare the ship built, you know, in the 2020s compared to what was built prior to 2013, you know, fuel savings could be up to maybe 20%-25%.
That, depending on the size of the ship, it can translate from $1,000 to, you know, maybe even $ 2,000, $2,500 per day on the earnings. You know, we don't have a plan of selling ships every quarter specifically. We time it based on the kind of transactions we can get. We do have vessels which are coming close to the end of their lives, we will continue switching vessels over the next few quarters. Which transactions come in which quarter, we'll have to see as the deals fructify.
Okay, sir. Thank you.
Thank you.
Thank you.
Thank you. The next question is from Anuj Sharma with SteadFort Investment Managers. Please go ahead.
Yeah, hi, thanks. A couple of questions. One is on the LPG carrier. One. The profit share model, if we were to look at it today, what is the difference versus the earlier charter? The second or the third one which is yet to come, if we were to reprice it today, what would be the mark-to-market difference in the spot rates?
You mean you're comparing the time charter rate with the current spot rates?
The repricing.
Repricing.
Yeah, the repricing rates.
The ship which is coming off charter early next year, the current charter rates are probably $15,000 to $ 20,000, no, closer to $20,000 a day, higher than that ship's charter rate. Okay, okay.
The one in which we have a profit share, assuming the charter rates are today. If you add back the profit share, what would be that?
Based on current spot rates, yeah, we make significantly higher, maybe 25%-30% higher than the previous charter rate, previous fixed charter rate, based on today's spot rate. Again, this changes every month.
Sure. On the ONGC tender, the rig which is now tendered, what is the rate which we have closed it at?
We don't disclose the rates of any of our contracts.
Fair, fair. Just on the spot rates of OSVs, a couple of them are expected to be repriced. What if we compare it with CY 2025 and 2024? What would be the difference in those, the spot rates versus the spot rates in 2025 and 2024? For OSVs?
Okay, it's tough to give a specific number. In some regions, the markets are a little weaker. For a large anchor handler, it's probably weaker today than it was a year ago, marginally weaker today. For— In some regions, for a larger anchor handler in the North Sea, market is much stronger than it was a year ago. These are very specific assets, it's very different from the shipping business. They're very specific assets with very specific markets. It's tough to put that number. In general, our earnings are higher than they were, say, a year ago, also because of repricing of time charters that we have. The term charters have got repriced.
And we're largely covered for this financial year, we'll look at it how the repricings develop in the next financial year.
Got it, got it. One last question. Last time we spoke, there were two ships of ours in the Hormuz Strait. What is the status now?
All the ships that had to come out of the Strait have already come out. We have one ship in the Strait currently, but she's on time charter to ADNOC, she continues to do business there.
She doesn't have to come through the Strait of Hormuz.
She's employed on a trade which is within industry.
Thank you so much for that. Thank you.
Thank you.
Thank you. The next question is from the line of Siddharth Chauhan with 360 ONE Capital. Please go ahead.
Hi Shiv, thank you for the opportunity and congratulations on great set of results. Couple of questions. Firstly, you have one rig which is idle since 4Q FY 2026. What is the status on that tendering for that rig?
Yeah, she's not idle since 4Q, she's idle since end of April. We are trying to bid her for some short-term, or we are in discussions for some potential short-term business. Nothing has crystallized.
Yeah, she came off in April. I'm not sure if you know, but you know, in the monsoon months, generally rigs don't get deployed because it's, you know, you can't actually take them to the location and put them in. We're hoping to manage a contract sometime after the monsoon. This is a natural part of the rig business.
Understood. You have another rig which is up for repricing. Has the tendering been done by ONGC for that, or are we also looking out for some short-term contracts? For that rig? What is the strategy?
One rig is on, we have won the ONGC tender and we expect that to start.
No, we have the other one which is coming up for repricing is on a short-term contract.
It's on a short-term contract, we don't know about the exact end date of that contract. We'll have to negotiate that rig once closer to the expiry date of that contract.
Again, the customer is probably interested in retaining that rate for further work.
Understood. What percentage of order book across tanker and bulker is expected to be delivered next year? Do you have figures handy?
We would have that. We used to put that before. We probably have 7%, about 4% of bulkers, 7% of other tankers.
I think our team can share this separately with you.
Yeah.
Perfect. Lastly, you mentioned about CapEx in the first quarter and in July. Is there a budget for the entire year? Secondly, how do you benchmark it? Is it that ships older than, let's say, X number of years, you plan to replace them? Or is there a different way in which you look at it?
The larger principle is the age of the ship, because what we try to avoid is that we don't want any ship to have restricted tradability. Sometimes it is somewhat like a hard number where if it approaches a certain age, business can become very challenging or restricted. Sometimes maybe the ship is a bit younger, but we still feel that the options are reducing for the vessel.
It is a bit ship-specific, but it is largely guided by the age of the ship. Also we look at what we can switch it into, because today the idea is not to lose capacity. If you find a good ship and a good deal that we can switch the vessel into, then we may sell her slightly before that, you know, that theoretical age where we are concerned about the tradability of the asset.
Any budget, CapEx budget for the year? For modernization program?
No. We look at it more ship-specific. We have a guiding idea because we know the ships, how they're aging, and when we would ideally like to do certain things. You know, as you can imagine, if the markets change, we do change the way we stick to that plan.
Perfect. Thank you so much, and all the best for the future.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, to ask a question, you may click on the raise hand icon or the Q&A tab available on your screen, or you may post your text questions. Our next question is a text question from Rakesh Roy of Boring Asset Management Company. How much revenue spills from Q4- Q1? Any revenue spill Q3 from Q2 due to closure of the Hormuz during June?
Yeah, again, this happens from time to time in these voyages. Last quarter we had a INR 50 crore spillover from Q4- Q1. This time it's not really significant. This keeps happening, in and out keeps happening, depending on the voyage timing.
Thank you. The next text question is from Ronak Singhvi with NAFA Asset Managers. One. Current WS and average WS for Q1 . Two. Crude carriers operating days in presentation shows 46%, which is less than 50%. Is it only the war which is dragging down the operating days, or is there any other reason like maintenance or something else?
Yeah, I'll take the second question first. I think there's some confusion here. The 46% indicates the number of days of this quarter which have got fixed. It doesn't indicate the utilization of the ship. It means that 46%— the pricing for 46% of the days has been fixed. Because we operate all of the crude tankers in the spot market, that's why this number is lower than for the other sector.
Current WS— I assume this is world scale rates, not sure— again, this is for product tankers, they are probably significantly lower than they were in Q1, the current freight rates. For crude tankers, Suezmaxes are probably around the same or slightly lower. Aframaxes are significantly lower than they were in Q1 26/27. Bulk carriers are marginally higher.
Thank you. The next text question is from Mehul Mehta, an individual investor. Not sure if this is answered, is the management thinking about share buyback?
This question was asked and answered.
Thank you. The next question is an audio question from Rajesh Jain, an individual investor. Please go ahead.
Yeah, thanks for the follow-up. A few short questions. In this quarter, in the June quarter, for crude and product tankers, how much was the volatility in the freight rates? Basically, what were the high and low rates in the quarter?
You know, we can send you this data separately, but one thing you should know that, you know, because of what happened in the Strait is generally part of shipping, but it got exaggerated because of the issue we saw in the Strait. The rates that we saw in different part of the [world] was dramatically different, because Strait shot, i f you looked at vessels trying to be fixed just outside the Strait, there were a lot of ships competing for those cargoes. There were periods of time when either cargoes were not available or the rates were depressed.
If you were willing to go through the Strait, or if you were willing to go to certain areas next to the Strait where there was a higher risk premium, those rates were higher. If you were willing to transit the Red Sea because of the threat of the Houthis, the rates were higher, but they were lower at one point than they were higher. You know, it changes based on the risk premium someone associates with doing that trade.
In the West, we saw when the Strait shut a large, you know, a big spike in the rates because there were many vessels that were not in position, and there were a lot of charters and end customers who were desperate to own those cargoes and secure those cargoes. Vessels that were in positions at, you know, at ports, at exporting terminals, were able to take advantage of that. You know, the rates, the volatility, the difference is all over the place. What I can do is I can ask Shiv to send you all separately some information that may be able to give you some idea of this.
Yeah, that will be helpful. I will look forward to that data point.
Please, yeah, you can drop a mail to the corporate communication team and we will send across the information.
Okay, fine. The next question is, are you seeing structural changes in the trade routes due to refinery dislocations, and are they likely to stay for a very long time in your assessment?
We are seeing certain changes in the trading pattern. What will stick and not stick, time will tell. You can imagine that maybe, and this is just pure speculation on our part, that, you know, a lot of countries are very dependent on the Middle East for LPG, for oil. That will, you know, some countries like, you know, India, Japan, you know, countries that were heavily dependent on the region may say we want to diversify a source of supply. One also has to keep in mind that the Middle East, the amount that they produce, where can you diversify that supply from?
Okay, there are not many other nations that you can say, like just take LPG for example, 40% of the LPG trade is dependent on the Middle East. 40%, 45%, it comes from the U.S. There are not many nations from which you can diversify the supply. What could potentially happen is that countries like in the Middle East, we have seen them making, building pipelines which say that the oil or gas will be exported away from the Strait of Hormuz. Some pipelines are being built from the Persian Gulf to the Red Sea, some are being built to the Mediterranean, some are being built directly to Oman.
The idea is to try to move away from the dependency of the Strait, but the Red Sea has its own consequences. We've seen attacks by the Houthis, does the diversification of the pipeline to the Red Sea help or not? There are also security risks of building a pipeline because if these drone attacks can happen on ships, they can even happen on pipelines. That's why it would be difficult for us to say that, you know, these pipelines that we're seeing being built is the end solution and there won't be another solution that they may come up with.
I think today we can see people trying to make certain changes, but I think, you know, it's too soon to tell what those changes will be and whether they'll be permanent. Just to go back, you know, we have very focused on the Strait, in 2022 when the Russian war broke out, a large part of the Russian crude used to go to Europe, including the product export. With the war, as you may know, that has been diverted to all other nations. If, say, theoretically the war ended, there would probably be a requirement for the sanctions on Russia to be lifted.
Would Europe go back to the way they were importing oil and gas before the 2022 war? We are not sure. Maybe part of it, maybe none of it, I don't know. That again has to be seen based on because, you know, the economics favor Europeans buying more from Russia. Politically, they may want to have a diversification. I think we'll have to see at that point in time how individual players take it up.
Okay.
I hope I answered your question.
Yeah, yeah, you have partly answered. I mean, basically, I was mainly looking at the refinery dislocations of Russia and the trade from Venezuela because I mean, I've been listening to the con calls of a few U.S.-listed shipping companies, and they were quite positive on long-term structural tailwinds for the industry across multiple companies which I track.
What is the point they were raising? That more Atlantic crude will come to the east? Is that the point?
The attack on the Russian refineries, that was one point. The Venezuela trade is other point. There were a few more points which I could not fully comprehend because I'm not from the industry, but I got the gist that they were structurally bullish for a medium-term perspective.
The thing is, see, you know, Venezuela, after what happened in January 26th, we are seeing, you know, some of that trade was sanctioned and there were a lot of restrictions on that country, and a lot of that oil was going, you know, to China and other places. That Americans have taken control of those oil supplies, a large part of that Venezuelan crude is now available in the international market. That's a long-haul trade because largely the East is the countries that are increasing their demand for oil. Most of that oil goes long-haul, you know, from Venezuela East.
If you are talking about Russia, you know what's happened on the crude trade, where all that crude that was going short-haul from Russia to Europe is now coming East, either India or China or the Southeast Asian nations. That's a longer haul rate. What's happening on the refinery capacity in Russia? You know, recently we have seen increase in the amount of drone attacks by the Ukrainians on Russian refineries. Actually what we have seen is Russia reduce the export of products from that region.
If there is a deficit of refined oil, that has to be supplemented by some other countries. This refined product used to actually go to Europe which for many years has now moved away to other countries like in Africa and Asia. That has to be supplied by other countries. Refining capacity has largely grown in Asia, one can assume that compared to 2022, maybe there's slightly more shorter haul trades filling up those gaps.
It's not quite a structural story. It just has happened. The refineries are down, there is a shortage of that diesel export from Russia, which has to be made up by other refineries. That is not structural at all. It is a temporary phase. We don't know if those refineries are out of action forever. If they're out of action forever, then it's structural. For now, it just seems that they're out of action temporarily.
The call is whether, like I said earlier on in this question, it depends if the Russian war ends, then it may not be structural if the sanctions are lifted. Affected. It depends on how the Strait develops, because if that opens up, then again, a large percentage of the global refining capacity is in the Middle East, which today is not really available largely to the world, which will open up again. These, right now we are seeing the dislocations and the way the trade patterns are, whether it returns back to normal, how much it returns back to normal, that we'll have to see if these incidences resolve itself and in what form they resolve itself.
Sir, are you seeing any early signs of El Niño impact on Suez Canal crossings?
Not in not Suez Canal. The Panama Canal, while it's not been a large impact, we have seen certain water levels starting to drop off.
And the number of transits actually being restricted because of that in the Panama Canal. The Suez Canal has not had this problem, has never had this problem.
Yeah, it's mainly a Panama Canal phenomenon.
Okay, if this phenomenon develops, that will be basically, again, a benefit for the shipping industry in terms of the freight rates, right?
Mainly for LPG because LPG is very largely dependent on the Panama Canal. We'll also have to see how this affects on the dry bulk trade because of crops. It can affect us, it can cause droughts in certain regions, and therefore the crop yields can fall. Then we'll have to again see which nations get affected by that and how the crop yields get affected accordingly.
Do you keep track of the strategic petroleum reserves of different countries? If you do, then what is your assessment of the crude demand? If not immediate, then maybe six months down the line? What is your assessment? Can it support crude demand?
You mean whether the inventories can support it?
Yes. Because there have been reports of a large inventory drawdowns, right? Yes, you can tell me your assessment.
Yeah, we basically, you know, the data is somewhat available. You know, we have seen in the past few years China build up one of the largest reserves of oil. How much they have exactly drawn down during these last three, four months, they haven't, you know, actually declared. We have to make a, you know, certain amount of guess of how much oil has been drawn down. One other, you know, in the U.S. they do publish the data, so we know that the SPRs, you know, they used to be at 750 million barrels, they had fallen to about 450 million barrels before this Iran war, and now they're down to, you know, about 300-odd million.
They are one of the lowest they have been, although America has changed its, you know, it used to be a heavily oil-importing nation. It no longer is. It is somewhat self-sufficient in oil. Now whether they want to restock their balances, we'll have to see. I think the larger concern is that, you know, there are certain nations that import oil, but that does not mean that the stocks are in those nations, which means that considering that there have been so many months without a large supply of oil.
It will strain a lot of supplies. We don't have full information of how tight those supplies will be, but, you know, the longer the war draws down, there has to be a limit at which, you know, nations will come to a limit where, you know, they cannot just rely on inventory, and they may have to then start securing barrels from those who are producing, and that can have an impact.
Okay, sir, I have three more questions, I'll come back in the queue, just to see if anyone else is there in the queue. Fine, I'll just come back here. Thank you.
Thank you. Our next question is a text question from Mehul Mehta, an individual investor. What is our treasury strategy? Do we still hold cash in U.S. Treasuries or diversify to earn better returns?
Yeah, I should clarify, we don't hold any cash in U.S. Treasuries. Our money sits in the bank. We have some dollar balances which just sit in the bank. Our rupee balances are invested in debt funds or bank deposits typically. We don't have any exposure to U.S. Treasuries.
Thank you. The next is a text question from Arun Viswas, an individual investor. The rate fluctuation we have seen in the last quarter or the kind of sudden demand spike has been seen in the last quarter. Is similar demand and fluctuation exist in present time as well, or intensity has been reduced a little bit?
I think, you know, rates continue to fluctuate quite a bit. Now, you know, you can always question the degree of that fluctuation, but that would be difficult to comment on. We have to also see how this war develops because, you know, that could lead to more volatility, positive or negative, we will have to see.
Thank you. The next is an audio question, a follow-up from Rajesh Jain, an individual investor. Please go ahead.
Yeah, thanks. While the order book is increasing, what is your assessment on the delivery of the new ships? Are they likely to be on time, or do you think they could be delayed by six months or one year?
I think six months to one year is a very long delay. I think it's, I think broadly they should be delivered on time.
Yeah, there's no reason to believe that they would be delayed.
Okay, understood. In the past cycle highs, let's say the 2007-2008 cycle high, when the cycle started cooling off, how much used to be the volatility in asset prices in a quarter? Was it around 10%-15% drawdown in a quarter, or was it much higher in the previous cycle high?
Yeah, we've had, during the dry bulk cycle, I just recall this because we actually took an impairment during the dry bulk cycle, in the middle of the cycle, between beginning of 2005 and end of 2005 calendar year, I think we had a 15%-20% drawdown over a period of three quarters. This was between March 2005 and December 2005. We had a 20% type drop in the prices, which we had in this cycle also.
We took an impairment in March 2025 for vessels which we bought in between May and, yeah, between end of 2023 and middle of 2024. We actually took an impairment on some of those ships because the prices dropped by 20%. In that period, in the middle of, you know, a very hot market. Obviously you can have soft patches in that market as well. That happens. Ship prices do a lot of that.
Okay. Have your ships been taking any routes from Hormuz and Bab-al-Mandab Strait, or have you been avoiding?
No, we don't go through the Strait of Hormuz. After our ships came out, we have not gone into that area.
Okay, fine. My last suggestion is basically on the very first point. It's just a suggestion to seriously introspect adding at least one to two ships every quarter using incremental cash flows. You know, in a year time, you can end up having six to eight more ships while still preserving your, you know, your cash war chest. That will give you the best of both the worlds. I mean, my suggestion to seriously think about it.
Yes, you know, it is a fair point. We will consider it.
Okay, thank you.
Thank you. Participants, to ask a question, you may click on the raise hand icon or the Q&A tab to ask a question, to join the queue. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone, for attending this call. As always, the transcript will be up on our website and on the stock exchange website. For any queries, please feel free. We have the email ID at the end of our presentation, and you can drop us any questions that you have. Thank you.
Thank you. On behalf of The Great Eastern Shipping Company, that concludes this conference call. Thank you all for joining us. You may now disconnect your lines.