Welcome to today's Pacific Basin 2022 First Quarter Trading Update Call. I'm pleased to present Chief Executive Officer, Mr. Martin Fruergaard. For the first part of this call, all participants will be in listen only mode, and afterward there'll be a question-and-answer section. Mr. Fruergaard, please begin.
Yeah, thank you. Welcome, ladies and gentlemen, and thank you for attending Pacific Basin's First Quarter Trading Update Call. My name is Martin Fruergaard. I'm Chief Executive Officer of the company, and I'm joined by our CFO, Peter Schulz. Please turn to slide 2. The minor bulk freight market in the first quarter of 2022 was significantly stronger than the same period last year, driven by strong supply and demand fundamentals. Index spot rates for Handysize and Supramax ships averaged 20,550 and 23,900 net per day, respectively, in the first quarter of 2022, representing a 47% and 51% increase, respectively, compared to the same period in 2021. It was overall a good quarter despite increasing economic and geopolitical uncertainties, but still with minor bulk demand up, driven predominantly by loading of construction materials, cement clinker, and aggregates.
Going forward, we believe growth in minor bulk loadings will continue to support rates despite normalizing global economic growth, war in the Ukraine, and COVID-related uncertainty in China. Please turn to slide 3. Total minor bulk loadings grew approximately 12% in the first quarter of 2022 compared to the same period last year. Construction materials were the main driver, as I said, in particular cement clinker and aggregates, which are up 19% year-over-year. We believe increased global infrastructure spending and some relaxation of Chinese domestic property construction curbs will be supportive of minor bulk demand for the remainder of 2022. Reduced Black Sea grain exports in March contributed to lower year-to-date grain loadings of 3% compared to the first quarter of last year, as both Ukrainian and Russian exports have been disrupted.
Expectations are for a significant reduction of Black Sea grain export in 2022. Some of these lost volumes will be replaced by other producers, most notably the United States, Argentina, Brazil, and Australia, as high grain prices will incentivize farmers around the world to increase planting for export, with these volumes benefiting overall ton-mile demand. The disruption is unfortunately also driving global food security concerns, especially in China, which could further increase seaborne trade. The South American grain exports are now picking up, which we expect will support dry bulk demand in the second quarter. Coal volumes in the first quarter of 2022 decreased 1% compared to the same period in 2021. January coal loading decreased 14%, largely due to Indonesia's coal export ban.
Since the ban was lifted, we have seen a significant increase in inquiries, as well as increased ton-mile impact from higher demand from countries in Europe, which we expect will source more non-Russian coal throughout 2022. Iron ore volumes declined 3% in the first quarter of 2022 compared to the same period last year, mainly impacting the earnings of the Capesize vessels. The decline was due to seasonal weather impacting mining operations from key producers in Brazil and Australia, as well as Chinese New Year holidays and emission control during the Beijing Olympics. 2022 Chinese steel production is expected to remain within 2021 levels, and we expect Chinese steel output to rebound in the second quarter when output cuts and are expected to be eased in Northern China and the typical strong demand season begins.
Please turn to slide four. Our core business generated average Handysize and Supramax daily time charter equivalent earnings of $23,800 and $32,510 net per day in the first quarter, representing an increase of 117% and 122% compared to the first quarter of 2021 respectively. Our earnings benefited from a very high first quarter employment cover when entering 2022, in particular for our Supramax vessels. The decision to maximize first quarter coverage was made during the strong market in the fourth quarter of 2021 in the expectations of a usually seasonal weaker first quarter market.
For the second quarter of 2022, we have covered 75% and 92% of our core vessel days as at $23,970 and $31,250 net per day for Handysize and Supramax respectively. So far, 26% and 35% of our contracted Handysize and Supramax days in the second half of 2022 are covered at around $16,440 and $21,519 net per day respectively. The cover for the second half of the year comprises a higher portion of older long-term contracts, which are lower than the current markets.
We have significant opportunity to add cargo fixes and long-term contracts to our remaining 2022 book at rates which based on prior years, we would expect to be higher compared to the first quarter, which is normally the weakest quarter in the year, and also because our contract cover contains a relatively large percentage of backhaul contracts, bringing the vessels back to the loading areas. Please turn to slide 5. Both our Handysize and Supramax vessels outperformed the average Handysize and Supramax indexes by 3,260 and 8,610 per day respectively. Our performance continues to benefit from our diverse cargo and customer base and the close customer interactions facilitated by our extensive global office network.
Now turning to our operating activity, which in the first quarter generated a positive margin of $3,320 net per day over 5,160 operating days. Operating activity margins remain high, and we continue to see opportunities in this strong yet volatile rates environment to generate further positive earnings. This is a strong market outperformance by Pacific Basin in a volatile global environment, and it is again a testament to the great commercial acumen and operational excellence of our organization, both ashore and at sea. Please turn to slide 6. Our vessel purchasing has slowed in recent months as asset prices approached historical highs, and we expect our vessel purchasing activity to be reduced compared to last year. During the first quarter of 2022, we sold 4 of our older, smaller Handysize ships.
Secondhand sales price development for Handysize ships that are 20 years or more of age have outperformed younger ships. By selling these smaller, older Handysize ships crystallizes value and further optimizes our fleet. Our long-term growth and fleet renewal strategy continues unchanged. Please turn to slide 7. Despite strong earnings and healthy balance sheet for most dry bulk owners, we expect that the new ship ordering, in particular for Handysize and Supramax ships, will remain restrained, discouraged by uncertainty about the future fuels and vessel design and technology that will be required to meet coming decarbonization regulations. According to Clarksons Research, only 36 dry bulk vessels with a total of 2.8 million deadweight have been ordered year to date, a reduction of 70% and 74% respectively compared to the same period in 2021.
The overall dry bulk order book is currently 6.6%, representing a reduction of 0.4 percentage points since the beginning of the year, as deliveries has outpaced new ordering. In addition to a strengthening order book and lower future deliveries, we expect scrapping to increase in coming years as IMO fuel efficiency rules will encourage owners to phase out older, less efficient ships. Please turn to slide 8. Clarksons Research estimates dry bulk net fleet growth of 2.2% in 2022 and 0.4% in 2023, with scrapping of 0.8% in 2022 and 2.3% in 2023. We believe long-term scrapping in dry bulk will increase due to tightening environmental regulation.
If current earning levels continue in 2023, we might consider Clarksons Research scrapping estimate a little on the optimistic side, but we see higher scrapping from 2024 onwards, driven by tightening environmental regulations. Please turn to slide 9. We continue to prioritize the quality of our service and the safety and wellbeing of our ship's crew. COVID restrictions still create inefficiencies and complications with the repatriation of some of our seafarers and the associated higher costs we described at our annual results presentation. While we commit to only owning and operating zero-emission vessels by 2050, we must also focus our efforts on the current fleet we have as we target to achieve an AER rating of C or better from 2024 onwards.
This will require us to install power reduction devices on approximately 73 of our own ships to comply with the IMO high energy efficiency requirements. I look forward to updating you further as we progress on our decarbonization journey. Please turn to slide 10. First quarter of 2022 has started firmly compared to the same period last year. We expect demand, especially for minor bulk grain and coal in 2022 to remain strong, and we see further ton-mile demand due to change in trade flows and issues of food and energy security. At the same time, the order book is 6.6%, meaning fleet growth in 2022 and beyond is likely to be moderate. Clarksons Research expect 2.4% Handysize and Supramax fleet growth in, for 2022. From 2023 onwards, IMO environmental regulations will further constrain supply through speed reductions.
However, there are a number of risks that we of course monitor. So far, changes in trade flows caused by the very sad conflict in Ukraine have positively impacted ton-mile demand for some commodities. We continue to monitor the impact that the military conflict can have on global growth and grain flows later in the year. We also monitor the COVID situation in China, even though we are positive of the full year 2022 demand outlook in China as policy support focuses on investment in infrastructure, manufacturing and green investments, which all rely on minor bulk commodities. However, despite these risks, we continue to be optimistic about the long-term health of the dry bulk market.
This healthy market, our strong cash generation and limited expected cash, CapEx spending enable us to continue to reward shareholders by returning capital. Ladies and gentlemen, that concludes our trading update presentation. I will now hand over the call to our operators for Q&A.
Thank you, management. We'll now begin our question and answer sections. If you have a question for any of today's speaker, please press zero one on your telephone keypad and you will enter a queue. After you are announced, please ask your question. If you find that your question has been answered before it's your turn to speak, please press zero two to cancel. Once again, zero one on your telephone keypad now to ask a question. Our first question is Parash Jain from HSBC.
Hi. Thank you. Can I go ahead? Hey, Martin, can you hear me?
I can hear you. Please go ahead.
Okay, lovely. Yeah, hi. Good evening. Very strong set of operating statement it seems. Martin, can you help us understand a bit about what sort of seasonality shall we expect this year and how different it is from the usual cycle, given probably the impact of loss of cargo, grain cargo from Ukraine, some of the loss of volume from Russia, partially offset by ton-mile, at the same time, slower operating activities, probably at least in the first half or second quarter in China. When we put this together, does it seem like this, in the second quarter could be a softer quarter in terms of demand growth versus like the first quarter or the second half of this year? Any color on that, probably would be very, very helpful. Thank you.
Yes. Thank you, Parash. It's of course a very good question. There's of course a little bit of uncertainties in the market. I would still say that the development we've seen so far this year is actually sort of strong as it always is. You know, you have a weaker start to the year that is picking up and actually is quite normal that in April you also see the market coming down a little bit, which it has actually done, and now it's actually picking up a little bit. We see actually the FFAs for the future is now coming, especially for the Handysizes and the Supramaxes, is actually increasing at the moment.
If the year will follow the usual curve, we will actually see a sort of improving market until end of the year from now on. Of course, as you mentioned, it is a little bit of an unusual year. I think we also, you know, in all fairness, sit and look a little bit at what will happen. You did mention second quarter. I'm actually not so worried about second quarter. If any uncertainty in our market, I think it's in the second half when usually you have the grain coming out of Russia and Ukraine. Of course we sit and look at the war. Very sad to look at, but also how long will it actually last for?
On the other hand, we also just have to say that what's happening at the moment is that much of these commodities they have to be shipped from further distance away, so we have more ton-miles at the moment. We also see the coal into Europe, who imports 40 million tons out of Russia, will ban that as we understand it. They will have to find different ways to get it. The same with Japan in the year who has 20 million tons out of Russia. There's a lot of things happening that actually also you know in these unfortunate circumstances actually could be quite positive for our markets.
I must also say it's a little bit too early to judge exactly the consequences of the Ukraine situation. At the moment
Yeah, no.
We are actually quite positive about the market.
Okay, lovely. Just one more thing, if we, I mean, just so that I understand clearly, can you talk a bit about the backhaul cargo or the cargo that you have contracted last year are up for renewal. Will they be up for renewal sometime in second quarter? What percentage, is it still like 15%-20% of overall volume remains in longer term? Do most of them renew around this time? Thank you.
Yeah. We mentioned that for second half, you know, if we say first quarter is over and second quarter we have, I think we have 92% cover-
Yeah
75%. That is already done to a certain extent. It's the second half of the year we are looking at. There we have 35% cover on the supers and 26 on the Handysize. Actually on the Handysize, probably 60% of it is what we call backhaul. That's actually voyages bringing us down to the loading areas. On the supers, it's 50% of the cover. That is actually what we call the backhaul voyages. You can say the rates might look a little bit low. Some of it is also because it's older contracts, but it's also mainly because it's backhaul.
Backhaul
Voyages with an off-hire when you get into the loading areas. We do see at the moment the uncertainties, we also see that you also asked about. We also see that with our customers. I think the high oil price as well, you know, the ton, the US dollar per ton for the contracts is quite high because the oil price is also so high, the bunker price is high. There's a little bit of reluctance in the market to actually come out with the longer term contracts. We do a little bit, but I think there's a little bit of wait and see at the moment also from our customers.
It is also for them a very high level also driven by the high oil price and high bunker price. So some are coming, and we are extending some contracts. It's not easy to go out and take a lot of long-term contracts at the moment, especially if you wanna keep a good level, of course.
Very helpful. Thank you so much, Martin, and have a lovely day.
Next question is Karen Li from J.P. Morgan.
Hello, Martin. Hey, can you hear me?
Absolutely.
Hi. I have a few question. The first is regarding, you mentioned in the presentation that the grains, in first quarter, the loading volumes down 3%. That is due to the conflict between Russia and Ukraine. Can I understand a little bit better why exactly causing, you know, the disruption from this crisis? As we know that the grain harvesting season for Russia and Ukraine should be in third quarter. With regard to Pacific Basin, I think management in another call has mentioned, our exposure, you know, to that trade route is probably less than 3%.
Do we expect to benefit, as I think if this conflict continue into a longer period of time, say like second half or next year, there will be of course the rerouting of trade route? Do we see that as I think beneficial for us or net negative? That is the first question.
Yeah. There's of course grain and corn being exported out of Russia and Ukraine all year, you know, from storage. Of course you're right that the main season starts the second half of the year or into third quarter. That's one of the issues as well in Ukraine, is that it's impossible for them to get it to the port. Of course, the port is closed at the moment. You're right that the real volumes of course is after the harvest, later in the year. That's of course also what we look at. You know, it already has an impact on the export volumes.
You are correct that for Pacific Basin, the trade into Ukraine and Russia has been quite limited. Today we are not doing any business in and out of Russia and of course not in and out of Ukraine. Indirectly of course it's fairly big volumes of especially grain of Russia and Ukraine. The question is of course if the conflict and the war continues, will the world be able to replace these volumes from other places?
The thing we hear at the moment is that everybody else is of course planting more wheat and corn to sort of in the expectation that they have to replenish or they have to have a higher harvest other places to in order to supply the world with these commodities. I also hear one of the issues with that is that the cost of fertilizer has also gone up, because fertilizer is also exported out of Russia and Ukraine, and that's of course also missing at the moment. It is hard to predict exactly what's gonna happen. I think it's fair to say that the world will need this corn and wheat, and they will have to try and find it from other places.
These other places will be further away than from Ukraine and Russia. There will be more ton-mile for shipping. Unfortunately, in these circumstances, it's actually good for shipping even though it's a terrible situation in Ukraine.
Yeah. Got it. Okay, the second question is kind of related to Russia-Ukraine crisis as well. We understand the seafarers coming from Russia and Ukraine actually form a pretty large proportion of the seafarers globally. Can you actually share some update with regard to impact on Pacific Basin on that front, coming either due to I think these restrictions or the China situation, as we understand you know mobility curbs, quarantine requirements and so on, making other crew changes nearly impossible.
Yeah. First of all, I'd say the real impact is actually on the well-being of our crew. This is, you know, being Chinese and having to change to and from the ships is a terrible situation at the moment with the quarantine rules around the world. Similar of course with our crew. We do also have Russians and Ukrainians on board our ships, and that's really tough on them as well. I actually feel a bit sorry for these guys.
I would say actually that is actually where I think, you know, the health, you know, the well-being and the mindset of these guys who are actually sort of so important for us for the safety of the service we provide, that that's probably my biggest concern at the moment. There is of course a cost and there is a sort of a practical arrangement thing in these things, which of course is a little bit of a pain. I would say cost-wise, it is there has been, we also mentioned that for last year, the full year result, we did mention that costs have come up a little bit, but in the bigger picture it's not much.
I must say, you know, we do have Chinese, Filipino, and Indian crew and officers. I must say especially for our Chinese colleagues on the ships, it's really, really tough. With the crew changes, it's nearly impossible sometimes to send people home and get them to the ships. We are managing and I think our cost is under control. Of course, the airfares and the hotel quarantine rules and time of course have increased our costs somewhat. We hope this will disappear soon.
Got it. Okay, the last question is regarding our fleet strategy. I think you mentioned that we will be upscaling increasing the share of Ultramax. Can you share a bit more detail on that front? Do we see Ultramax as a percentage to be a more meaningful proportion of our fleet, you know, in coming years?
Yeah. I think we would like to have a little bit more balance in our fleet so we have, you know, probably as many, at least as many Ultramaxes as we have, Handysizes. I think we also have to admit that when we look over time, we can see that the larger ships, they have actually outperformed the smaller ships on the earnings. Of course that's also quite attractive to us. We still have to remember that the Handysizes is a very sort of important part of Pacific Basin service to our customers. I think for us it's not a question maybe of growing that, but we would like to maintain the size but also renew the fleet somewhat.
That's also why we're selling some of the older ones, and we'll see how to replace them over time. Our strategy is actually to grow our Ultramax fleet, maintain our Handysizes, but renew the fleets as we go along. That strategy has not changed. The only thing that has changed now is of course that the asset prices have gone up, we're probably a bit more reluctant to commit to the second-hand prices or buying at the current second-hand prices. There's not many opportunities of good ships actually out there. We are sitting looking a little bit at the market and see how that develops.
When we look at the fleet mix, Supramax, which includes Ultramax, roughly accounts for half of our fleet capacity in terms of number of vessels. For Supramax, that category, how much of the Ultramax ultimately will be accounting for percentage-wise?
What we said is that we'd like to grow that part of it, and I think our short-term ambitions would to have balance in it. We have about a little less than 100 Handysizes. You know, I think over time we would hope to be the owner of a similar size of the Ultramaxes as we go along. That will take some time.
Got it. Can I just, quickly check how many Ultramax we have? Sorry if you have mentioned about that.
I probably need you, Peter, to find the slide.
Your Supramax.
Sorry, Peter. You're, I think, at the moment in terms of Ultramaxes, I think we have about 13 Ultramaxes.
Okay. 13 out of 126 in total.
Out of the 121 ships owned in total.
Oh, okay. I'm looking at slide 25. Not sure whether I'm looking at correctly.
Yeah. Yeah.
Ultramax.
Of course there's like three sizes, so yeah.
Yeah.
Okay. 13 out of 126.
No, 13 out of 122.
Oh, 122. Okay.
Yeah.
Yeah.
Yeah.
Right. Oh, okay. All the owned vessel. I got it. Okay, I was referring to the total vessel for Supramax category.
Yeah.
I understand what you mean now.
Oh, yeah, sorry. I see what you mean. Yeah. Got it. Sorry. We think of the owned vessels.
That's okay. Sorry. We're looking at different line.
Yeah. Thanks, Karen.
We look, I think we look horizontally.
Karen, we as you see on page 25, we have balance in the total. But when you look at the owning side, that's what I'm looking at as well, right? When we talk about our asset strategy, we talk a lot about our owning side of it. There we want to own more Supramax, Ultramax. We wanna maintain our Handysize fleet, but renew it. That's the 132 ships it says here, where 79 are Handysizes and 42 are Supramaxes.
Got it. Okay.
But, but, but-
How full are you guys on that? Oh, sorry.
Just one last thing, Karen, on that Supramax.
Sure.
Remember, your 126 number includes the short-term ships, and that goes up and down every day.
Okay.
as we take ships and redeliver.
Every day.
So, so-
Okay.
That number moves all the time. Yeah. Sorry.
Got it. Okay. Got it.
Our website has the latest fleet list for you.
Okay. All right. Thank you.
Thank you, Karen.
Next question is Alan Choi, Individual.
Oh, hi, everyone. Can I start now?
Go ahead, Alan.
Okay. Hi. Hi, Martin. Hi, Peter. Congratulations on a very strong quarter again. I have two questions. My first question maybe is for Peter. With the expectation of rising interest rates, is there some work being done on the debt carried on the company's book to move towards more of a fixed rate category? If you don't mind sharing if any kind of percentages from floating to fixed, that would be helpful. Then my second question is, do you have a view on kind of any future industry consolidation for dry bulk as a whole? That's it, two questions. Thank you.
Okay. Thank you. Thank you, Alan. We actually have very, very limited interest rate exposure. The majority of our facilities are either already on a fixed rate or they're hedged with interest rate hedges. So there's a fairly small proportion that is open. There's a little bit more information about the exact percentages in the annual results announcement. So I'll urge you to have a look at that. But if you also add the amount of cash we have on the balance sheet, which acts sort of as a natural hedge, because as interest rates go up, we can make a little bit more return on that cash. We're actually making more money when interest rates go up.
We actually have a positive correlation with interest rates, which is a little bit unusual for a shipping company. That's a reflection of the hedges that we have and our strong balance sheet. I'll hand you over to Martin on the question of consolidation.
Yeah. We of course always look at the opportunities we see in the market. I think it's hopefully fair to say, and hopefully it doesn't sound too arrogant, but Pacific Basin has actually sort of done quite well, sort of on the top line, outperforming the market both on our supers and the Handysizes. I think we are market leader on that part. I actually think on the cost base, we're also quite doing quite well, probably also market leader on that side. Should we merge or consolidate with somebody, it should be somebody who brings us some value. We do have 260 ships that we control today. Do we believe that being a lot bigger will give us a lot?
It might give us some, but I'm not so sure. We quite sort of lean in the way we have everything in-house. We're quite lean in our focus on minor bulk, Handysizes, supers and ultras. Should we consolidate with somebody, it should be somebody who can bring us some value to what we do today. I'm sure there's somebody out there who of course you know do quite well, and they could help us and give us something. It's not that clear that any consolidation actually makes sense. I think for us it's also very much focusing on what we do. We have a good market at the moment. Let's harvest. Let's make sure we do what is right.
Let's not complicate our business by taking in consolidation or mergers and so on, because it will complicate things, and it will take focus away from what is the core of what we do. That is actually delivering good service to our customers, making sure we do it safely, and making sure that we keep our costs down and maximize our top line. I think we do quite well on that at the moment, and I think that is where focus should be at the moment. But that doesn't mean that you know we do follow the opportunities in the market. We're always open for discussions. But we will be very careful before we do anything. We wanna make sure that we maintain the good things that Pacific Basin has developed over many years.
I hope that is a fair reply and not too arrogant.
No, that's good. Thank you.
Our next question is Johnson Wan from Jefferies.
Yeah. Hi. Hi, thanks very much for your time. I have a few questions. The first is related to the fleet size, right? You mentioned that you sold 4 of the vessels year to date of the older vessels. Two parts of this. The first is how many more of these do you plan to sell? Second part, does that mean that your capacity for the Handysize for this year would then be lower on a year-on-year basis? Because if I look at your long-term charter rate, it's roughly flat on a year-on-year basis. If you sold 4 of these vessels, does that mean that your capacity will fall into this year and then into next year, your long-term charter falls again, right?
Does that mean that you'll have two years where what you'll get is that your revenue days or capacity will be shrinking? Okay, that's the first question. Second question is, if I look at your first quarter update compared to last year, it seems as if you have a higher covered percentage, right, for the Supramax. Is there a reason why it's a higher percentage? Third question I would say is could you give us what the scrubber premium was for the Supramax? I think that's all I have for now.
Let's see if I can remember those. If we first take the charter party, it is correct that, you know, last year we bought 12 ships, and I think we sold 4. This year so far we have received delivery of 1 Ultramax, and we have sold 4 ships. Those 4 ships has not been delivered to the new owners yet. That will be done here within April, May, and June. You are absolutely correct that when they leave the fleet, of course we'll have less ships in the fleet. On this of course we take in short-term charter ships in or longer term charter ships in.
Of course if we do that will of course be at a rate that's somewhat higher than on the cost of our own core fleet. You are correct. If we keep selling we'll have less ships in the market, unless we do something else. Our ambition is still to buy if the right opportunities come up. At the moment we at least on our older ships, we have seen that the asset prices have gone up 200% since early last year. So that's actually, you know, three times up on the asset prices.
Of course we do the calculations, you know, looking at, you know, what is the future expected market, and we compare it to the market price we can get on the ship now. We have decided that some of these ships, especially those who are due for drydock, and also those that we know might have a little bit of issue with the upcoming IMO regulation next year, that maybe it's time to sell those ships to other owners who are probably better at handling those ships in the changing market. That's the driver of it. Of course we will still be there to grow our fleet when we find the right opportunities. We also feel that part of our business is selling at the right time.
We feel it's the time to sell some of the ships. I'm fairly sure we'll sell a little bit more. We have a few others of ships that is close to the 20-year age and we will sort of look at those as we go along the market. The second question was, just remind me again. Well, I can take the scrubber part. Yes, the scrubber, we usually say $1,200 a day. We have 32 vessels, Supramaxes, who has scrubbers on board. Normally it's $1,200. It is actually at the moment somewhat more than $1,200 due to the high oil price.
It has driven up and the spread has also increased. At the moment it's actually a better deal than $1,200 per day.
Yeah. My second question was.
The question I remember. Yeah. That was about the Supermaxes versus the Handysize.
Yeah.
I think there's a little bit of difference in the market. There is a difference in how the market works for the Handysize versus the Supramaxes and the Ultramax, where the Handysize are a little bit more industrial to a certain extent, and the other ones is a little bit more trading part of it. I think it's just possible, has just been possible on the larger ones to take more cover at better rates. We thought that was a good thing to do. Remember that actually the today the spot market is pretty much the same for Handysize and for Ultramax. Maybe we have felt a little bit on the Handysize that we less enjoy the spot market and not take too much cover.
There's no sort of, you know, new strategy in it at the moment.
Maybe a follow-up question. The China lockdown, COVID lockdown in Shanghai et cetera, right, are you seeing an impact on volumes in April? Because I see that your first quarter, right, was up 12% in terms of minor bulk. Have you seen any, like, is there a big falloff so far in, like, for the first two weeks of April?
I have not seen that, and I have not heard that that has had a major impact on our business so far. I think it has a big impact on the container business at the moment. I'm sure it has an impact on the minor bulk as well. I have not, for Pacific Basin, heard that this has a huge impact on us at the moment. I don't know, Peter, if you have a different view.
No, I think it has maybe impacted the Pacific market, maybe a little bit negative when it comes to sentiments. You know, we had a very strong Pacific market for a while and a relatively weak Atlantic market that has rebalanced in recent weeks. I think the sort of lockdown concerns is partly responsible for that. We also think that, you know, at some point when they get out of these lockdowns, there will be a great need, and we're already hearing it from, you know, the prime minister of China, to stimulate the economy to reach the growth targets, which I think this year particularly are very important to China. You know, there's a lot of talk about further infrastructure investments.
There's a lot of push to keep the logistics chains open.
There is talk of, you know, reducing property curbs to local governments, you know, taking its own initiative on these things. You know, whenever you close something down, you know, you tend to have the pendulum effect, just like we had after the lockdowns in the West. If you couple that with a bit of stimulus to get back on track, you know, this could provide some support for the latter half of the year. It all depends on how this COVID fight evolves, right? It's still early days I think for China to kinda grapple with this.
We haven't seen any sort of fall-off in loadings in the last couple of weeks. That hasn't been the case.
Okay. That's great. Thanks very much for spending time answering my questions. Great start to the year. Let it continue.
Yeah. Hopefully. Thank you.
Our next question is [guess] .
Martin, I understand there's about 500 bulk carriers waiting off PRC ports at the moment. Clearly, that's been good for demand at the moment. Will there be a significant reduction in demand when China gets back to normal?
I'm not sure that these 500 ships are. I think when they say dry cargo, I also think they're talking about container ships. That's at least the opinion or the feeling that I have. You know, COVID is nothing new in China, and the lockdowns in China has actually been ongoing for a period of time. I don't sit with the feeling to say that this will disrupt the market in any way when things is gearing up for the dry cargo. Remember that for Pacific Basin, loading and discharge in China is about 2% of our loading and discharge operations around the world.
For minor bulk, of course, China is directly and indirectly important, but maybe less so than it is for Capesizes and other ships. We don't sit and fret it's a big threat. We actually do feel that when China opens up again, it actually will mean increased steel production, and that actually might be better for our market than it is today. I don't think the 500 ships are pure dry cargo ships in the sense of the bulk carriers as us. I think it's also container ships we're talking about.
Thank you. Also, with your sort of selling of the ships, obviously those haven't been received yet. I think you said they were being delivered from April through June. Your strong cash flow at the moment, when do you think Pacific Basin will be debt-free on a net basis? I'm not suggesting you'll pay off all your debts, but when would you be net cash?
We're already net cash.
Already net cash. Okay. Just a final concept on the dividend. I remember asking you, Peter, last time about quarterly dividends. One sort of halfway house to that, I just feel it's a little bit unwieldy having such a large percentage as a final dividend. I just wanted to sow the thought for you that when you announce your final results, you could pay half of whatever you announce as a second interim dividend at the time of your final results in February, and then perhaps the balance as a final dividend in May, which would perhaps just make trading a little bit more even in the shares of the company.
Yeah. No, it's something to think about. We haven't changed our methodology of paying dividends or how we report as well. I mean, we don't do a full P&L for the first and the third quarter as well, right? We haven't changed that for some time. No, we do take on board any suggestions. We do know many shareholders would like a more distributed dividend stream, and we take that on board. We always have discussions on how we can improve these kind of things.
Yeah. I remember last time you said because you're only doing a trading update, you didn't want the quarterly dividend, and I think I agree with that. This one, as there's obviously quite a long time between getting accounts out, getting AGMs to approve things, that might just give between February and May, you've still got a few months, then that might just spread it out a bit. I just
Yeah.
That's that for you to consider. Thank you.
Yeah.
Congratulations. Good results.
Thank you.
Seeing there are currently no more questions, I'll pass back the time to Mr. Fruergaard. Thank you.
Thank you. Yeah, I'd like to thank you again for joining us today and for your continued support to Pacific Basin. If you have any further questions, please contact Peter Budd from our investor relations department. Thank you again and goodbye.
This concludes our conference call. Thank you all for attending.