Ladies and gentlemen, welcome to the 2020 Bulkers Q3 conference call. For the first part of this call, all participants are in a listen-only mode. Afterwards, there'll be a question and answer session. To ask a question, please press star five on your telephone keypad. I will now hand it over to the speakers. Please begin.
Thank you, operator. Welcome everyone to the third quarter 2022 earnings call for 2020 Bulkers. As usual, I'm also joined here today by our CFO, Vidar Hasund. Before we start the presentation, I'd like to remind you that we will be discussing matters that are forward-looking in nature. These forward-looking assumptions are based on the company's current views with regards to future events, and they're subject to risk and assumptions subject to uncertainties. Actual results may differ materially. With that, I'll move over to the highlights for the quarter. 2020 Bulkers generated a net profit of $7.3 million in the third quarter. We still have an unbroken track record of profitability every quarter since we got our first vessel in operation in Q3 2019.
We again outperformed the Capesize Index during the quarter, and we achieved average time charter equivalent earnings of $25,800 per day compared to the Baltic Capesize Index, which was approximately $13,700 per day during the quarter. This comes from a combination of some fixed charter coverage as well as our vessels' general higher performance than the standard Capesize vessel. For the months of July through September, we announced a total of $0.30 per share in cash distributions. During the quarter, we extended the index link time charter with Koch for Bulk Sandefjord from August 2022 to August 2023. We also converted the index link charter for Bulk São Paulo into fixed rate charter at $16,146 per day gross plus scrubber benefits from October 1st until March 31st, 2023.
On August 9, the company transferred tax domicile from Bermuda to Norway. Over to some key subsequent events. So far in the quarter, we've achieved time charter equivalent earnings of approximately $26,700 per day. Today, we declared a cash distribution of $0.10 per share for the month of October. Lastly, during October, we converted the index-linked charter for Bulk Sandefjord into fixed rate charter at $14,392 per day gross plus $4,500 net for the scrubber for the period from October 19th until March 31st, 2023. With that, I'll leave it over to Vidar.
Thank you, Magnus. 2020 Bulkers reports a net profit of $7.3 million for the third quarter of 2022. Operating profit was $9.7 million, and EBITDA was $12.7 million for the quarter. Earnings per share was $0.33. Revenues were $18.7 million for the third quarter, and the average time charter equivalent rate was approximately $25,800 per day gross. Vessel operating expenses in the third quarter were $4.8 million, and the average operating expenses per ship per day was approximately $6,600, which includes $300 per ship per day in COVID-19 related expenses. G&A for the third quarter was $1 million.
2020 Bulkers charged $0.3 million in management fee to Himalaya Shipping for the third quarter, recorded as operating income in the income statement. Interest expense was $2.3 million in the third quarter. Shareholders' equity was $154.8 million at the end of the quarter. Interest-bearing debt was $225 million at the end of the third quarter, down from $228.7 million at the end of the second quarter, reflecting scheduled repayments. Cash flow from operations was $9.2 million for the third quarter. Cash and cash equivalents were $14.6 million at the end of the quarter. The company declared total cash distributions to shareholders of $0.30 per share for the months of July, August, and September 2022. That completes the financial section.
Now back to you, Magnus.
As you know, 2020 Bulkers has a policy to pay free cash flow to shareholders on a monthly basis. We've now returned free cash flow for 28 consecutive months. That's every month since we had the full fleet delivered. Both our Q3 2022 distribution of $0.30 per share and our year-to-date distribution of $1.18 equals approximately 15% annualized yield on the current share price. Since inception, we've returned 75% of total paid in equity back to shareholders. As you can see from this slide, we have over time shown strong commercial performance relative to the TCE results announced by our public peers who report separate earnings for Capesize and Newcastlemax. Relative to the Capesize Index, we've also outperformed earnings-wise 35 out of 39 months. Now, to have a look at the market.
After a decent start to the year, we have seen unseasonal weakness in the market during Q3 and Q4. We believe this is largely due to the unwinding of fleet inefficiencies and congestions that have been a factor since the beginning of COVID-19. Additionally, there's been a year-over-year contraction in Brazilian export volumes of iron ore, which has had a negative ton-mile effect due to the long traveling distances. Overall though, Capesize ton-miles is up by 1.3% this year in spite of the slowdown in the world economy. We'll have a look at some earnings scenarios and what that would generate in terms of free cash flow.
As you can see from this sensitivity table, which covers November and December of this year, taking into account that we have four ships at fixed rates and four ships at index-linked rates for the rest of the year, we're well positioned to generate free cash flow in the coming months. Moving on to the illustration for next year, we have taken cover of two ships for the first quarter, which is typically a seasonally weak period. With the current chartering book and prevailing fuel spreads, we should be in a position to generate free cash flow as long as the standard Capesize market is above high 7,000s in dollars per day. Our goal is to keep monitoring the market and keep it downside protected while giving away as little optionality as possible for the majority of 2023. Taking a look at the overall market.
For the overall Capesize trade, we actually see that traded volumes are up this year compared to last year while trading distances are down. Comparing these factors shows that overall ton-mile for Capesize is up around 1.3% compared to the same period last year. This is mainly driven by a 32% increase in ton-miles for bauxite. For iron ore, ton-miles are down 1.6%, negatively impacted by the Brazilian exports, and Australian exports are up 1.4%. For the coal trade, ton-miles are down 1.9% year to date. As we showed you on the previous slide, the downturn in the market since Q2 is probably not caused by the lack of volumes. We believe the main explanation for the softness is the unwinding of inefficiencies and congestions that occurred following the outbreak of COVID.
As you can see from this slide, the share of the Capesize fleet in port has dropped from an all-time high of 34% in April, down to the pre-COVID levels, around 26% that we see today. On a more positive note, we think this unwinding is now largely behind us. We don't see increased inefficiency as a significant risk to the market from here on. Now taking a deeper look at the steel market. Global steel production ex-China was down 6.9% for the period of January through September. Following four months of sharp year-over-year declines earlier in the year, September actually showed a 4% increase in production compared to September 2021. Chinese steel production for January through September fell 3% year-over-year. Following seven months of year-over-year declines, Chinese steel production increased in August and September by 1% and 18% respectively.
As a consequence of the continued weakness in the Chinese economy, China has continued to increase infrastructure stimulus by increasing and bringing forward quotas for issuance of local special infrastructure bonds. As you can see, infrastructure and manufacturing fixed asset investments have increased on a year-over-year basis so far in 2022, while real estate fixed asset investments are still lagging. Over to a closer look at iron ore market. Chinese iron ore imports were down 1.2% for the period of January through October 2022 compared to the previous year. Imports have, however, picked up during the last months, with September and October imports up 4% and 5% year-over-year respectively.
Chinese iron ore port inventories currently stand at 121 million tons compared to 135 million tons a year ago, also down from a peak of 160 million tons in February. Lastly, we'll have a look at the supply side again, where the order books keep shrinking and is now down to 5.8% of the existing fleet on order for the Capesize segment. This, in combination with Chinese yards essentially having very little capacity for new orders between now and the end of 2025, gives us great visibility that we're facing three years with low and declining fleet growth. Deliveries of Capesize will drop to approximately 10 million tons this year, deadweight tons, from 18 last year, and 25 in 2020.
The order book for 2023, 2024, and 2025 is very light at 12.5, 6.5, and 1.6 million deadweight tons respectively. Scrapping year to date accelerated during September as the market weakened, and is so far at 2.7 million deadweight tons scrapped, which is down from 3.1 million during the same period last year. If the somewhat weaker spot market continues, we would expect to see an uptick in scrapping, particularly given the upcoming environmental regulations we have summarized on the next slide. With that, I'll end the presentation, and I'll open up for questions. Over to you, operator.
Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, please press five star again. We'll have a brief pause while questions are being registered. The first question is from the line of Frode Mørkedal from Clarksons. Please go ahead. Your line will be unmuted.
Yeah, this is Frode for Clarksons. Hello.
Hello.
Hello. I guess we're just a few weeks away from the new regulations coming in here. I see you have a slide on it, but maybe you can just summarize, you know, how you think this will play out on the market balance? I guess it's very little relevance for you or modern fleet, but yeah, curious on the wider implications here.
Yeah. I think, I mean, of course, you're talking about two different regulations, EEXI and CII. EEXI, which is a one-off certification that you have to do, I think will certainly lead to some ships having to effectively reduce their trading speeds through Engine Power Limitation, which essentially caps the RPM. I think it's fair to say that right now, when the market is in a softer spot, although profitable, the speeds are generally lower. I'm not necessarily sure if you will see any reduction compared to the speeds we currently have.
I think as the market tightens up, you will see ships of older, less fuel efficient vintages not being able to increase the speed, which of course takes away some of the slack that is typically there in the market. When it comes to CII, that's assessed annually, and a function of both the emissions but also the trading patterns. I think, as you know, that regulation tightens year by year. I think that will probably not have a major effect in 2023, but it will lead in coming years, combined with the order book to, I think a gradual either speed reduction or in some cases earlier phase out of older tonnage.
I think it's still tough to quantify, but, you know, the effect over the coming years will certainly be positive on the margin, and I think may also be a factor in people's decision on whether to scrap their units or not. I mean, we've seen this year in September when the market was weak, I think we saw a vessel as young as 2004 built that was scrapped, which could of course have something to do with people looking into these regulations and how they will be faring.
Yeah. You know, FFA or the futures are fairly low, but, what do you see in the time charter market for Newcastlemax these days?
No, I mean, it's a very liquid market chartering wise. I think, you know, I would say the last done premiums are a little bit depending on their design of 135-138 range, above Capesize Index plus the scrubber benefit. I think what's interesting is, I can't name any for Newcastlemax simply because I haven't seen any done recently, but we've seen some fixed charters for Capesize done over the last weeks, which have been at a premium to the curve. Not just because the ship is performing better than the curve, but I think that's telling you that this market, which typically is pretty mechanically priced up the curve.
There's been probably a case where charters are looking to take on tonnage and owners are not willing to price based on the curve. I think if anything, I think we've seen some benchmarks that are reflecting slightly more optimistic view than the current FFA curve.
Yeah. Makes sense to me. I guess it's when I look at calendar 2023, I mean, it's just like $12,000 per day or something. To me, at least, overly conservative. Anyway, how would you summarize your dry bulk view now? You know, what are the positives? What are the negatives? You know, what's your overall view?
No, I think the one key message I want to get across is that, as I mentioned, the disappointing market that we've had in Q3 and Q4 relative to the start of the year, it's not based on collapse in volumes. I mean, volumes are actually up this year. It's not driven by iron ore or coal. It's driven by bauxite. But iron ore and coal are kind of down 1.5%-1.9% if you're looking at ton-mile basis.
What really killed the market compared to where we thought it was gonna go was that all these inefficiencies and port congestion that built up during COVID, which frankly we and I think most other players I talk to in the business would know that they would go away sometime, but we didn't expect it to happen as long as China had the zero COVID policy. If you think about it, going from 32%-34% of the fleet, the Capesize fleet in port in April down to the levels of 26% now, that's adding a lot of capacity to the market. That's hurt it. Of course, on the other hand, that's now in the past, and we're at levels which are kind of low to mid-range of what we used to see before COVID.
I think I'm not gonna make a call on China reopening, but I think it will eventually, but not on the timing of it. I think once that happens and we get a bit more volumes going and probably also leading to a bit more congestion, I think we're coming from a firmer base. Of course, the order book, you know, at the risk of sounding like a broken record, it’s never looked better in the history of Capesize. That's not something that's necessarily gonna make you money tomorrow. I think once we come out of this, we're looking at a period with very low and shrinking fleet growth in combination with those environmental regulations you were talking about. Then we'll see.
I mean, it's whether it's just a blip or a trend, but the fact is, as I showed in the presentation, I think we wrote in the report, there's actually been year-on-year pickup now in steel production, both in China and the rest of the world. I think maybe the sort of worst pain is behind us. I think regardless for our company, we're focused on one thing. Remember, we have never lost money for a single quarter since we got our first asset on the water. We cannot guarantee anyone that we'll never do it, but I think we have the tools. We have some coverage now for Q1. We're trying to keep as much optionality as long as possible.
Of course, even at the levels where the FFA curve is now, we can cover one or two ships to take the cash breakeven even further down. It's also generating a pretty decent yield. I think at least we're not in as happy a place market-wise as we thought. The counterpart of that is people are not ordering ships, and that's gonna make the eventual recovery, you know, stronger and longer when it comes. In the meantime, we're just gonna focus on at least creating some free cash flow to reward our shareholders a little bit.
Great. Thanks, Magnus. That's it.
Thank you Frode.
As there are no further questions at this moment, I will now hand it back to the speakers for any closing remarks.
Okay. Well, just say thank you for dialing in, those who did. If you find out you have any questions, after this call, feel free to reach out and we'll speak to you next quarter. Thank you. Bye-bye.