Welcome, everyone, to the Q1 2021 Earnings Conference Call for 2020 Bulkers. As usual, I'm also joined there today by our CFO, Widar Hasson. Before we start the presentation, we would like to remind you that we will be discussing matters that forward looking in nature. These forward looking assumptions are based on the company's current views with regards to future events, and they are subject to risk and assumptions that are subject to uncertainties. Actual results may differ materially.
And with that, I'll move over to the highlights for the quarter. 2020 Bulkers generated a net profit of $5,800,000 in the Q1. This marks our highest quarterly result since we started operations, and we're pleased to deliver our 7th consecutive profitable quarter. That means we've been profitable every quarter following the delivery of our first vessel in Q3 2019. We continue to outperform the Capesize index during Q1 this year, and we achieved average time charter equivalent earnings of $23,900 per day in the quarter.
This compares to Baltic Capesize Index, which was approximately $17,100 per day. For the months of January through March, we announced a total of $0.26 per share in cash distributions. So far this quarter, we've earned approximately 33,000 per day on average across the fleet. And with that, I'll leave it over to Wider.
Thank you, Magnus. 2020 Bulkers reports a profit of $5,800,000 for the Q1 of 2021. Operating profit was $8,200,000 and EBITDA was $11,100,000 for the quarter. Earnings per share was $0.26 Revenues were $17,000,000 in the first quarter and the average time charter equivalent rate was approximately $23,900 per day gross. Vessel operating expenses were $4,100,000 in the first quarter, which is an average of approximately 5,600 dollars per day per vessel.
Vessel operating expenses includes approximately $600 per day per vessel in COVID-nineteen related expenses. 2020 Bulkers had a total of 7 20 operational vessel days in the Q1. G and A for the Q1 was $800,000 Interest expense was $2,400,000 in the 1st quarter, Currently, the company is paying approximately 3.6% in average interest rate on the company's long term debt. Shareholders' equity was $144,500,000 at the end of the quarter, and interest bearing debt decreased from $250,000,000 at the end of the 4th quarter to $246,400,000 at the end of the first quarter, reflecting scheduled repayments. The company reports cash flow from operations of $9,000,000 for the Q1.
Cash and cash equivalents were $20,200,000 at the end of the quarter. The company have declared total cash distributions to shareholders of 0.2 dollars 0.06 per share for the months of January, February March 2021. That completes The financial section and now back to you, Magnus.
Thank you, Wielhard. The Capesize market has had the strongest start to the year in more than 10 years. Year to date, rates are close to 4x higher than what we saw last year, And today's rates are around 4.5x the levels we saw 1 year ago at the same date. At the current rates, Taking into account the premium we are getting on our Newcastle MAX with scrubbers, our index vessels are today earning around $50,000 per day. So what's driving this strength?
Number 1, we're seeing strong volumes out of Brazil, which are up approximately 15% year over year. We're also seeing good volumes out of Australia, which is so far up around 3% compared to last year. The Brazilian volumes are, of It's very important in this context as 1 ton exported from Brazil requires around 3x the vessel capacity of 1 ton exported from Australia. Vale earlier this week reported their Q1 results having produced 68,000,000 tons of iron ore. They're maintaining a guidance with a midpoint of 325,000,000 tonnes for the year, which would imply we should see an uptick in volumes with an average of around 85,000,000 tons per quarter for the remaining quarters this year.
We're also seeing a tightening coal market We knew that yesterday that the National Department of Reform in China has reportedly started directing customs to release more import quotas for the year to boost coal imports in preparation for the summer season. Although capesize spot rates are the strongest seen in the decade, they're still low relative to value of the freight we're carrying. Historically, freight rates from Brazil to China have averaged around 16% of the price of Brazilian iron ore. As an example, if rates were to revert to that average ratio, current iron ore prices should support rates for standard capes size of around $50,000 per day, which would mean that our index linked pistols earn around $65,000 per day, including the scrubber benefit. As you know, 2020 Bulkers' main mission is to give shareholders a good return on their investment through monthly dividends.
As you can see from this sensitivity table, which takes into account the fact that we have 2 ships at fixed rates and 6 ships at index linked rates for the rest of the year, Our dividend potential is significant. We, of course, can't give any guidance on rate expectations, but as a reference, the current FFA curve from May through December implies a potential annual run rate of NOK 26 per share in annual distributions. And the current spot rates, which are higher, would imply a run rate of around NOK 35 per share. We'll now take a look at some of the key market drivers. The Chinese steel industry continues to be the most important demand driver, with China representing 70% of imported iron ore globally.
Chinese steel production for January through March '21 was up 14% compared to the same period in 2020. Although the Chinese government during recent months As imposed restrictions on steel production in certain areas in order to limit pollution, the most recent production data from ESI shows no signs of a slowdown. The data shows that the period between April 10, 2020 showed the highest reading on record. We also see that steel output outside of China has recovered, and we're optimistic in terms of continued strong development given the fiscal stimulus packages that are being announced all the places these days. Again, taking a look more specifically at the iron ore side, We see that Chinese iron ore imports were up 8% year over year for the period January through March 2021, with March showing an increase of 18% compared to March 2020.
In spite of these high imports, inventories are still relatively moderate and currently sit at around 1 month of estimated consumption. Now taking a look at the supply side. We believe Size dynamics in our market are the most attractive seen in more than 30 years. The Capesize order book is around the lowest level seen since the mid-80s And with the current order book at around 5.5% of the existing fleet on the water, fleet growth is set to be low in the years ahead. Capesize ordering was the lowest last year we've seen in 20 years and given the recent massive ordering in the container space, Yards are filling up and there's very little yard capacity available for new orders before 2024.
Scrapping also remained healthy last year even in second half of the year as the market recovered. And also given the strong rates this year, you could have expected scrapping to be less, but we've seen 12 Capesize being scrapped year to date, and we expect that scrapping will remain at a relatively decent level given some of the upcoming environmental regulations that we'll talk a bit more about shortly. We also talked about this on our previous call, but we'd like to go through it once over because we think it will have a major impact on the supply side of shipping in the years ahead. In January 2023, IMO will most likely implement EEXI, and Energy Efficiency Index, which effectively reduces the allowed CO2 emissions from the global shipping fleet. Non compliant ships may comply by applying performance enhancing measures, which typically requires significant investment and in many cases, will not get them into compliance.
The more realistic alternative for most operators with older ships will be to reduce the engine's power output. We also see having looked at the profile of the fleet that a significant part of the Current trading fleets may not be able to comply at all and may have to retire their ships early. We see it as inevitable that the implementation So EXI will reduce the average sailing speed for the fleet, and it will lead to more modern ships being favored by charters. And they should therefore be commanding an earnings premium following the implementation of EEXI. Lastly, I wanted to give a quick summary of what our company looks like and what we believe is the investment case.
We have a fleet of 8 Newcastle MAX vessels with an average age of 1 year. This is the most modern fleet among our listed peers. At today's spot rates, our index linked vessels earn approximately 50,000 per day, which compares to a cash breakeven budget $14,500 per day, including all debt service. The current FFA curve for the rest of 2021 implies time charter equivalent earnings for a scrubber fitted Newcastle MAX of around $40,000 per day. We pay all our free cash flow as monthly dividends.
And in terms of the market, I think we're looking at the most favorable supply side dynamic in more than 30 years. This comes at a time when demand is expected to continue to recover as the world comes out of COVID. And with that, I'll leave over to the operator for questions.
Thank you. Ladies and gentlemen, We'll now begin the question and answer session. And we do have a request from the line of Frode Modykal of Clarksons Securities. Please go ahead.
Yes. Thank you. Hi, Magnus.
Hi, Gilbert.
Yes. On the chartering side of it, you have 2 ships now, 2 out of 8 that are on fixed charters. And I believe you still have The ability to turn those floating charters into fixed bonds, right? So the question is really, Would you consider that in today's market by any chance?
Yes. I think this is, of course, something we look at every day. And it's something that we think is very attractive with our chartering model, the fact that we Can have ships on floating rates. And as you say, we may choose to convert them at times. I think right now, we're very constructive on the market.
Of course, the market is higher than it's been in a long time, If you just simply look at the day rates, however, if you look at where we are, we're typically coming out of what's usually the slow season. So we do expect volumes to be ramping up out of Brazil in the coming months as they typically do this time of year. And also looking at the supply side, most of this year's order book or the most heavy deliveries Came between January April. And we see the pace of deliveries will be lower from there on out. So with all that in mind, I think we still think that Supply demand should be tightening.
And I think, therefore, we haven't converted anything more for the time being. But it's something we're evaluating on a continuous basis. And I guess we did 2 earlier in the year, which We, of course, thought were okay levels, but they also brought down the effective cash breakeven for the rest of the fleet to a very low level, Meaning that essentially as long as the Capesize market is above 5,000 a day, our other index will cover the remainder that's needed to cover its cash breakeven. So we're Extremely well protected on downside. We see a good supply dynamic for the next couple of months.
And I think Yes. With that, we're keeping it open for now. But we're, of course, watching this every day, as I said.
Yes. That sounds good. On that final note on supply side, I think you just mentioned it, but there's Limited yard capacity for Capes. Just wondered if you could elaborate on that point, please.
Yes. And I think that's one of the things that really make us exciting. If you look at aside from the fact that No. Demand is recovering as the world is getting out of COVID. You are Currently got the lowest order book, probably seen I think we subscribed to your data, but it doesn't have anything that's lower since 'ninety six.
But I've done some more digging, and I think you have to go back to 1986 to find a similarly low order book. And what's happened in the recent months is there's been a massive influx of container vessel orders, more than 2 The influx of container vessel orders, more than 200 ships ordered in the recent months. And this has taken up a lot of the capacity that would otherwise be used for building big bulk carriers. And I think secondly, the yards typically have better margins on building container vessels. They'll always prefer to do that if they can.
And we are, of course, not looking to order any newbuilds. And just to say that very clearly, that's not in this business model. But We did go out about a week ago through 2 different brokers, checking what's being marketed presently in terms of available capacity for Capesize or larger. And I think we counted Around 8 slots divided on 4 yards until the end of 2023. Now of course, there will be along the way some slots that are reserved for options that will not be declared.
And There are always some unreported orders in the market that are concluded, but not out there. But Again, I mean, if we were to start this company once over and go and order 8 ships and you would want to stick to 1 yard, you could get maybe 2 ships in 20 23 and the rest would be in 2024. So in shipping, it's always tough to predict the demand side, although you know it's been growing Over time, pretty steadily, 3% to 4% for dry bulk. Where you can have some confidence is on the supply side. And we just know there's not a lot of Ships that can come out in the coming years.
And if you add EEXI on top of that, which will take down the utilization of the fleet by slower speeds, I don't think there's ever been a time where the supply side looked so attractive. And of course, also a consequence of The tightening yard capacity is newbuild prices are going up. And we're seeing now, I think there's been few orders, but there was an order last week for 2 Newcastle MAX without scrubber for $58,000,000 which means Ordering 1 of our similar vessels today, we would probably be at 60 plus. So we're very encouraged with what we're seeing there. It's going to help supply demand and it's pushing prices higher.
Great. And yes, you mentioned newbuild prices are going up. And what are you seeing in terms of second Second values?
Yes. I think they are, of course, also going up quite rapidly. Just looking at At Carson's values, a 10 year old vessel was probably around $20,000,000 at the end of last year. I think you're marking them for 28 today, but there was actually one sold last week for 30.5. So secondhand values are moving up.
But I still think they're lagging compared To where you see time charter rates. Typically, you see time charter rates move ahead and then values follow. The last time you saw 1 year time charter rates for standard CAPE at similar levels was in the late 2014 or early 2015. At that point in time, the resale standard, Capes, was $65,000,000 So it's definitely on the move up, and It's lagging time charter rates. If time charter rates hold or move higher, I think you're going to see even bigger moves.
Yes, I agree. Just a final question for me is on the EE XL. Have you heard any good estimate on the slows? How much low ceiling we could expect?
The answer is It's very difficult to sort of create a rule of thumb and apply it across the fleet because it all depends on The efficiency of the individual ships, and you actually need sea trial reports enabled to in order to calculate it. But I've seen some data from one of the class agencies suggesting that onethree of the fleet might have to slow down by 20% or so. So that's an estimation that's been out there. I think we've seen cases when we've had access Let's do some data of ships built as recently as 2010, 2011 that will have serious problems meeting these Because you can, of course, reduce your output, but you get to a point where it impacts speed to the level that The ship gets handicapped and trades unacceptably slow. So it's I wish we could just say a number.
This is it. It's not that simple, but it will have an impact. I think that's for sure, assuming this gets implemented on January 1, 2023, As the plan is.
Yes. Thank you very much.
Well, thank you.
There are no further questions at this time. We have one more question here, and that is From Erik Havelsen from Pareto Securities. Please go ahead.
Yes. Magnus, two questions really. So one, How much of the current strength do you think is explained by fleet inefficiency, So congestions and port waiting and so on. I guess it's been going on for a long time. But Is this also with COVID delaying everything everywhere basically?
Is that also a contributing factor here?
I think earlier in the year, the strength we saw in January was definitely driven by inefficiencies. You had extremely cold weather, as you may remember. There was lots of ice in China. And we had vessels that were waiting for up to 20 days, I think, to discharge. We did an update now just looking at the global congestion because there's always, I guess, in shipping a hiccup somewhere.
But it's actually come down quite a lot. So I wouldn't say that we're at any kind of extreme levels. I think the thing in our trade that's probably creating a bit of inefficiency is quarantine restrictions in conjunction with crude change. It's Not an issue if you're going to Brazil or West Africa or any of those destinations. But Of course, if you're doing a crew change and you're going to Australia, in theory, you have some waiting time because you need 15 days before you can get in.
But I think that it looks to me like most of the operators have found ways and are planning around Not the trade patterns, because again, if you're doing a long voyage, there you shouldn't necessarily have a lot of For downtime. So the way we look at it, we don't see any major inefficiencies. If you were to look for things that could Kind of loosen the market. Maybe there's a little bit to go in terms of speed, It seems to us that it's a very balanced market, and it's not just a Cape market because the smaller sizes are tight, as you know. And it feels like a pretty Solid gradual tightening that has to do with less ships coming out and with trade recovering.
Agree. And when you look at your company, I mean, obviously, today, it's impossible to kind of replicate what you built a few years ago. But When you look at your yield, I mean, based on current markets, based on FFAs, based on what you're seeing in booking, obviously, Your dividend yield is high, and it's kind of impossible not to accumulate cash here. It's attempting at all to accelerate a little bit the debt repayments to be less levered. I mean, you're not levered, but even less so ahead of schedule really?
Or should we kind of assume you to just Pay out everything almost regardless of the dividend yield.
Yes. I think you should assume the latter that we pay out everything that we're left with each month after debt service and including interest and amortization. Of Of course, we do keep a cash buffer. So we always have a minimum of around $20,000,000 that tends to sit there as cash. I don't think we see any need to lower the debt either.
To us, the debt level is one thing, but Look, most important thing is your cash breakeven. And even with the some additional costs that we're seeing related to COVID, which Wiederah hinted to earlier, We're budgeting $14,500 all in for the year. And I think we typically if we have everything spot, we earn that with a Capesize market of less than $10,000 And I think a lot of our peers It's certainly important for Capesize. So we're at the lower end of the cost curve. And we've also shown that we Occasionally take some cover to lower that even further.
So as I said, for the rest of the year, if The standard Capesize market is 5,000 a day. Then the index ships cover our whole Company cash breakeven together with the 2 ships fixed on contract. So I think we're very comfortable with where we're sitting. And as As you point out, there should be some very significant dividend capacity, and we intend to continue paying that out to shareholders.
And just a final one, do all your index linked contracts have clauses where you can turn them into fixed contracts?
Yes, they have. They are the conversions are done On the basis of the FFA market. But there's that is a very liquid market, and we've done this quite few times now, there's never been any issues in doing the conversions. Okay. Thank you very much.
Thank you.
I'm not seeing any further questions. And there are no further questions at this time. Please continue.
Well, I think that concludes the presentation then. So thank you for Ron who dialed in, and we'll speak again soon.