Ladies and gentlemen, welcome to the Safe Bulkers conference call to discuss second quarter 2020 financial results. Today we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou, President, Loukas Barmparis, Chief Financial Officer, Konstantinos Adamopoulos, and Chief Operating Officer, Ioannis Foteinos. At this time, all participants are in a listen-only mode. We will start with the presentation, followed by a question- and- answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone and wait for your name to be announced. Following this conference call, if you need any further information on the conference call or the presentation, please contact Capital Link at two one two-six six one-seven five six six. I must advise you that this conference is being recorded today.
Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. Concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters. Words such as expect, intend, plan, believe, anticipate, hope, estimate, and variations of the words and similar expressions are intended to identify forward-looking statements. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies. Many of which are beyond the control of the company.
Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited, changes in the demand for dry bulk vessels and charterers in the market in which the company operates, with operations outside the United States and other factors outlined from time to time in the company's filings with the Securities and Exchange Commission. The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. I now pass the floor to Dr. Barmparis. Please go ahead, sir.
Good morning? I'm Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the second quarter of 2020. I would like to start by thanking our seafarers for their commitment and dedication throughout this difficult period. The difficulties for crew changes continue, and I would like to say that in many places, the situation is very unfair for people who had stayed on board for extended periods supporting the smooth operation of supply chains. Our results for the second quarter were negatively impacted by the reduction in charter rates due to COVID-19 outbreaks. A number of charter contracts that had expired in the previous period has been replaced by contracts with lower charter hires. Despite that, there is a small increase in our aggregate revenue due to scrubber benefit and due to addition of the new vessels.
Voyage expenses that are deducted from the revenue in order to calculate the TCE was substantially increased due to vessel repositioning, higher cost of bunkers, and consumption cost for scrubbers. Our decision in this uncertain environment is to maintain strong liquidity, which was $111.3 million as of July 31, 2020. This can be a cushion if situation with coronavirus is developed negatively or a strong tool that will allow us to opportunistic move when the situation improves. Moving to slide three, we were able to develop six five-year charter contracts and two contracts of other expiration, nine and twelve months, which represent a substantial change in our chartering policy. Together with the three Capes, we will have fixed about 1/4 of our fleet in medium to long period time charters.
The anticipated total revenue on the basis of FFAs is about $113.7 million and the important feature is that liquidity is provided up front. The second point is that the charters that we have concluded in July, they have higher charter hire, $13,800, compared to those in May at $11,750. Let's move into analyzing the market conditions. In slide five, we are presenting a comparison of the Capes and Kamsar market chartering rates as published by the Baltic Exchange between 2020 and 2019. The COVID-19 effect in terms of seasonality coincided with the lower quarter of the shipping market. Therefore, following a low first half of the year, the market started improving after May and picked up in July at about $14,000 for Kamsarmax and $34,000 for Capes.
Presently, Kamsarmax are trading in the region of $12,000 and Capes in the region of $20,500. Main reasons for the recovery of the market is the resumption of economic activity after the lockdown, and especially the resumption of China providing for increased volumes of iron ore, coal, and grain trades. Looking forward, the implementation of the U.S.-China trade deal is an important factor for the shipping market while the COVID-19 remains a threat. Turning to slide six, we provide more input in relation to Chinese economic recovery. During the lockdown period in Q1, China's economy contracted by almost 7%. Resumption of economic activity and fiscal measures to stimulate Chinese economy have led to a V-shaped recovery with a GDP growth in Q2 of about 3.2%. Moreover, as shown in the bottom graph, China's industrial indicators show continued recovery.
According to National Bureau of Statistics of China, data show that the industrial output grew by 4.8% year-on-year in June, after declining to about -15% during lockdown. The fixed asset investment in infrastructure is down by 1.2%, as compared with a decrease of about -30% during Q1. The fixed asset investment in manufacturing is down by 11.7%, as compared with a decrease of about -30% during Q1. The actual effect of this recovery is reflected in the increased volumes of Chinese imports for dry bulk commodities. As presented in slide seven on the graph within June 2020, there were increased imports on the major dry bulk commodities. June 2020 iron ore imports increased by 16.8% month-on-month and 35.3% year-on-year. For the period January to June 2020, iron ore increased by 9.3% as compared to the same period in 2019.
Forecast of Brazilian major miner leading lower indicate markets remain unchanged, implying a substantial increase in their second half 2020 volumes. As is estimated by the shipping analyst of Braemar Shipping Services, the shipments would need to rise in the second half of the year by 31% versus the first half of the Brazilian miner to achieve its lower target for shipments. The middle graph presents the increase on Chinese import in thermal coal and lignite. The June 2020 imports increased by 14.6% month-on-month and by 23.1% year-on-year, while for the period from January to June 2020, imports increased by 34.5% as compared to the same period of 2019. The lower graph presents the increase on Chinese imports of soya beans.
The June 2020 soya bean imports by 19% month-on-month and by 71.4% year-on-year, while for the period from January to June increased by 17.7% as compared to the same period of 2019. As the rest of the importing countries will be dealing with COVID-19, it is possible to assume a soaring in demand formulating a bottleneck of imports towards the end of the year. According to market information, increased exports of grains from U.S. Gulf are already scheduled as part of the implementation of phase 1 trade deal. On the supply side in slide number eight and the order book, things have remained unchanged with literally no new orders. As of today, the order books for Capesize stands at around 8% of the total fleet and 6% for Panamax. In both cases, it is evenly spread between 2020 and 2021.
Slippage or cancellations due to COVID-19 are still creating extensive delays. We believe that aging of fleet, low freight rates and increased CapEx for complying with environmental regulations may enhance scrapping activity. When demolition countries India, Bangladesh begin recovering from COVID-19, the scrapping activity is expected to increase. Lastly, ongoing environmental discussions for emission decarbonization will not favor new orders. Turning to the next slide, number nine, we make a brief presentation on the status of the fuels market. Global lockdowns and mobility restrictions have reduced the demand for fuels and distiller products. As global lockdowns cease, oil demand will continue to improve. The future market indicates that bunker prices will recover in 2021 and in 2022. The spread differential between 0.5% very low sulfur fuel oil, which is a compliance fuel, and 3.5% high sulfur fuel oil, the so-called Hi5, has narrowed massively.
The futures curve indicate that Hi-5 will be recovering in excess of $80 in 2021 and 2022. Eventually, the recovery of global economies, the full restoration of mobility restriction, and subsequent increase of crude oil prices could possibly push the Hi5 differential towards pre-COVID-19 levels. Turning to slide 10, in the context of our environmental, social responsibility policies, we undertake significant environmental investments by retrofitting scrubbers and ballast water treatment systems on our fleet. We have already invested $68.2 million as of June 30, 2020, and have retrofitted 19 scrubbers out of 20 scheduled in total and 36 ballast water treatment systems. By the end of the third quarter of 2020, five more ballast water treatment systems and the last scrubber will have been installed. On the bottom table, we estimate the expected downtime in days for Q3 and Q4 2020 in order to assist analysts with their projections.
In slide 11, let's summarize the key market takeaways. The Chinese fiscal stimulus package may signal a V-shaped market recovery. We have a declining order book 2020 onwards. The ongoing decarbonization discussions do not favor new orders. CBAM's aging of fleet, low freight rates, and increasing environmental CapEx may enhance scrapping activity. Global lockdown adversely affects demand for oil and distillates fuels. We may have a slow oil demand rebound in second quarter 2020, as global lockdowns ease. Eventually, the best prices recovery may lead to a wider Hi5 spread differential. Concluding in slide 12, let's summarize Safe Bulkers' key takeaways. Key note is our liquidity exceeding $110 million, which gives us flexibility in the present unstable and uncertain market environment. We have entered in total into eight long-term period charters during the second quarter, evidence of excellent relations with our charters.
Our ability to complete our environmental investments is an evidence of our technical expertise. Our smoothened debt profile for the next two years is an evidence of lenders' trust and support. Now I will pass the floor to our Chief Financial Officer, Konstantinos Adamopoulos, who will present the quarterly financial results.
Thank you, Loukas, and good morning, everyone. Let me continue with our liquidity in slide 14, which as of the end of July 2020, stood at $111.3 million, consisting of $89.9 million in cash and bank time deposits, and $19.4 million in restricted cash, and $2 million available under unsecured revolving credit facilities. We have refinanced a large portion of our debt. In slide 15, we present our repayment schedule as of June 30, 2020. In close cooperation with our lenders, we pushed back loan payments to 2022 and 2023, which were originally scheduled for this year and 2021, expanding the average tenor, creating a smoother repayment schedule for 2020 and 2021, and maintaining the same covenants of our debt while increasing our flexibility during this difficult period.
Moving on to slide 16, we present our quarterly daily OpEx, which stood at $4,779 versus our quarterly daily G&A, which stood at $1,374. The aggregate number for both OpEx and G&A for second quarter of 2020 was $6,103, demonstrating our focus on lean operations. We believe that this figure for both OpEx and G&A, when comparing apples to apples, is one of the industry's lowest, given the fact that we include in our OpEx all our dry docking expenses, and in our G&A, our directors' compensation and all expenses related to our administration. Moving on to slide 17, we present our quarterly TCE, which stood at $8,094, clearly affected by COVID-19 versus our quarterly OpEx, which stood at $4,779. Let's move to slide 18 with our quarterly financial highlights for the second quarter of 2020 compared to the same period of 2019.
Net revenues increased by 5% to $49.3 million from $45.5 million, despite a relatively weak charter market due to COVID-19 restrictions, mainly due to the additional revenues earned by our scrubber-fitted vessels and the additional vessel which was delivered in April of this year. During the second quarter of 2020, we operated in a weaker charter market environment compared to the same period in 2019. This was evident from the reduced TCE of $8,094 compared to $11,970 during the same period in 2019. A number of charter contracts entered in previous periods expired and were replaced by contracts with lower charter rates hired. Net revenues were supported by the benefit from scrubber-fitted vessels, despite the reduced [spread] price differential between heavy fuel oil and compliant fuel, which was due to the oil price war, and by revenue contributed by our newbuild delivery.
Operating expenses have slightly increased due to increased vessel repositioning expenses, higher loss on bunker sales due to the oil price war, and consumption costs for the scrubber-fitted vessels. Daily vessel OpEx increased by 2% to $4,779 compared to $4,616 for the same period last year. Daily vessel operating expenses, excluding dry docking and pre-delivery expenses, decreased by 2% to $4,207 for the second quarter of 2020 compared to $4,253 for the same period in 2019. Our adjusted EBITDA for the second quarter of 2020 decreased to $6.3 million compared to $21 million for the same period in 2019. Our adjusted loss per share for the second quarter of 2020 was $0.16, calculated in a weighted average number of 102.8 million shares, compared to adjusted loss per share of $0.01 during the same period of 2019.
Calculated on a weighted average number of 101.3 million shares. Closing our presentation, slide 19. We present our quarterly fleet data and average daily indicators compared to the same period of 2019. We would like to emphasize that in this period, we have worked extensively despite the tough market conditions, and we have contracted a total of eight long-term period time charters, including six five-year charters, adding front-loaded cash flows. We refinanced the last part of our debt early in 2020, providing us with additional liquidity, and we took a step further to push back to 2022 and 2023 loan payment schedule for this year and next year. We have installed 19 scrubbers, with just one remaining. We have a strong balance sheet with comfortable leverage, a smooth debt profile for the next year, and liquidity of $111.3 million.
Lastly, we took measures to protect our seafarers ensure employees' health and well-being, and kept all our vessels sailing continuously servicing our charters. Once again, concluding, we would like to thank our seafarers for their commitment, dedication, and efforts throughout this tough period. Our press release presents in more detail our financial operating results. Now we are ready to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. If you wish to ask a question, please press star and one on your telephone and wait for your automated message advising your line is open. Please state your first and last name before asking your question. If you wish to cancel your request, please press star two. We will take our first question from the line of Christian Wetherbee of Citi, p lease go ahead. Your line is now open.
Hi, this is William off of Citi. Thank you for taking my question. Just starting off on the rate side, it does seem like as you guys have mentioned, that there's kind of recent increase in some of the shorter-term rates that you guys have been able to obtain in the spot market. I'm just wondering how sustainable you think this increase is, and if you have any sense of what positive and negative factors will be that are going to impact rates for the remainder of 2020 and into 2021.
Yes. Hello. Good morning. The rates as we speak in the last month have been increasing sizably and right now the spot market is performing at around 12 and a half thousand dollars a day. Since we have the majority of our ships in the spot market, we are able to capture this increase very, very quickly. We are in a very good position to enjoy this improvement of the market which, as we said in previous calls, we were expecting it to start after China announced a big stimulus plan. It's happening now with very strong grain exports in South America the last three months, and now with very strong grain export from U.S. Gulf and from U.S. West Coast.
Okay. Do you think that this recent increase in rates will kind of lead to a sustainable increase in vessel values? I know that they've also recovered a little bit recently, but obviously have remained at a fairly low level.
Yes, we think that vessel value always are affected by increased freight rates. We think that this will be the case again. I think that there is good support from banks over the last year or so and they are there to finance projects. It's more technicalities that they are involved with the acquisition of vessels at the moment, the difficulty to conduct inspections on behalf of the owners, pre-purchase inspections because of restrictions on boarding vessels. This is the only negative thing. Otherwise, I think that as the freight market is improving, I think that prices will start very soon to improve as well.
All right. One other question that I had was, I know you guys have discussed an increase in voyage expenses very recently in place. They also did step up from the first quarter to the second quarter as well. I know a lot of that is due to increasing expenses and also fuel-related costs, but I'm just wondering if you can provide some sense of where you expect that expense line to go in the remainder of the year. Should we expect it to kind of be at the first half average around $17 million, or should it be coming down?
Look, voyage expenses have increased in the past for three reasons mainly. First of all was the valuation of the fuel that we have on board, whose price was dramatically, it was quite lower in the previous months due to the fuel oil war. The second was repositioning of vessels, as we said. The third was that right now the fuel that is used for scrubbers is included in this voyage expenses is reported in the voyage expenses part. That's why we will maintain somehow higher voyage expenses in the future. The one part which is due to the oil prices, I believe that it will not be affected so much in the future. The second part, which is basically the repositioning will be lower. We expect it will be lower.
The last part, which is due to the recognition of fuel oil scrubbers in the voyage expenses, will remain.
Got it. Thanks, Polys. Just finally, I know you guys have $100 million of debt maturing in the remainder of 2020 and through 2021. I was just wondering if you could touch on how you plan to refinance these out payments.
Could you please repeat the question a little bit slower because you have some noise?
Apologies about that. I'm just referring to slide 15, which shows your debt repayment profile, it looks like you guys have $100 million worth of maturing in the remainder of 2020 and 2021. I was just wondering what your plans are to refinance these payments.
These are scheduled installments. We don't have any debt maturing this year or next year.
There are in 2023?
Yeah. The first maturity, I believe, it's in 2023.
All right. Well, thank you so much for the last decision, but I appreciate you answering all my questions.
Your next question comes from the line of Randy Giveans of Jefferies, p lease go ahead and ask your question loud and clearly.
How are you doing, Randy?
Hi, again, from Jefferies. How are you?
Hi.
Yeah, you booked these fixed long-term charters in the second quarter. That's more of the same? Are you going to look to lock in additional longer-term charters now that the stock market has improved, focusing more on the short-term charters in spot going forward? What was the rationale for the five-year charters in the last couple of months?
Look, the rationale of the five-year charter was that we get a good premium in the first two years above the current spot market at the time we did the fixtures. This is a very good cash flow injection during an uncertain time until we get over this pandemic of COVID-19 or whatever that will be. The policy now that the market is improving is to lock in into some more period charters when we get the opportunity. Of course, they cannot all be five-year charters or the same structure. It could be one or two-year charters. As we approach or exceed break-even levels, it makes sense to charter at this sort of levels. It wouldn't make sense a year ago or six months ago to charter a one or two years period at $8,000, $9,000 or $10,000 a day.
Now that we can secure numbers around $13,000 a day, it makes sense for the company to try and with appropriate charters to secure some period charters. We have many ships in the spot market, and we can take a more balanced approach.
Okay. Then following the swaps, which were very attractive for you for three years- five years, what is your weighted average interest rate in terms of the premium or the margin, as well as what you're swapping it at?
The average of the swaps that we've done so far is a little bit below half a percent. We fixed around 35% of our loan book.
Yep. Then the margin?
We will nod disclose that. We'll give you the number.
Give you the number, yes.
It's not in the report.
It's about 2%, a little bit higher of 2%, about 2. 10%, the average margin.
Okay. All-in interest expense sounds like it's below 3%?
Yeah.
Definitely below 3%.
It's a very comfortable level based which we can make our forward planning.
Yeah. No, absolutely. All right, the final question. Now that you have kind of the refis done and swaps and what have you, what is your kind of first use of cash? Are you looking at preferred repurchases? Those are yielding 11%, 12%, what have you now. Is that an option? Do you have some authorization there? What is your appetite for the preferred repurchases?
The most important thing I think is to keep a strong cash position in the balance sheet, because there's a lot of uncertainty ahead. We are optimistic about the market and the stimulus pack, but there's no guarantees. We have already a second threat from this coronavirus disease that we don't know how it will be developed in the winter months, if there are more lockdowns or partial lockdowns or other things. We intend to keep a strong cash position, and if possible, use part of it to deleverage and prepay earlier some installments of the loans. We want to focus right now on handling the situation with the COVID-19 with the least possible damage to company's operations. Right now, we face a very big challenge all companies are facing, I think this also may help the freight market.
We're facing a lot of delays in various ports of the world with crewing matters, with changes of crew, with the testing of the crew, with delays in ports to berth before they test the crew. With the limitation of the ports around the world where we can make crew changes because of strict regulations and the non-availability of international flights. We also are very disappointed to say that the owners are not having the support of charterers when it comes down to social responsibility to the well-being of seafarers. We have to face all the costs ourselves, which is the least. Here we have lack of cooperation by many charterers, including major ones, when there is a need to make a small deviation from the intended route in order to disembark our crew and put on board fresh crew.
Even big names, big charterers, that they should have supported such small deviations, of course, at owner's cost, they are not willing to collaborate and to assist because they need their cargo faster in the destination. They are creating a lot of hassle and a lot of problems to the owners to make such small deviations, which are primarily due to compassionate reasons and humanitarian reasons for our crew. I think this is a time bomb for the shipping industry. It will explode one day, and it will hit all of us. It may kill all of us one day, what is happening right now.
It's not good for the major charterers only to put it in their reports, and mention the social responsibility that they have and how well they feel about the well-being of the crew and all the people associated in the chain of sea transportation. These principles that they state in their brochures and in their code of ethics, they don't pass it on to their chartering departments who are resisting whenever owner is asking to make a small deviation for crew changes. I think there is a lot of hypocrisy in the market. We all need to sit down together and cooperate in order to save a time bomb that is going to hit the world transportation chain. I have seen only two or three charterers really understanding the problem and cooperating. The good names like Cargill or Bunge, they are doing their best to assist.
There are some other names that we are really disappointed, and I consider this as the biggest problem of the shipping industry for the next 6 months to 12 months. People, they have to make an effort to assist owners in order the crews that they are on board more than 12 months or 14 months, to get relief and to go back to their homes, and the new crew to be able to join the vessels. Otherwise, things will explode, I'm afraid. I want to say these things that we all have to face our social responsibilities, not only the owner himself, that he can do it. We need the cooperation of all the parties, the cargo owners, the charterers, everyone.
Got it. Okay. How much is outstanding on the preferred right now? Is it still the $137 million?
Look, the preferred is a part of our capital structure.
We will continue to maintain it for the foreseeable future, simply because we feel that having one of the best operating expenses in the market, a very comfortable management fee and the preferred dividends, we are quite competitive. I think the need right now is liquidity, and as Mr. Hajioannou said just before, there are two points here. The one is liquidity needs in this low part of the market, which can be used as a cushion if the market, if a second wave hits, or as a tool if there is an improvement in the market. The second point is deleveraging. As we always say, that we intend in the next three years- five years to bring the net debt of the company close to the steel value. Basically, we have a specific target of our deleveraging policy, and we also maintain our liquidity.
I think this is a recipe for a good company for the following years. It is more important to bring the debt down to the scrap value of the vessel than to repay early the preferred, which is perpetual equity and can be repaid at any time in the future when freight rates really over-perform the current situation. I think this time will be in the next few years. We will get the opportunity as the world trade increases and as the world fleet is not increasing. We'll get the opportunity of better markets to start reducing that preferred. For the time being, there is no plan to reduce the preferred.
I'm just asking the outstanding amounts on the preferred.
It is $157 million.
Got it. Okay. Just making sure. That's it for me. Thanks again, fellas.
Thank you.
There are no further questions at this time. I will hand back to the speakers for closing. I now hand back to the speakers to close off the call. Do you have any closing remarks?
Thank you very much for attending this call during the summer month of August. Stay safe, all of you, and we believe that we'll see better markets in the second half of 2020. Thank you to all.
That does conclude our conference for today. Thank you all for participating, and you may now all disconnect.