Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the Third Quarter 2021 and Nine Months Financial Results. We have with us Mr. Petros Pappas, Chief Executive Officer, Mr. Hamish Norton, President, Mr. Nicos Rescos, Chief Operating Officer, Mr. Simos Spyrou and Mr. Christos Begleris, Co-Chief Financial Officers of the company. At this time, all participants are in a listen-only mode. There'll be a presentation followed by question and answer session. At which time, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. We now pass the floor to one of your speakers today, Mr. Spyrou. Please go ahead, sir.
Thank you, operator. I'm Simos Spyrou, Co-Chief Financial Officer of Star Bulk Carriers, and I would like to welcome you to our conference call regarding our financial results for the third quarter of 2021. Before we begin, I kindly ask you to take a moment to read the safe harbor statement on slide two of our presentation. In today's presentation, we will go through our Q3 results, cash evolution during the quarter, a walkthrough of our dividend policy, an overview of our balance sheet and operational and ESG update, and the latest industry fundamentals before opening up for questions. Let us now turn to slide three of the presentation for a summary of our third quarter 2021 highlights. The company reported a record performance this quarter.
Net income for the third quarter amounted to $220.4 million and adjusted net income of $224.7 million or $2.20 earnings per share. Adjusted EBITDA was at $277.8 million for the quarter. On the bottom of the page, you can see the evolution of our adjusted net income and adjusted EBITDA performance. For the third quarter, we declare a dividend per share of $1.25 payable on or about December 22nd, 2021. During Q3 2021, our company prepaid in full the $50 million outstanding 8.3% senior notes, which were due in November 2022.
In addition, as part of the authorized share buyback program, we repurchased 466,268 of our shares in open market transactions at an average price of $22.01 per share for aggregate consideration of $10.3 million. In November 2021, we had 75,000 tons for Q1 2022 of the VLSFO HFO spread at an average price of $134.8 per ton. In November 2021, we released our third annual environmental, social, and governance report, which records our ongoing efforts to further strengthen the company's environmental stewardship, social contribution, and corporate governance, and provides a transparent account of our ESG strategy and performance. On the top right of the page, you will see our daily figures per vessel for the quarter.
Our TCE rate was $30,626 per vessel per day. Our combined daily OpEx and net cash G&A expenses per vessel per day amounted to $5,291 per day per vessel. Therefore, our TCE, less OpEx and G&A, is at $25,335 per day per vessel. Finally, for the fourth quarter of 2021, we have covered 71% of our fleet's available days at a daily rate of $38,250 per vessel. Slide number four graphically illustrates the changes in the company's cash balance during the third quarter. We started the quarter with $242.8 million in cash and generated meaningful positive cash flow from operating activities of $251 million due to the strong freight market.
After including debt proceeds and repayments, our notes prepayment, CapEx payments for ballast water treatment installation, as well as the second quarter dividend payment, we arrived at a cash balance of $371.7 million at the end of the third quarter. Slide five has a walkthrough of our dividend policy with an example for the dividend calculation for third quarter 2021. As of September 30th, 2021, we owned 128 vessels and our total cash balance was $371.7 million.
With a minimum cash balance per vessel as of September 30th of $1.9 million, on November 16, 2021, pursuant to our dividend policy, our board of directors declared a quarterly dividend of $1.25 per share, payable on or about December 22nd, 2021 to all shareholders of record as of December 10th. The ex-dividend date is expected to be on December 9th, 2021. Please turn now to slide six, where we highlight the continued strength of our balance sheet. Our total cash today stands at $531.7 million, including a $30 million revolving facility, which is currently undrawn. Meanwhile, our total debt stands at approximately $1.6 billion. Our working capital stands at approximately $80 million.
We have completed four financings, which will raise $400 million in senior debt and result in interest saving of about $5 million per annum. Our annual amortization is $207 million per annum, and our pro forma average margin at approximately 2.4%. Finally, by the end of the year, we will have five unlevered vessels and no debt maturities until the third quarter of 2023. In slide seven, we demonstrate the inherent operating leverage and cash flow potential of the company and the illustrative free cash flow per share, as well as the potential cash flow yield. For example, with approximately 46,700 fleet available days per year based on the current 2022 FFA curve, Star Bulk would produce $3.8 of free cash flow and yield of approximately 20%.
I will now pass the floor to our COO, Nicos Rescos, for an update on our operational performance.
Thank you, Simos. Please turn to slide eight, where we provide our operational update. Operating expenses, excluding non-recurring expenses, was at $4,288 per day per vessel for the nine months ending in 2021. Net cash G&A expenses were $1,053 per vessel per day for the same period. Despite continued adverse COVID-related restrictions, which have a direct impact on operating expenses, the combination of our in-house management and the scale of the group enable us to maintain very competitive costs, being the lowest operator, lowest cost operator among our peers and continuing to rate at number one among our listed peers in terms of our ship rating. Slide number 9 provides a fleet snapshot and some guidance around our future dry dock and ballast water system installation expenses for the next 15 months and the relevant total of hire days.
Star Bulk operates one of the largest dry bulk fleets with 128 vessels geared towards larger sizes. Our expected dry dock expense for the next 15 months is estimated at $32.9 million with a dry total of 31 vessels with another $26.3 million towards our ballast water installation CapEx. In total, we expect to have approximately 950 off-hire days for the forward 15-month period. We anticipate that 97% of our fleet will be fitted with ballast water systems by the end of 2022. The above numbers are based on current estimates around dry dock retrofit planning, vessel employment and yard capacity. These figures incorporate our current understanding of present and future shipyard congestion.
On the scrubber front, high fuel spreads have recently been increasing due to an upward momentum on fuel prices, a pickup in jet fuel demand and increased production of HSFO. With an estimated annualized consumption of 800,000 tons of HSFO across the Star Bulk fleet, we expect to have recouped our scrubber investment by the end of Q2 2022. Given that 94% of our vessels are fitted with scrubbers, a continued increase in high spread can have a significant value generation for our company. I will now ask our Chief Strategy Officer, Charis Plakantonaki, to provide an update on the latest ESG development.
Thank you, Nicos. Please turn to slide 10, where we provide an update on Star Bulk ESG activities. The first annual Star Bulk environmental, social and governance report has been published and is available on the company's website. The report has been developed following rigorous global reporting standards, the disclosures of which have been assured by EY Climate Change and Sustainability Services. During Q3 2021, Star Bulk joined the Maritime Anti-Corruption Network, a global business network with more than 160 companies which works with governments, NGOs and civil society to eliminate maritime corruption. On the decarbonization front, we have participated actively in and sponsored The Next Wave: Green Corridors report presented at COP26 last week, a multi-stakeholder project which analyzed the feasibility of specific trade routes between major port hubs where zero-emission solutions could be demonstrated.
We have participated in the development of the Poseidon Principles for Marine Insurance, an initiative by the Global Maritime Forum, which serve as a framework to better align hull and machinery portfolios with responsible environmental impacts. Star Bulk has become a signatory to the Call to Action for Shipping Decarbonization, an initiative by the Getting to Zero Coalition, which publicly calls on governments and international regulators to take action in support of shipping decarbonization. Within the scope of the call, Star Bulk has made specific climate commitments on greenhouse gas transparency, on international collaboration, and on pilot and demonstration R&D projects on green energy. I will now pass the floor to our CEO, Petros Pappas, for a market update and his closing remarks.
Thank you, Charis. Please turn to slide 11 for a brief update of supply. During the first 10 months of 2021, a total of 32.9 million deadweight was delivered, and 4.9 million deadweight was sent to demolition for a net fleet growth of 28 million deadweight or 3.1% since the beginning of the year.
Just to advise, we have switched to the backup.
Despite the 31.4 million deadweight ton orders reported year-to-date compared to 15.8 million deadweight tons of the corresponding period of 2020, the order book still stands at the historical low level of 6.8% of the fleet, including options that have been declared. The strong increase in container ship orders during the last year has filled up shipyard capacity until the end of 2023. Uncertainty on future propulsion as a result of upcoming environmental regulations, combined with increased shipbuilding costs, has helped keep new orders under relative control. Furthermore, the surge of global steel prices has pushed scrap prices to record levels and may make demolition of overaged tonnage an attractive option during seasonal downturns.
Average steaming speed of the dry bulk fleet currently stands at 11.9 knots, and despite the improved freight rate environment, it has only increased by 2.5% year-over-year. Quarantines related to COVID-19 pushed port congestion to record levels during the third quarter and helped rates to hit 14-year highs. Congestion at Pacific ports has corrected during the last month, but still remains at inflated levels, and combined with political tensions between China and Australia, create strong inefficiencies for trade with a positive effect on vessel utilization. As a result of the above trends, net fleet growth is projected to end up at approximately 10.5% during 2021 and average out at 2% per annum during 2022 and 2023. Let's now turn to slide 12 for a brief update of demands.
According to Clarksons, total dry bulk trade during 2021 is projected to expand by 4.8% in ton-miles. During the first three quarters of the year, dry bulk volumes have experienced a strong recovery following the synchronized global economic stimulus and the gradual reopening of economies supported by vaccination programs against COVID-19. Record high commodity prices during 2021 have provided a strong incentive to major producers of dry bulk cargos to expand output and exports during 2022. Having said that, China has experienced a strong slowdown during the third quarter of 2021 in a response to high energy and raw material costs and stricter lending requirements affecting the real estate market. We're still at the early stages of the global recovery from COVID-19, with the IMF projecting global GDP growth of 4.9% in 2022.
According to Clarksons, dry bulk trade is projected to expand 2.4% during 2022, while increased Atlantic exports and political tensions between China, Australia are expected to support ton-mile growth and vessel requirements over the next years. Iron ore trade is expected to expand by 2.2% during 2021 and 1.5% in 2022. During the first half of 2021, Chinese steel production expanded by 11.5%. Since July, the government imposed strict production curbs, resulting in a 13.2% year-on-year decline during the third quarter. The Chinese restrictions should help ease energy shortages and are expected to last until the end of the Winter Olympics.
On the other hand, steel makers from the rest of the world have increased production by 16.6% year-to-date and are still unable to meet regional demands. Brazil iron ore exports are slowly recovering from the 2019 disaster and have increased by 7% year-on-year. Coal trade is expected to expand by 7.8% during 2021 and 2% in 2022. During the first three quarters of 2021, China and India thermal electricity output increased at a higher pace than domestic coal production, and the combination created a shortage of supply that pushed stocks lower and prices to record high during the third quarter.
China and India have increased domestic production during the last months in an effort to increase stocks ahead of this winter. Nevertheless, due to the La Niña phenomenon, a colder than average winter is expected to boost power demand from households and to affect domestic production of coal. Moreover, the Chinese ban on Australian coal has forced power utilities and steel makers to diversify and seek cargoes, coal cargoes from longer distance sources such as South Africa, Colombia, the U.S. and Canada, but also increased imports from Indonesia that experience long delays due to quarantine measures. Grain trade is expected to expand by 2.9% during 2021 and 3% in 2022. China's demand for grains is projected to remain strong due to the five-year plan focusing on food security.
U.S. corn exports have experienced a record high season, while sales for the current marketing year stand at elevated levels. The U.S. soybean export season started with delays, but is catching up and is projected to remain strong over the next months in the wake of the Phase One trade deal. Looking into the next marketing year, Brazil coarse grain and soybean exports are projected to experience record high shipments and generate significant ton-miles for smaller sized vessels. Minor bulk trade is expected to expand by 6.4% during 2021 and 3.1% in 2022. Minor bulk trade has the strongest correlation to global GDP growth, and smaller geared vessels will continue to benefit significantly from resynchronized consumption recovery.
Shortages of steel products and positive price arbitrage should continue to incentivize Pacific exports to the Atlantic while the container sector strength has had a positive spillover effect for dry bulk. Moreover, West Africa bauxite exports are projected to generate strong ton-miles for Capesize vessels during the next years. Finally, our outlook for the market during 2022 and 2023 remains positive. The very low order book, combined with the lack of yard space, uncertainty on future vessel propulsion and increase in efficiencies create a favorable supply side picture for our industry and support our optimistic view on the future prospects of the dry bulk markets. Back to you, operator.
Your first question today comes from the line of Ben Nolan from Stifel. Please go ahead. Your line is open.
Yeah. Hi, thanks. Let's see where to start. First of all, I guess just the easy one. Could you maybe is it possible to break down the 71% of days fixed by segment at all?
Yes. Hi, Ben. We have covered 62.5% of our Capes at $46,600. 74% of our Panamax at $35,100 and 77% of our Supramax at $35,000.
Perfect.
Other 250.
Right. Perfect. No. My next question is related to just a few things that were a little different than I expected. First of all, the dry docking days for the fourth quarter were a lot higher than they looked like they were projected to be when you reported last quarter. I'm curious where that stands. Also, the G&A was a little bit higher too, and I know that in the release you called out stock-based comp. How should we think? What's the right run rate for G&A going forward?
Ben, hi, this is Simos. The increase of the G&A, of the cost G&A expenses for the third quarter versus the third quarter of 2020 was entirely due to the euro-USD effect. Basically, you know, on an absolute number, we should expect that basically, the change and the strengthening of the dollar in the fourth quarter is going to assist. You have to subtract basically the non-cash item, which was on the third quarter, the share-based compensation, which is not non-recurring. On the dry dock days, I will pass it to Nicos.
Hi, Ben. For Q3, five out of the six dry docks we carried out also involved ballast water installations, which take a bit longer. Of course, we have the additional costs. That's where you see the difference in the days and costs.
Okay, those were pushed back from the third quarter or something. Is that what happened?
Well, these are the ones that took place during the third quarter.
Oh, okay. Yeah. Well, it was just in the last release you'd said that you expected 46 days in the fourth quarter and now it's 194.
Well, that's basically we have six ships in Q4. We have also the ballast water installations. That's why you see more days than previously expected that were supposed to happen early in the year. We push them forward.
Okay. Last for me, and I'll turn it over. There's been a little noise about you guys putting a handful of vessels on time charter. Just curious where that stands in terms of how much maybe of the fleet is contracted for next year as well, and how you're thinking about the combination of spot versus contract.
Well, our coverage for Q1 basically is around 17%. Basically, we have three Capes worth, nine Panamax worth, and nine Supramax worth covered for Q1 at just below $32,000.
Wow. That's pretty good. Nice work on that. I appreciate the color. Thanks. Thanks, all.
Thank you, Ben.
Thank you. Your next question comes from the line of Amit Mehrotra from Deutsche Bank. Please go ahead. Your line is open.
Thanks, operator. Hi, everyone. Hopefully you can hear me. I had a couple questions. First, maybe just a market-related question. We've obviously seen a pretty significant step down in spot rates. I think, Petros, you mentioned the congestion. I was wondering if you could give us a little bit of an overview of what you're seeing on end-market demand growth in China. I mean, obviously there's some emission mandates. There's the Olympics coming up. What are you seeing in terms of risks associated with demand there? Also just talk about how the psychology of the market is changing, whether owners or charterers perspective, because clearly we were in a very hot market earlier this year. Things have cooled down.
I wonder if there's any psychological impact that may be driving it or could drive it even further. If you could talk about that as well.
Thank you, Amit. It may take me a little bit longer to answer your question. First of all, the market is down for three reasons. These are China and China. To explain further on that, we had a strong steelmaking reduction to the tune of 20% almost in the last couple of months, which is obviously negative for imports. Of course, it also affects congestion. It reduces congestion. We saw China increase their local coal production because capping prices, so therefore less imports. Actually, imported coal is more expensive than local coal. Before that, higher commodity prices basically led to a certain demand destruction, at least in the short term. China basically wanted clear skies for the Olympic Games.
I mean, it's a combination of clear skies and reduction of commodity prices from China. That's what their goal was. Let me make a side comment here, which I think is important. I was going through the imports of China earlier today, and I realized that in 2022, China. Sorry, 2021. In the last 10 months of 2021, China actually imported 2 million tons less than last year. You remember what we all used to say that if China sneezes, we will catch pneumonia. The market will catch pneumonia. Well, China sneezed, and we didn't catch exactly pneumonia. I think that happened because the rest of the world came up.
When we're talking about 4% increase in imports in trade in 2021, actually, that's about 180 million tons of additional trade. All of it came from countries other than China. I consider this as extremely important, and especially for the future. Now, talking about the future. We are very positive, actually. We remain very positive. We think there's going to be a slowdown during Q1 for the reasons already explained. We think that the market will start moving after the Winter Olympics. We foresee very strong grain trade coming from Brazil and to a lesser degree from Argentina. We think that coal prospects are pretty good, especially from India. But China will also. China, having achieved their goal, will probably turn to more imports.
As I said before, international prices are cheaper. Iron ore, you know, China imported 38 million tons less of iron ore this year in total. We think that will change going forward, and we think that most, a lot of it is gonna come from Brazil. We expect more ton-miles, which is going to be positive, very positive. Actually, ton-miles are more important than tons.
Right. I'm sorry, go ahead, Petros. Sorry.
Yeah. Another couple of minutes. Then China, we're positive about China. We think that after February, March, it will have to start a new easing cycle, and it will stimulate the economy and infrastructure. Let's not also not forget supply. I mean, supply. In next year, we have 28 million tons of orders. If we have 8 million scrap, that's 2.2% increase in supply. In 2023, we have 20 million tons orders. If there's 6 million scrap, that's gonna be 1.5% supply. So the supply situation is very positive. We also believe that the strong Chinese currency is going to help imports. It will make freight cheaper for them. We think that inefficiencies will continue to exist.
We don't think that China will change their COVID-19 rules for a long while. Finally, we also think that oil prices will remain strong, and that will be a disincentive towards increasing speed, not to mention environmental regulations that will kick in later on in time, and they will help as well. You know, I try to make a general comment. Let me just say very quickly that on specific vessels, we think the Supramaxes will do very well next year as well because we think container market is gonna be good and there will be an overflow of cargos from the containers to the bulk side. We also believe that there's gonna be a strong minor bulk market. On the Panamax side, we think grains are gonna be very strong. Don't
Never forget that, grains are long-distance cargos. Coal will be relatively strong as well, as I previously said. Capes we see weak during Q1, but then we count on, Brazil imports and West African, bauxite imports to increase. We think that the market is going to improve after Q1. I hope I didn't tire you, but I tried to.
No, that was very comprehensive, and I apologize for interrupting prematurely earlier. If I could, my follow-up question is less macro and more micro-focused. You know, Star Bulk has a break even of a little bit under $11,000 per day, which means given that you guys are at your cash threshold levels, anything above even that level will translate into dividends. Year to date, we've had about $23,000 per day average time charter equivalent, which is not a wonderful number. It's an okay number. It's kind of a mid-cycle number. And you've still been able to pay out over $2 per dividend per share in dividends for the first nine months of the year, which I think speaks to the micro aspects of the capital structure in the model. My question is.
After that big preamble, my question is, you know, I assume you guys are just incredibly frustrated by the way the equity value of the company has reacted to these payments, which is something like 15% yield maybe annually, which is just really, the outcome so far at least is not clearly the intended outcome of this strategy. The question I have is, you know, how committed are you to this strategy in the context of how the market is taking it now. Now, keep in mind we've had 10 years of a bad market, so it might take more than nine months of a good market to change people's minds. Talk about how patient you guys are because I can imagine the level of frustration is pretty high at the moment.
First of all, I will turn part of the question to Hamish. Let me say that we don't get easily frustrated to begin with. Let me also say the following. I was doing another calculation earlier today. I like math. I was looking at FFA rates. Average FFA rates were around $17,500. If you calculate that $17,500 less than $11,000 cost as you mentioned, that would actually give us a 15% yield over next year. Every $1,000 above $11,000 would give us about 2.4% yield. Like, if we made $12,000, it would be 2.4%.
If we made $13,000, it would be 4.8%, et cetera, which I consider actually pretty good in view of our very low cost. I'll turn the rest to Hamish now.
Amit, you know, basically it gives us a warm and fuzzy feeling to distribute cash to needy shareholders around Christmas.
You know, our dividend policy remains in effect.
Yeah, but that's not really the answer to my question, Hamish. The question was really around you have many options for distributing excess cash. You certainly have share buybacks, which I've been very much against, but there are a lot of other people that are not against that. Certainly on paper it makes sense. There's vessel acquisitions, which certainly don't make sense with equity for sure, but may make sense with cash. Just talk about at what point do you guys say that, look, this strategy is not giving us the intended consequence or the intended outcome, and so you pivot to something else. I mean, are you close to that point? Do you want to give it another year? How, where is your collective thinking on that?
We, you know, Amit, have no other thoughts in our head at this point. We're not planning on buying ships in the near term. We are planning on finishing up, you know, the authorized number, amount of share buybacks probably financed by, you know, selling a couple of vessels as long as we can do that without too much disruption in the market. We would hope to finish that up in, you know, the next quarter or so. But, you know, we're continuing on this path.
Right. Okay. Very good. Thank you very, very much. Congrats on the results, and hope you guys have a nice holiday. Thank you.
Thank you. You too.
Thank you. Your next question comes from the line of Randy Giveans from Jefferies. Please go ahead. Your line is open.
Howdy, Team Star Bulk. How's it going?
Great.
Great, Randy.
All right.
Okay. Great to see the dividend obviously above expectations at $1.25. Clearly making some steps with the accretive share purchases there. You kinda answered the question a little bit there, Hamish, in terms of the remaining $40 million. I'm glad to hear that's gonna be finished here in the next few months. I guess just looking at the dividend, obviously the Q4 quarter to date rate guidance is very strong. You already have some bookings into the first quarter. Just kind of sequentially from here, obviously, there's changes in working capital and others, but how should we think about the Q4 dividend compared to the $1.25 announced for Q3?
Well, you know, I mean, as I've told you in the past, Randy, you're the securities analyst. We just run the shipping company. You know, we don't try to make forecasts about the future, especially not in public. You know, I'm sure you will be pretty accurate.
All right. I was just seeing if there was any nuance to changes to working capital or debt repayments that we need to factor in for the fourth quarter that maybe weren't there in the third quarter. That's fine. I'll ask you offline for that. I guess looking into the first quarter for the hedge of the fuel, 75,000 metric tons, is the quarterly fuel burn about 250,000 tons still? How meaningful is that hedge for the first quarter?
This is Christos. Hi, Randy. Essentially, we have around 200,000 tons approximately per quarter, and we have hedged 75,000, so 38%. If we see the spread jumping, it's not unreasonable to assume that we may increase the hedge. So far the hedge has proven to be profitable.
Yep. Just following up on that, what does that translate to on a Capesize, for example, in $ per day?
Sorry, can you repeat the question?
Yes. What is the cost for a $30 ton spread? What is the savings or premium, however term, whatever term you wanna use for a Capesize?
For a Capesize vessel at levels of around 135, it's approximately $3,500 per day, the savings that we will generate, $3,500-$4,000 per day.
Perfect. All right. That's what we're having as well. All right. That's it for me. Thanks, fellas.
Thank you, Randy.
Thank you. Your next question comes from the line of Omar Nokta from Clarksons Securities. Please go ahead. Your line is open.
Hi, guys. Good afternoon. You've addressed pretty much most of the questions I had. I did wanna ask since, Hamish, you brought it up. You know, the way you're kind of viewing the secondhand market today in terms of valuations. This is probably, I would say perhaps a good test to gauge the overall resilience of vessel values since they've shot up so much this year with all the volatility we're seeing in the spot market now. Just wanted to ask kind of how you from your perspective are seeing the secondhand market shaping up here. Has there been any indication that values are softening as a result of what we're seeing or are things still fairly firm?
Hi, Omar. It's Petros. We think that secondhand values have gone down by about 10% perhaps. That's our estimate at this point in time.
Okay. Thank you. That would be, I guess, Petros for, you know, typical 5- to 10-year-old, second-hand ships.
Yeah. Yeah. Yes.
Yeah. Okay. I know it's probably sensitive to an extent, but, you know, in terms of, as you said, financing the buyback with some vessel sales, in any particular sort of part of the fleet you would look to monetize in this environment today?
You know, I think we'll basically look at, you know, what we get good value for, what's you know easy to sell without disturbing the market. You know, I mean, I think it will change from day to day, and we'll be very careful about it.
Got it. Yeah. Thank you.
We wouldn't put the bucket down.
Yeah.
That's what Hamish means, I think.
Yeah.
Yeah, I understand. Cool. Well, thank you, and thanks, Petros.
Thank you, Omar.
Thank you. Your next question comes up from the line of Magnus from H.C. Wainwright. Please go ahead. Your line is open.
Thank you. Good afternoon. Just one question to follow up on, you know, bookings for first quarter. I know you were talking, you know, a few months ago about securing more days for the first half as there was some uncertainty there with China slowing down. Would rates, you know, with booking very attractive rates for 17% of the fleet, would you book at a lower rate as well, or do you think you just gonna stay spot for the rest of this weakness?
First of all, we actually didn't expect the market to go down that fast, to be honest, between mid-October because this is hedging we did two to three weeks ago. It was up to two three weeks ago. We didn't expect to go down that quickly. We are expecting a rebound somewhere in the next two weeks or so. If that happens, then we will increase our coverage for Q1.
Okay. Now I like your example there of 15% yield at current FFA rates. Is that something that you guys are thinking about just to kind of provide some visibility of the dividend?
Sorry, Magnus, I'm not sure I completely understood the question.
No, I'm just, you know, there's a lot of talk about, you know, sustainability and viability of dividend. Would you consider booking more, you know, ships at these lower rates? I mean, since the returns would be very attractive, or would you know, just stay spot?
Well, actually we're positive about next year. It is only Q1 and mainly on Capes that we think that it's gonna be slower. If we fix, we would fix for Q1 mostly, and that's it.
No, that's great. I like your charting strategy, so keep it up. Thank you.
Thank you, Magnus.
Thank you. I will now hand the call back for closing remarks.
Thank you, operator. Just two quick reminders. The 15% yield at present FFA at a low market, and that this market that we've seen during 2021 has been without China being in the picture. That, in our view, means that once China reenters at some point next year, it will show a much stronger market. Thank you very much, and talk to you. Have a Merry Christmas and Happy New Year, and we'll talk to you again in February.
Thank you. That does conclude today's conference. Thank you for participating. You may all disconnect.