SB » Topics » The international drybulk shipping industry is cyclical and volatile, and charter rates have recently decreased substantially; these factors may lead to further reductions and volatility in our charter rates, vessel values and results of operations.

This excerpt taken from the SB 6-K filed Jun 8, 2009.

The international drybulk shipping industry is cyclical and volatile, and charter rates have recently decreased substantially; these factors may lead to further reductions and volatility in our charter rates, vessel values and results of operations.

The drybulk shipping industry is cyclical with attendant volatility in charter rates, vessel values and industry profitability. For example, the degree of charter hire rate volatility among different types of drybulk carriers has varied widely. After reaching historical highs in mid-2008, charter hire rates for Panamax and Capesize drybulk carriers have reached near historically low levels as of late 2008. Because from time to time we may charter some of our vessels pursuant to short-term time charters, we may be exposed to changes in spot market and short-term charter rates for drybulk carriers and such changes may affect our earnings and the value of our drybulk carriers at any given time. Although nine of our 13 drybulk vessels in service as of May 15, 2009 were deployed on period time charters of more than one year, if the current low charter rates in the drybulk market continue to prevail during periods when we must replace our existing charters, it will have an adverse effect on our revenues, profitability, cash flows and our ability to comply with the financial covenants in our loan agreements. In addition, we are currently scheduled to receive five newbuilds at various times beginning in the third quarter of 2009 and through 2010, three of which do not currently have charters. We cannot assure you that we will be able to successfully charter our

2


vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations or pay any dividends.

The factors affecting the supply and demand for drybulk vessels are outside of our control and are difficult to predict with confidence. As a result, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.

Factors that influence demand for vessel capacity include:

 

 

 

 

demand for and production of drybulk products;

 

 

 

 

global and regional economic and political conditions;

 

 

 

 

environmental and other regulatory developments;

 

 

 

 

the distance drybulk cargoes are to be moved by sea; and

 

 

 

 

changes in seaborne and other transportation patterns.

Factors that influence the supply of vessel capacity include:

 

 

 

 

the number of newbuild deliveries, which among other factors relates to the ability of shipyards to deliver newbuilds by contracted delivery dates and the ability of purchasers to finance such newbuilds;

 

 

 

 

the scrapping rate of older vessels;

 

 

 

 

port and canal congestion;

 

 

 

 

the number of vessels that are out of service, including due to vessel casualties; and

 

 

 

 

changes in environmental and other regulations that may limit the useful lives of vessels.

We anticipate that the future demand for our drybulk vessels and, in turn, drybulk charter rates, will be dependent, among other things, upon economic growth in the world’s economies, including China, India, Brazil and Russia, seasonal and regional changes in demand, changes in the capacity of the global drybulk vessel fleet and the sources and supply of drybulk cargo to be transported by sea. A decline in demand for commodities transported in drybulk vessels or an increase in supply of drybulk vessels could cause a significant decline in charter rates, which could materially adversely affect our business, financial condition and results of operations.

This excerpt taken from the SB 20-F filed May 19, 2009.

The international drybulk shipping industry is cyclical and volatile, and charter rates have recently decreased substantially; these factors may lead to further reductions and volatility in our charter rates, vessel values and results of operations.

The drybulk shipping industry is cyclical with attendant volatility in charter rates, vessel values and industry profitability. For example, the degree of charter hire rate volatility among different types of drybulk carriers has varied widely. After reaching historical highs in mid-2008, charter hire rates for Panamax and Capesize drybulk carriers have reached near historically low levels as of late 2008. Because from time to time we may charter some of our vessels pursuant to short-term time charters, we may be exposed to changes in spot market and short-term charter rates for drybulk carriers and such changes may affect our earnings and the value of our drybulk carriers at any given time. Although nine of our 13 drybulk vessels in service as of May 15, 2009 were deployed on period time charters of more than one year, if the current low charter rates in the drybulk market continue to prevail during periods when we must replace our existing charters, it will have an adverse effect on our revenues, profitability, cash flows and our ability to comply with the financial covenants in our loan agreements. In addition, we are currently scheduled to receive five newbuilds at various times beginning in the third quarter of 2009 and through 2010, three of which do not currently have charters. We cannot assure you that we will be able to successfully charter our

2


vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations or pay any dividends.

The factors affecting the supply and demand for drybulk vessels are outside of our control and are difficult to predict with confidence. As a result, the nature, timing, direction and degree of changes in industry conditions are also unpredictable.

Factors that influence demand for vessel capacity include:

 

 

 

 

demand for and production of drybulk products;

 

 

 

 

global and regional economic and political conditions;

 

 

 

 

environmental and other regulatory developments;

 

 

 

 

the distance drybulk cargoes are to be moved by sea; and

 

 

 

 

changes in seaborne and other transportation patterns.

Factors that influence the supply of vessel capacity include:

 

 

 

 

the number of newbuild deliveries, which among other factors relates to the ability of shipyards to deliver newbuilds by contracted delivery dates and the ability of purchasers to finance such newbuilds;

 

 

 

 

the scrapping rate of older vessels;

 

 

 

 

port and canal congestion;

 

 

 

 

the number of vessels that are out of service, including due to vessel casualties; and

 

 

 

 

changes in environmental and other regulations that may limit the useful lives of vessels.

We anticipate that the future demand for our drybulk vessels and, in turn, drybulk charter rates, will be dependent, among other things, upon economic growth in the world’s economies, including China, India, Brazil and Russia, seasonal and regional changes in demand, changes in the capacity of the global drybulk vessel fleet and the sources and supply of drybulk cargo to be transported by sea. A decline in demand for commodities transported in drybulk vessels or an increase in supply of drybulk vessels could cause a significant decline in charter rates, which could materially adversely affect our business, financial condition and results of operations.

EXCERPTS ON THIS PAGE:

6-K
Jun 8, 2009
20-F
May 19, 2009
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