00:00John Wobensmith, chairman and CEO of Genco. John, so great to see you as always.
00:04Yeah, thank you for having me.
00:05And look, just such a strong set of results. I was looking like the measure of how much a single
00:09ship makes per day in quarter two was already up 24 percent in Q1.
00:13I guess how much of this is sustainable if so much of it is just based off of the geopolitical
00:19angst and what's happening in Iran?
00:21How do you sort of translate that, what that looks for the rest of the year?
00:23Yeah, so as you said, our Q1 this year is the best we've had since 2022.
00:28And what has actually gone on here is there is a very positive balance between the supply of ships on
00:36the water and the demands for for volumes of commodities.
00:40And we've been seeing that demand increase with a fairly flat supply situation. So it's translated into higher freight rates.
00:49It's translated into higher dividends, better forward looking dividends for us for the rest of the year.
00:56It's we're running on all cylinders right now, to be quite honest.
00:59On that supply demand balance, I know that you've been spending more money acquiring vessels over the past five years.
01:05You know, I think the figure was something like five hundred fifty million dollars worth.
01:08Are you just still adding to that, given that there's more demand?
01:11We are. We're in fact, we are taking delivery of another cape size vessel, one of the larger ships, in
01:19just a month and a half or so.
01:21So this is a strategy that we put into place because we recognized back in 2023 we were going to
01:28see growth in the larger ships in terms of commodities.
01:31So we started investing more and more towards the larger vessels, creates higher operating leverage for the company, again, higher
01:38dividends for shareholders.
01:40By the way, you were explaining this to me in the break. But for those of viewers who don't understand,
01:45how do you basically change things around the price of oil?
01:48Because it's been very volatile. Crude has been over a hundred dollars a barrel. How do you factor that in?
01:53How do you pass it along?
01:54Yeah. So we're booking, for the most part, a cargo on what's called a spot basis.
01:58So a client comes to us and says, we need to move a piece of cargo. We quote them the
02:04price. We do it at the same time that we're purchasing fuel.
02:07So we really don't have the fuel exposure. It does get passed on to the to the end user.
02:13What's interesting, though, because of where the price of fuel in general has gone, the price of oil has gone.
02:19We are seeing more increased coal shipments out of Baltimore, in particular, and Colombia. And when you start to see
02:26those ports ramp up exports, you know you have a coal market that's in a good demand situation.
02:33Is that a structural shift? Do you think that is the future going forward? Or is this just a temporary
02:37stock gap measure?
02:38I think it's two things. I do think it's the price of fuel.
02:41But I also think country, you know, the EU in particular, Japan, South Korea are all reassessing their energy security
02:48needs.
02:48We obviously have the whole AI story and the data center story and the need for for power.
02:54So I think there's a reassessment going on there. And then with the higher fuel prices on on top, coal
03:01is obviously less expensive and easier to to source today.
03:06Well, because I was going to ask with fuel prices going higher, if you've seen any levels of demand destruction,
03:12are you seeing any demand destruction or again, is the demand so high that they're still paying up?
03:18And then you add coal into that, too, and everything is fine. Right now. So I would say there is
03:22a little, very small piece of demand destruction on the fertilizer side.
03:26But when you really look at it, only two percent of the dry bulk trade is actually inside the straits.
03:34So it's not that much of a factor.
03:36What has happened, though, because of the higher price of fuel, the fleet has slowed down in the water, which
03:43effectively creates an even lower supply situation number of ships because there's ton miles from point A to point B
03:50grow.
03:51And then, I mean, for you, again, you don't have any ships in the Strait of Hormuz. But in order
03:56to get a ship that will traverse it, I mean, the U.S. and Iran right now are apparently close
04:02to having discussions on this one page memo that would include lifting restrictions on the Strait of Hormuz.
04:06What does it actually take to be able to get ships through there?
04:08So I think it's more of companies need to feel comfortable that they can go through. It's fantastic to draw
04:16up plans. And, you know, we saw Marisk obviously have a ship that that was escorted out.
04:21But that was one ship with with a lot of coordination. So I think it's more about the general feel
04:27that ship owners will have, whether it is safe or not.
04:31The Red Sea is a prime example. So the Red Sea, we haven't had really any attacks lately, but we
04:37still won't go through that area because we don't feel comfortable that our crew and our ship will be protected
04:43if something happens.
04:44By the way, is there a real risk that you could have, you know, Israel, for example, continuous attacks on
04:50on Lebanon?
04:51Is there a real risk that you could see more Iranian proxy forces increase activity in the Red Sea, for
04:57example?
04:58And what would that do to the entirety of the shipping industry? Like, what are some of these tail risks
05:01you're thinking about?
05:02Well, so the Red Sea in general, right, that is very positive for the container ship industry, a little bit
05:09positive for us.
05:11I think it's difficult to tell what group is going to do what. But, again, I don't see the Red
05:16Sea situation alleviating any time soon.
05:19By the way, when it comes to the dry bulk market, China has been really, really active with iron ore.
05:26I, one, wonder how much that's just contributing to your overall earnings. But, two, if you have a China that's
05:32trying to more, you know, nationalize the entirety of the process,
05:37if there is a risk that they cut companies like Genco out, if they do look at their more domestic
05:42shipping industry to try to make sure everything is vertically integrated.
05:45Right. So China is doing a few things. One, they are taking control or buying into control of commodities, particularly
05:53iron ore.
05:54There's a very large project in West Africa that's going to really ramp up over the next several years on
06:01the iron ore front. Long ton miles going into, into, into China.
06:06On the shipping front, in terms of protectionism, the fleet, their domestic fleet's just not big enough. It's similar to,
06:15if you think about the Jones Act in the U.S., we need foreign ships that can come and bring
06:19goods into the U.S.
06:20It's the same with China. So I actually, I don't see any risk on, on that front.
06:25Are we going to get the Jones Act repealed? It feels like, especially in this period where we've talked about
06:28backing off of it, that it feels like antiquated.
06:30Well, we certainly, we certainly have had it suspended. That is, that's for sure.
06:33The suspension is different than just like repealing this thing.
06:36Yeah. Well, it's, it's, it's political, right?
06:38So it's going to depend on what's going on in the House and Senate and who's in the executive branch.
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