Navios Maritime Partners Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 23, 2023

There are 9 speakers on the call.

Operator

Thank you for joining us for Navios Maritime Partners Second Quarter 2023 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou Chief Operating Officer, Mr. Stratos Desypris Chief Financial Officer, Mr. Esteroni and Vice Chairman, Mr.

Operator

Ted Petrone. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.navios mlp.com. You'll see the web Kathleen in the middle of the page, and a copy of the presentation referenced in today's earnings conference call will also be found there. Now I will review the Safe Harbor statement.

Operator

This conference call could contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward looking statements are statements that are not historical facts. Such forward looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward looking statements. Such risks are not fully discussed in Navios Sparner's filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks.

Operator

Navios Partners. There's no dispute any obligation to update the information contained in this conference call. The agenda for today's call is as follows: 1st, Ms. Fanbo will offer opening remarks next Mr. Desypris will give an overview of Navios Partners segment data.

Operator

Next Ms. Tironi will give an overview of Navios Partners financial results. Then Mr. Petrone will provide an industry overview. And lastly, we'll open the call to take questions.

Operator

Now I turn the call over to Navios Partners' Chairwoman and CEO, Ms. Angeliki Frangou. Angeliki?

Speaker 1

Good morning to all

Speaker 2

of you joining us on today's call. I am pleased with the results for the Q2 of 2023, In which we reported revenue of $346,900,000 and net income of $120,300,000 We are pleased to report a net earnings per common unit of $3.65 for the quarter. Navios Partners is a leading publicly listed shipping company diversified in 15 asset classes in 3 sectors with an average vessel age of about 9.8 years. We have 175 vessels split roughly equally into 3 sectors based on a charter adjusted volume. The macro environment is challenging.

Speaker 2

Trade patterns continue to be impacted by the war in Ukraine. China has experienced anemic economic growth since it exited the pandemic It currently appears to be addressing potential deflation. The West, while relatively healthy, are: With inflation, while fearing recession. Whether dry, container or tanker, there is a great deal of uncertainty about future prospects. We continue to focus on things that we can control, such as reducing our leverage rate.

Speaker 2

Our stated goal is to reduce leverage so that our net APV sourced within the range of 20% to 25%. This past quarter, net LTV ticked up slightly because of some deterioration in steel volume. However, our accumulated cash offset most of this decline. I mentioned this property so that you can understand how important we view this single metric. Please turn to Slide 7.

Speaker 2

As you can see, we have $270,000,000 of cash on our balance sheet, an increase of approximately $57,000,000 per last quarter. We are investing our net cash through our treasury function and earning about 5% on an annualized basis in the Q2 of 2023. We secured $350,000,000 of new financing in the Q2 of 2023. About $288,000,000 are: was used to refinance 36 vessels at an average margin of 2.4%. The remaining $62,000,000 was used to finance 2 additional MR2 newbuilding vessels at an implied fixed interest rate of 7%.

Speaker 2

Overall, our current weighted average interest rate is 7%. This consists of 5.6% average interest on our fixed rate debt, representing 36% of our debt 7.8 percent average interest on floating rate debt, representing 64% of our debt. As announced in the Q4 of 2022, we purchased 2 MR2 vessels for a total of $80,000,000 We expect to take delivery of these vessels in the second half of twenty twenty five and the first half of twenty twenty six. We recently chartered these vessels out for 5 year periods at a net rate of 22,959 Dola's 8 day total vessel. The overall economics of the purchase and charter can be summed up as follows.

Speaker 2

At the end of the 5 years, we expect to have earned aggregate EBITDA of $52,300,000 while having only 20% residual value exposure with 20 years of remaining useful life. During the charter, we will enjoy 13% annual yield. Fleet update. In 2023 year to date, we sold 13 vessels generating an aggregate sales proceeds of $242,000,000 We offset the sales repurchase of 3 vessels, including 2 additional MR2 newbuilding vessels For $80,400,000 the 2 vessels are expected to be delivered in 20262027. Our operating cash flow is strong.

Speaker 2

For the remaining 6 months of 2023, our contracted revenue is expected to exceed total cash expense by $64,800,000 We have 8,146 open index days, so we expect to generate significant additional cash in the second SRA of 2023. Please turn to Slide 8. Since our transformation in 2020, Our financial performance has been strong. Our Q2 2023 adjusted EBITDA is 17% higher the Q2 of 2021. Looking backwards, 2022 was 57% higher than 2021 and almost 5 70% higher than 2020.

Speaker 2

We believe that our diversified business model can continue to perform in difficult markets. I now turn the presentation over to Mr. Stratos Desypris, Navios Partners' Chief Operating Officer. Stratos?

Speaker 3

Thank you, Yieli, and good morning all. Please turn to Slide 9, which details our strong operating free cash flow for the second half of twenty twenty three. We fixed 71 percent of our available days at an average rate of $25,459 net per day. Our contracted revenue exceeds expected total cash expense for the remaining 6 months of 2023 by about 65,000,000 We have 8,146 opening index linked days that will provide additional profitability. Slide 10 Demonstrates our diversified platform in action.

Speaker 3

We aim to benefit from countercyclicality by redeploying cash flows from well performing segments Into assets and underperforming segments. We believe diversified asset base, mutual volatility on our financial statements. You can see this dynamic playing itself out in our asset base. As of the Q2 of 2023, container values dropped by 4%, Entribark and tanker values decreased by 1%, respectively, compared to the 4th quarter values. In sum, the net change to our fleet value is a decrease of approximately 2 Sasan.

Speaker 3

Multiple segments also allow us to optimize shuttering. In segments with attractive returns, we can enter into the interior charters. In other segments, we can be basing. Our containerships are 100% fixed at $38,200 net per day. Our tankers are 89% fixed $26,088 net per day and our drybulk fleet is 66% fixed at $14,620 net per day.

Speaker 3

As you can see from the chart on the bottom, overall, we fixed 80% of our 13,779 total available days For the Q1 of 2023, at the net average rate of $24,543 net per day. Please turn to Slide 11. We are always renewing the fleet so that we maintain a light profile benefiting from

Speaker 4

We have

Speaker 3

$1,400,000,000 remaining investment in 22 newbuilding vessels delivering to our fleet through 2027. In containerships, we acquired 12 vessels for a total of $860,000,000 which we helped by entering to long term credit worth of charges, Generating about $1,100,000,000 in contracted revenue for about 6.5 years average duration of the related charges. In the tanker space, we entered the LR2 Aframax subsector by ordering 6 vessels for a total price of approximately 380,000,000 These vessels have been chartered out for 5 years at an average net rate of $26,500,000,000 per day, generating revenues of approximately 290,000,000 We also ordered 4 high spec MRP vessels for about $160,000,000 2 of the vessels have been shuttered out for 5 years At an average net daily rate of $22,959 generating revenues of approximately 85,000,000 The drybulk newbuilding program of 8 vessels was completed in June 2023 with the delivery of a Capesize vessel. 7 tanker vessels for about $160,000,000 taking advantage of strong tanker market. Also, we sold 6 drybulk vessels for a total price of $82,400,000 Moving to Slide 12.

Speaker 3

We continue to secure long term employment for our fleet. As Yigaliki mentioned earlier, In the second quarter, we have created over $130,000,000 additional contract revenue. Approximately $85,000,000 relates to 5 year charters of $22,959 net per day on 2 new 1,000,000,000 in Artus and about $47,000,000 relates to 3 existing tanker vessels. Our total contracted revenue amounts to $3,300,000,000 of which $900,000,000 relates to our tanker fleet, dollars 300,000 relates to our drybulk fleet $2,100,000,000 relates to our containerships. Charters are extending through 20,237 with a diverse group of quality counterparties.

Speaker 3

About 55% of our contracted revenue will be earned in the next two and a half years. I will now pass the call to Ed Siloni, CFO, who will take you through the financial highlights. Eddy?

Speaker 1

Thank you, Stratos, and good morning, Oren. I will briefly review our unaudited financial results for the Q2 and first half year ended June 30, 2023. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Moving to the earnings highlights on Slide 13. Total revenue for the Q2 of 2023 increased by 24 $246,900,000 compared to $280,700,000 for the same period in 2022.

Speaker 1

Time charter revenue for the period is understated by $7,500,000 because of U. S. GAAP rules required the recognition of revenue for our charters with de escalating rates on a straight line basis. Available days increased by 20.4 percent to 13,572 compared to 11,269 for the same the quarter last year. Our average time charter equivalent rate was $23,900 per day, in line with Q2 2022 levels.

Speaker 1

In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. PC rates for our tankers increased by 89% to 30,947 and for our containers by 12% to $35,466 per day. In contrast, our drybulk PCE rate was 36% lower compared to the same period last year at $15,715 per day. EBITDA for Q2 2023 increased by 23 percent to $201,600,000 compared to $163,500,000 $163,500,000 for the same period last year. Our EBITDA includes a $10,200,000 gain related to the sale of 4 vessels.

Speaker 1

Net income for Q2 2023 decreased by 5% to $112,300,000 compared to 118.2 Zillow in Q2 2022, mainly as a result of a $16,300,000 increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from 4 0.27% in Q2 2022 to 7.44% in Q2 2023. In addition, net income has been negatively affected by a $15,400,000 increase in depreciation and amortization expense a $12,300,000 reduction in the positive impact of the amortization of unfavorable leases. Earnings per common unit for Q2 2023 were $3.65 Total revenue for the first half of twenty twenty three increased by 27% to $656,500,000 compared to $517,300,000 for the same period in 2022. Time charter revenue for the period is understated by $20,500,000 because U.

Speaker 1

S. GAAP rules require the recognition of revenue for our Sartes with de escalating rates on a straight line basis. The increase in revenue was a result of a 22% increase in our available days 27,480 compared to 22,497 for the same period in 2022. Farflee, time charter equivalent rate showed a slight improvement to $22,337 per day. In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year.

Speaker 1

TC rate for our tankers increased by 87% to 29,664 and for our containers by 20% to 35,226 per day. In contrast, our drybulk TCE rate was 40% lower compared to the same period last year at 13,346 per day. EBITDA for the first half of twenty twenty three increased by 35% to 390 €400,000 compared to €289,600,000 for the same period in 2022. Our EBITDA includes a $43,600,000 gain related to the sale of 12 vessels. Net income for the first half of twenty twenty three increased by 4% to 211.5 are $1,000,000 compared to $203,800,000 for the same period last year.

Speaker 1

Our net income was negatively affected by a $37,100,000 increase in our net interest expense due to the increase in our debt levels and interest rate costs. Our average interest cost increased from 3.98% in the first half of twenty twenty two to 7.2% in the first half of 'twenty three. In addition, net income has been negatively affected by a $29,500,000 increase in depreciation and amortization expense a $26,500,000 reduction in the positive impact of the amortization of unfavorable leases. Earnings per common unit for the first half of twenty twenty three was $6.87 Turning to Slide 14, I will briefly discuss some key balance sheet data. As of June 30, 2023, cash and cash equivalents were $270,100,000 In the first half of twenty twenty three, we paid $113,600,000 of pre delivery installments and other capitalized expenses under our newbuilding program $70,600,000 for vessel acquisitions and improvements.

Speaker 1

We sold 12 vessels for $215,800,000 net, adding $137,000,000 cash after the repayment of their respective debt. Our other current decreased mainly due to the decrease in accounts receivable from charters, which were settled for the year end, while our other current liabilities decreased mainly following the payments made in accordance with the management agreement. Long term borrowings, including the current portion, net of deferred fees, slightly reduced to €1,92,000,000 Net debt to book capitalization decreased to 37%. Slide 15 highlights our debt profile. We continue to diversify our funding sources between bank debt and leasing structures, while 36% of our debt has fixed interest at an average rate of 5.6%.

Speaker 1

We also try to mitigate part of the increased interest rate cost having reduced the average margin for our floating rate debt by approximately 30 basis points to 2.4% from 2.7% compared to 2022 year end. Our maturity profile is staggered with no significant volumes due in any single year. Slide 16 gives an update of the Q2 2023 Debt Developments. In terms of our newbuilding program, approximately 95% of our newbuilding financing is already concluded already documentation phase at an average margin of 1.8%. We have used the opportunity to expand our financing resources, adding new banks and resource, while we have also concluded our 1st export credit agency bank facilities in China and South Korea.

Speaker 1

During the quarter, we have arranged a total of $350,200,000 of new financings. Dollars 287,800,000 relates to spin. You can see our ESG initiatives. We continue to invest in new energy efficient vessels and reduce emissions through Energy Saving Devices and Efficient Vesselty Operations. Navios is a socially conscious group whose core values include diversity, inclusion and safety.

Speaker 1

With a very strong corporate governance and clear code of ethics. Our Board is composed by majority independent directors and independent committees that oversee our management and Sperations. I now pass the call to Ted Petrone to take you through the industry section. Ted?

Speaker 5

Thank you, Eri. Please turn to Slide 20 for the review of the tanker industry. GDP is expected to grow 3% in both 2023 2024 Based on the IMF's July forecast, there is an 85% correlation of world oil demand to global GDP growth. In spite of economic uncertainties and the Ukraine crisis, the IEA projects a 2,200,000 barrels per day or a 2 point 2% increase in world oil demand for 2023 to 102,200,000 barrels per day And a 1,000,000 barrels per day increase in 2024. Chinese crude imports continue to rise, averaging 11 300,000 barrels per day through July, a 12% increase over the same period last year, assisted by a record 12,700,000 barrels per day imported in June.

Speaker 5

Following a very strong Q1 across all asset classes, tanker rates softened only slightly in Q2, but remained well above long term averages on the back of strong supply and demand fundamentals, minimal fleet growth and shifting trading patterns resulting in longer haul routes, especially for Suezmax and Aframax. Recent OPEC cut, although less than the headline numbers and seasonality have put downward pressure on VLCC rates, particularly out of the Middle East Gulf. Turning to Slide 21. As previously mentioned, both crude and product rates remain strong across the board due to previously mentioned supply and demand fundamentals. Product tankers are also aided by healthy refinery margin and discounted Russian crude Exported to the Indian Ocean and the Far East, returning to the Atlantic as clean product.

Speaker 5

2023 crude and product ton miles growth is expected to increase by 6.6% and 11.9%, respectively, with continued ton mile growth in 2024. Turn to Slide 22. VLCC net fleet growth is projected at 2.2% for 2023 and negative fleet growth 0.9 percent for 2024. This decline can be partially attributed to owners' hesitance to order expensive long lived assets In light of macroeconomic uncertainty and engine technology concerns due to CO2 restrictions in force since the beginning of this year. The current record low order book is only 2.1 percent of the fleet or only 19 vessels, the lowest in 30 years.

Speaker 5

5 VLCCs were delivered during the balance of this year, One East in 20 4 and 20 5. Vessels over 20 years of age are about 14% of the fleet 428 vessels, which is about 7 times the order book. Turning to Slide 23. Product tanker net fleet growth is projected at 2.1% for 2023 and only 1.1% for 2024. The current Protecco order book is 9.7% of the fleet, one of the lowest on record and is approximately equal to the 9.8% of the fleet, which is 20 years of age or older.

Speaker 5

In concluding tanker sector review, tanker rates across the board continue at strong levels. The combination of below average global inventories, growth in global oil demand, new longer trading routes for both crude and products as well as the lowest order book in 3 decades And the IMO 2023 regulations should provide for healthy tanker earnings going forward. Please turn to Slide 25 for the review of the dry bulk industry. Chinese dry bulk import volumes held up well in the first half, while the net fleet growth slightly outpaced trade growth. That and the unwinding of congestion continue to put a cap on rates.

Speaker 5

For Q2, the BDI averaged 13.13, A 30% increase over Q1, which Capes provided the majority of that increase. As of yesterday, the BDI stood at 1194. While Chinese economic indicators continue to disappoint, it remains to be seen if the government will address these issues sufficiently to revive economic growth with past levels. Going forward, supply and demand fundamentals remain intact. A normally seasonal stronger second half, the historically low order book, declining net fleet growth, Softening U.

Speaker 5

S. Dollar and tightening DHT emission regulations remain positive factors, which are reflected in the FFA market. Overall, dry bulk trade in the second half of twenty twenty three is projected to increase by about 3% over the first half of this year. Please turn to Slide 26. With regard to iron ore, China's GDP grew at 6.3% in Q2 of this year.

Speaker 5

Should China implement stimulus measures, They should maintain already healthy iron ore demand. Global iron ore trade is expected to increase by 3.6% in the second half of twenty twenty three Over the first half of this year, coal trade continues to be impacted by the war in Ukraine as a ban on Russian coal shifted trading patterns Towards longer haul routes. Seaborne coal trade is expected to decrease by 2.7% in the second half of this year over the first half of twenty twenty three. As with coal, the global grain trade is also impacted by the war in Ukraine, shifting trading patterns towards longer haul routes. Seaborne grain trade volume is expected to grow by 2.5% in 2023, aided by tonne mile growth of 3.7%.

Speaker 5

Russia recently abandoned the Black Sea grain export deal. Additional grain volumes from Brazil, Europe and Russia are expected to make up the shortfall and further add to ton miles. Please turn to Slide 27. The current order book stands at 7.8% of the fleet, one of the lowest since the early 1980s. Net fleet growth for 2023 is expected at 2.9% and only 1.9% in 2024 as owners removed tonnage that has become uneconomical Due to the IMO 2023 CO2 rules enforced since the beginning of this year, vessels over 20 years of age are about 8.5% of the total fleet, which compares favorably with historically low order book.

Speaker 5

Concluding the drybulk sector review, continuing demand for natural resources congestion at the Panama Canal, war and sanction related longer haul routes combined with the slowing pace of newbuilding deliveries, All support freight rates going forward. Please turn to Slide 29. Container rates, Although well down from the first half of twenty twenty two historic levels, continue to surprise in 2023 with the Shanghai Container Freight Index, SCFI currently at tenthirty 1, which is only slightly lower than it opened the year at 1061. Overall, 2023 trade growth is projected to increase slightly at 0.3%. The outlook noticeably improved compared The initial 2023 growth projection of negative 1.6%.

Speaker 5

Global container trade is expected to remain challenging in 2023 the macroeconomic issues, including inflation, the war in Ukraine and elevated deliveries. As you'll note in the graph on the lower right, the U. S. Retail inventory to Sales ratio was off the recent low, but still well below the long term average. The graph on the lower left shows continuing growth in U.

Speaker 5

S. Consumer purchases of goods, Which is still above pre pandemic levels. Imports in the U. S. Have slowed using port takeaway bottlenecks and port congestion.

Speaker 5

Turning to Slide 30. Net fleet growth is expected to be 7.3% for 2023 and 6.6% for 2024. The current order book stands at 28.5 percent against the 10.9% of the fleet 20 years of age or older. About 73% of the order book is for 10,000 TEU vessels or larger. Concluding the container sector review, Supply and demand fundamentals remain challenged due to the economic and geopolitical uncertainties and an elevated order book.

Speaker 5

However, the prospect of Chinese stimulus And world GDP growth at 3% for both 2023 2024 provide a counterpoint to a challenging 2023. This concludes our presentation. I would now like to turn the call over to Angeliki for final comments. Angeliki?

Speaker 2

Thank you, Ted. This is completed our formal presentation. We'll open the call

Speaker 6

are. And our first question will come from Omar Khadav with Jefferies.

Speaker 4

Thank you. Hi, good afternoon. Thanks for the update, always very detailed across the business and the industry. I did want to ask just about kind of are: Clearly, you guys have been very active in terms of deploying your capital, I would say, wisely. You've been selling ships on the older end and you've been investing in your new buildings.

Speaker 4

And we wanted to ask you, you highlighted and you've talked about this Several quarters is the net LTV, trying to get that down to 20% to 25% range. Given you're a bit above that at the moment, and we can see visibly The path to get there over the next couple of years, but in the interim, how are you thinking about deploying the capital today, Forgetting the new buildings that you've got and forgetting if they're selling ships, how are you thinking about deploying capital for 2nd hand ships on the water today. Do you see opportunities there given the pullback we've seen Definitely dry bulk and containers and as you mentioned some uncertainty ahead just overall. Do you think there's opportunities to deploy capital

Speaker 2

I think you have seen how we are looking. I mean, the macro environment, we see the expected Chinese anemic growth and Western countries that are between inflationary recession. Nobody knows exactly if and when. So we try to be conservative. We see on the container segment, we have done a renewal of our fleet.

Speaker 2

We're 100% fixed, so we are sitting in a position to watch the market. On the tanker segment, as is very well said, we are optimistic on the market. We see that longer termite both on crude to be here in the main. We see and what we have done, we sold all the We sold about 25% of our fleet, replaced it with high quality vessels, which are we also charter out on quality counterparties, providing a 12%, 13% return. And basically, limiting our residual value risk.

Speaker 2

This is on and then So this is a position where we continue and we charter out our vessels at very attractive rates. Now on the dry, are: We have done a replacement of our fleet. We are opportunistically fixing our vessel on strength, and we are working. On any year, we will have a 10% of our fleet replaced, Depending on the position and the replacement, our guidelines on what we are trying to achieve, You can see very clearly from our actions. Now on looking on Our target, we have been articulating what is liquidity we want to have per vessel about 2,000,000 per vessel and our target ATV, net ATV.

Speaker 2

And this is 2 areas where I think it's fundamental to us. As we never know what will happen in next year, this is very fundamental on how we focus on this.

Speaker 4

Thanks, Angelique. And just the you mentioned $2,000,000 per vessel Of cash on hand or liquidity is the target?

Speaker 2

Yes, yes. And this is something you have heard that previously It is basically calculated on your net LTV. So

Speaker 4

Yes. Okay. And then maybe just on a follow-up, you highlighted the MR new buildings, you ordered 2 late last year, you just ordered another 2, We fixed the initial ones on a 5 year charter where residuals really come down, residual risk is really low. And just in thinking about the latest two orders, do you think is the plan or is the thought process to also secure those 2 new buildings similar to the first two on these 5 year charters. And also, can you give a sense of whether the charter Of the first to have given indications of interest on wanting more.

Speaker 2

I mean, we see quality I mean, we see top end users that they like this kind of vessels. We are talking about by replacing this getting the older vessels out and getting these newer MR tools, you have substantially reduced scrubber footprint, less consumption. So this is we see a high demand for quality vessels. And securing this specification. I mean, we think that we will be able to fix on these vessels, the second Not necessarily to the same counterpart, but we are not eliminating that possibility.

Speaker 4

Okay, got it. And then maybe just finally on Just overall, you have the new buildings in the container ships and in the tankers, you just took delivery of your final Cape new building. In terms of further new buildings as opportunities arise, do you think there's something to do in dry bulk Or do you look maybe to perhaps balance out the portfolio that given that is where your biggest footprint is, at least in terms of the vessel count? Are Or is drybulk also an opportunity for in new buildings if there's if you see things that make sense?

Speaker 2

Stratos always had this nice draft in the past where basically Where newbuilding prices are on drybulk and where earnings come from a period based only in March at this point, are: We have but we are always open on opportunities on vessels, investing in the water. We are looking and we are doing our math all along on every segment. We are trying to be as disciplined by. We don't forget, we bought over 10 drybulk vessels, which we already have completed and put them on charters, 5 year charters. And that was done, The last one was in this quarter, I think.

Speaker 2

So basically, this is a position we already have taken and we did it. We have those vessels in 2020, okay, so it was sometime ago, 2020.

Speaker 4

Yes. Okay. Well, very good. Yes. Definitely.

Speaker 4

Okay. Well, thanks Angeliki. I'll turn it over.

Speaker 6

Thank you. Are And our next question will come from Chris Wetherbee with Citi.

Speaker 7

Good morning. Good afternoon. It's Rob on for Chris this morning. Good morning. Good morning.

Speaker 7

We've seen some a nice uptick in terms of the Freitas pricing, Mainland China to U. S. West Coast. In the past couple of months, we've also seen a little bit of an improvement of some lows in terms of Mainland China to Europe. Could you give us an update in terms of what you're seeing within your customer base as we think about peak and looking out to next

Speaker 8

are So, our view is a bit more macro that we're watching the different It's a summer up, summer down. You can see the average on the SCFI that we talked about has been pretty good. The U. S. Consumer continues to surprise a bit.

Speaker 8

Remember, we're leasing out these ships to the All the charterers who are looking at the end users. We see a lot of there's some newbuilding overhang, right? But are: On the lower side, it's below $13,000 deadweight. I think the order book is probably half of what it is, that's 28%. So, we're very confident going forward that the charters will be looking at taking on ships.

Speaker 8

It's like the housing market. There's not most of the ships have been taken. And if you're looking to get some, there's not much out there. So some of the time charter rates have been going up and so has the duration, which is very good sign for us. But it's a challenging year for And for the market, but I do think you'll see some surprise numbers.

Speaker 8

And of course, being 100% fixed, We could sit back and watch it objectively.

Speaker 7

No, that makes sense. And as we're thinking about next year, kind of How fixed are you guys in the time charter? Can you just kind of remind us where you are with regard to charters coming off The next couple of years.

Speaker 2

Yes.

Speaker 3

In the Next year, we only have around 80%. We have around 80% of our vessels containers fixed. And we are starting to get But I would say that we are pretty much covered for at least 24 in our fleet in the container sector.

Speaker 7

That's helpful. Obviously, there's been a lot of noise about climate change and the impact in terms of certain key Trade routes. We're seeing very, very low levels in the Panama Canal, which is causing kind of backlogs. Are Are you seeing that in other trade routes? And maybe you could just kind of talk higher level kind of what the impact you're seeing from congestion are And from low water levels is having just broader demand across the different vessels that you guys operate in.

Speaker 2

Yes, and that's a very good and very topical. Ted will go through, but big picture you should think of the following. I mean, we show the pickup And that is it is actually going to be affecting it's like congestion. It affects It creates longer time at sea, longer ton miles, and they have to divert. That is one charging point and then and it is basically like congestion.

Speaker 2

So I mean

Speaker 8

Yes, I think such a big topic, The climate change. I think you're going to El Nino now. You're going to have some better grain out of South America, less out of Australia, you have water issues in Europe, which would sort of eliminate some of the takeaway from the biggest ships as the barges go inland. There is the yin and the yang also. I think China was having rain in the wrong places.

Speaker 8

So every year you're going to be looking at Different issues that affect, but I do as Angeliki said, the Panama Canal is definitely a freshwater issue, which is Related or not to climate change, but it's going to run through the winter that could bring congestion for bulkers that are going with grain, the containers coming back, some of the Capes coming back from the Pacific. There's a lot of issues here. But really, the macroeconomic ones that we think are more instrumental in driving the market, but it's certainly an issue that we're all watching on the climate change side.

Speaker 7

And Ted, on the bulker with regard to Panama Canal, are you getting inbound inquiries from some of the container, the vessel operators to really kind of extend trade route, I. E. Kind of go around Africa as opposed to through the Panama Canal, given where The backlog, is it getting through the Panama Canal? Or is that not yet something we're seeing?

Speaker 8

Yes. No, not yet. I think you're going to see some more congestion as the Gulf grain season opens and clogs the canal more. You'll be seeing some grain vessels going through the Suez Going out to the far east. So even if congestion stays where it is, I think as Angeliki said, we were probably at about 80 ships normally or about 130 now on the canal 4 days, Not so much, but as that goes up, that may stay there, those numbers.

Speaker 8

But what you'll be seeing is other ships doing longer routes, which you don't Into the canal congestion, right, but it's going to be affecting the routes and it makes the fleet more efficient, which obviously brings the rates up.

Speaker 7

Yes, that makes a lot of sense. Really appreciate the color.

Speaker 8

Sure. Thanks.

Speaker 6

Thank you. At this time, there are no further questions. So I would like to turn the call back over to Angeliki for any closing remarks.

Speaker 2

Thank you. This completes our second quarter results. Thank you.

Speaker 6

Thank you, ladies and gentlemen.

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Earnings Conference Call
Navios Maritime Partners Q2 2023
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