Golden Ocean Group Limited (GDOCF) Q3 2015 Results Earnings Conference Call November 24, 2015 8:00 AM ET
Executives
Herman Billung - Chief Executive Officer
Birgitte Vartdal - Chief Financial Officer
Analysts
Fotis Giannakoulis - Morgan Stanley
Erik Stavseth - Arctic Securities
Magnus Fyhr - GMP Securities
Amit Mehrotra - Deutsche Bank
Ole Stenhagen - SEB Enskilda
Operator
Good day. And welcome to the Q3 2015 Golden Ocean Group Ltd. Earnings Conference Call. Today’s conference is being recorded.
At this time, I would like to turn the conference over to Herman Billung. Please go ahead, sir.
Herman Billung
Many thanks and welcome to the Golden Ocean third quarter 2015 presentation. We’ll go through the agenda as follows. We’ll go through some highlights and Birgitte will take you through the highlights, recent developments, financials, fleet information, and then I will briefly take you through a macro update and we’ll open up for Q&A in the end. So then please, Birgitte?
Birgitte Vartdal
Thank you. The market improved in the third quarter relative to the first half of the year. This led to an increase in the net time charter revenues of $13.4 million. The increase is mainly explained by higher rates in the Capesize segment but also our ice class Panamax vessels had stronger performance due to profitable contracts in the third quarter. However offsetting the higher earnings was several negative effects, including one-off items as impairment and negative mark-to-market movements on interest rates.
The company has taken further steps to improve the cash position during the quarter both through further delay in the newbuilding program as well as conversion and sale of two newbuilding contracts.
As of today, the fleet of Golden Ocean consists of 52 sailing vessels, including one in a joint venture and 21 newbuilding contracts of which five will be sold.
Look at the fleet development. During the quarter, we took delivery of the first of the four vessels that have been sold to an unrelated third party. The sale was concluded in August and got sale proceeds of $46.8 million including extra. Also in September, the company took delivery of Golden Finsbury from JMU. We paid $41 million on delivery and drew $27.2 million of debt.
During the third quarter, we completed a transaction with Ship Finance for a sale-leaseback of eight vessels. The vessels were delivered more or less evenly spread during the quarter and you can say that on average each vessel were owned half of the quarter and on time charter, approximately half of the quarter. The transaction freed up around $83 million net of debts paid. Also due to delay in the newbuilding program, we have agreed with RWE to amend the contract up to charter of 10 vessels for 7.5 years instead of 15 vessels for five years on index linked time charter contract.
On the newbuilding program, we have agreed with [indiscernible] to perform delivery of three Capesize vessels from September and November this year until February through to April of next year. Also, the company has agreed with the new time [ph] to convert two Capesize vessels to Suezmax vessels and subsequently to sell those contracts to Frontline. The net proceeds received from the sale is $1.9 million. In addition, the company has reduced the capital commitments with $93 million. This is equivalent to a sale price of $47.5 million per vessel had the company constructed the vessels and sold them on delivery. The transaction is expected to close late 2015, and we expect to record a loss on disposal of $9 million in total on the two vessels.
We also like to mention that for Golden Aso which was delivered on June 30, we drew down $26.4 million in debt early July. The company held its annual general meeting in September and it was approved to reduce the share premium account to zero and credit the same amount to the contributed surplus and this was carried out in Q3.
If you look at the results for the quarter, operating revenues are up by $16.4 million, about the same time voyage expenses are up $3 million. So net time charter equivalent is up by $13.4 million from the second to the third quarter.
Operating expense is slightly higher in the quarter mainly due to increased dry-docking activity in the third quarter as well as a few more sailing vessels. Charter higher expenses increased due to the delivery to Ship Finance and also due to a provision for onerous contract of $1.8 million. Admin expenses are down by $1.7 million in the quarter relative to the second quarter mainly related to extra costs that was incurred in Q2 following the merger between the former Golden Ocean and Knightsbridge Shipping.
There is a loss on sale of a newbuilding of $2.3 million related to Front Atlantic, and at the same time we have taken an impairment of [7.1 million] related to the three following newbuildings that are sold in the same transaction. These vessels are constructed by Ocean -- will be delivered to the new owner upon completion from the yard.
It’s important to note that for the Ship Finance transaction which is classified as an operational lease, the hire paid is partly booked as charter hire expenses which is the – they are both elements of the hire of $10,600 per day and partly as operating expenses which is the actual operating cost incurred on the vessel.
The net operating loss for the quarter is $24.8 million and other income expenses which are mainly finance related items is negative with $15.9 million giving a net loss of $40.7 million for the quarter. On the financing, there is a negative mark to market of $5 million in Q3 related to interest rate swaps which dropped during the third quarter.
If we look at the balance sheet, cash including cash classified as restricted cash is $190 million at the end of the third quarter. Most of the restricted cash is related to our cash covenants in the loan agreements and is not restricted as such. The vessels increased with delivery of Golden Finsbury and decreased with the sale of eight Ship Finance vessels. The debt decrease is due to the repayments of vessels sold to Ship Finance, and this transaction also reduced the short term debt as part of the facilities related to those eight vessels were due within one year as of June 30, and as they are now paid back, the short term portion is related to running debt repayment. We also drew debts on Golden Aso and Golden Finsbury during the third quarter.
On the newbuildings, following the postponement of the three vessels to next year, we will not take delivery of any vessels to our fleet during the fourth quarter. One vessel will be delivered and sold to new owner during the fourth quarter. Based on the conversion and sale of two contracts, the remaining newbuilding program will be taken delivery to the company is 13 Capesize and 3 Supras. The conversion has removed the financing need for 2 Capesize vessels and the company currently has 3 Supramax vessels outstanding to finance.
When looking at the exposure, the majority of our fleet has been trading spot, we have fixed some of our ice class Panamax vessels for the winter season and we also have some cargo contract on the ice class vessels. For the operating expenses, we have picked out what has been ordinary operating expenses and what is related to dry-docking. For Q3 the numbers are based on 50 vessels in total, two Kamsarmax and one Capesize were docked in Q3 and in Q4 we expect one Capesize to dock. In total, if we also include vessels docked in former Golden Ocean during the first quarter, the company has docked eight vessels this year but for 2016 we only expect 3 vessels to be docked.
The operating expenses including management fee paid to ship managers is stable around $4700 per day for Supras, $5500 per day for the ice class vessels and Kamsarmax vessels and around $5400 per day on average for the Capesize vessels.
Herman Billung
Many thanks, Birgitte. I will be little bit briefer than usual on the macro side, not because we have given it, but there is not that many changes really from last report apart from the fact that fourth quarter has been a big disappointment for owners of the dry-bulk assets and I will try to explain what is really going wrong at the moment on the demand side.
Looking into the global economy, I mean at first glance, it doesn’t look too savvy in a way that I am still expecting a growth this year of about 3.1% but obviously looking into what is happening in China and the 6.9% growth, it’s where that growth is coming from which is a growing concern, given that these softer sector services are taking a bigger share, as an example, the GDP growth in second quarter and well into third quarter, the contribution from finance services was about 25% of the GDP growth in China and on top of that, as we all know questions continue to be asked about the quality of numbers presented from the Chinese authorities.
And on the next slide, I think that kind of illustrates quite well what I just said about what is happening in China. I mean we are hovering around zero growth in most important areas for dry-bulk. We have seen a small pickup in year on year change in investment and real estate floor space. We have seen at least in tier 1 cities that prices have gone up slightly and usually housing starts is lagging six to nine months compared to say price hikes but a lot of uncertainty is still related to over-capacity in real estate in China. Steel output, more or less the same. Car sales, still a negative territory year on year and electricity output is basically at zero. That takes the utilization at the moment, like about 80%. We see now that we will have and I will come back to that, we will still be struggling with quite a few newbuildings are expected to be delivered first half ’16 but just six months ahead of time, the supply will look much better than it does right now.
Looking again then on the import quarter to quarter. We continue to be -- the big negatives are not surprised any more, but the biggest negative element, we have seen a small pickup in iron ore but year on year its iron ore is more or less flat. Grain is slightly up and others are slightly up but we don’t see a demand growth this year, I think best case will be around 1%.
And again looking at iron ore and coal, it looks apart from sale they were slightly disappointing but it seems that coal is presently stable I think at least for the last two months, iron ore more or less the same what has been the biggest contributor on the smallest size has been steel products which is mainly then Chinese steel exports, we expect China to export around 110 million tons of steel this year which is one of the biggest contributors to the fact that steel production in China is more or less flat while the consumption is down. But all in all the China’s dry-bulk imports is down 4% year on year and coal on its own is down 65 million tons so far this year while India’s imports are up 25 million tons, so India has not been able to catch up with a shortfall of Chinese coal imports.
Global steel production, slightly up maybe half a percent down, and China goes along with the rest of the world, so global steel production is slightly up so far this year. Then I think the most interesting part and I apologize we are not mentioning this before but this source for this presentation is Clarksons Platou where they have updated their base case on Chinese iron ore sensitivities and if you see there, in their base case they expect steel production to be the same in 2017 which today means that the total iron ore should be 1.2 billion tons but at the same time they expect the substitution factors seem to be there backed by lower commodity prices or iron ore prices which means that iron ore imports should increase according to Clarksons Platou by and over 75 million tons over the next two years which is basically about 2% per annum. In their downside risk scenario where they have reduced their steel production from 830 million to 810 million tons and less substitution, iron ore imports will be more or less flat going – over the next two years.
Generally coal is obviously under threat from many reasons, first and foremost from environmental perspective, however I am a little bit cautious optimist when it comes to coal imports to China coming months, mainly due to the renewal effect, there are many analysts who have different views on that, but at least we know this, water [ph] is so large, are still fairly low and cold winter and dry winter in China will support coal imports but overall I think we should not expect Chinese coal imports to increase going forward or at least at a very small scale.
Then again looking a little bit on what will contribute – or what is contributing to the energy generation in China, obviously coal is still a major contributor but year on year coal contribution is down year to date 2.3% while natural gas is up 33%, obviously from extremely low levels. But there is a shift in sourcing. But looking ahead we know that most of new capacity of hydro-power is kind of installed, so we don’t expect a lot of new capacity coming and if we believe that China will increase their power generation by 2% over the next two years then coal will have an impact. But again the sourcing is a big question, are they going to import or are they going to use domestic coal? We know that also it’s not only international coal producers who are struggling at the moment, Chinese domestic producers are having a tough time, major layoffs and one of the major coal producing companies is stock listed one and the big question again, are the Chinese authorities there to subsidize domestic coal but that they will have to use more coal over the next two years, that’s something most analysts agree upon and this is accordingly to National Energy Board of China.
And the next is just showing what we have been discussing many many times, the sensitivity in Chinese coal imports shows that only 6% of their demand is covered by imports, so we all understand that on the 3.7 billion ton production, just a small change from domestic to imported or the other way around has a major impact on demand.
India, again according to official Indian sources, India is going to be supplied by coal within the next seven to eight years, we don’t really believe in that and I think I am in line with what Clarksons Platou is saying here that we will expect China, not India – coal imports to increase gradually and at an average 50 million tons over the next say two to three years. Supply – that’s a – it’s the forward curve, so right now as an example, Capesize FFA market was hedged for 2016 and ’17, combined is trading at $7500, $8000 per day, if that is happening, I mean I think the supply side will – it’s forced to repay so faster than most analysts really are able to capture with, still their official order book is around 16.8% in deadweight ton and number of vessels 15%, so I think the order book is more like 11% to 12% and if you take – in a market scenario which is still reflected in the FFA market, I think any Capesize older than 15 years is a potential scrapping candidate and which means – and if you look at the total order book for Capes, all Capes older than 15 is more or less balanced, which is also you can see next graph is just showing the breakdown of each year of delivery and obviously what we have seen – what was ordered in say ‘12 and ’13, that was the last kind of done so orders with the market in really needs.
To conclude, Clarksons Platou is expecting demand growth to pick up slightly next year more or less par with the fleet growth and then demand growth will gradually overtake the supply growth through ’17 and I think that is more or less what most analysts are saying. I think it’s a fair chance that the supply could look better than what is illustrated here, maybe that demand could also be slightly worse but all in all I believe that we will be struggling with over-supply next six to 12 months. As a consequence the focus for Golden Ocean obviously is to do whatever possible, all means possible to repair or to take actions to protect both the cash and the balance sheet. Of course as we have said this few times, I think Golden Ocean has the backing both through the shareholder base and support from our lenders to be the last man standing if the FFA market materialize. Personally I doubt it, I think it will – the first six months will be challenging but then I think we will see gradual improvements through – from second half of ’16 and through ’17.
So that ends our presentation. And then we open up for any questions the audience might have.
Question-and-Answer Session
Operator
[Operator Instructions] And we will take our first question from Clinton Webb from GMP Securities.
It seems that Mr. Webb has stepped away, so we will now take our next question from Fotis Giannakoulis from Morgan Stanley.
Fotis Giannakoulis
Herman, you talked about the backing from your banks and your major shareholder and the focus of the company on liquidity. Can you give us a few examples of how this liquidity can be further enhanced? Are there any sale and leasebacks or additional debt finances that you are considering or that might include also equity issuance?
Herman Billung
At this stage -- I mean this is work in progress as you saw. For this, we were able to do something now in November. I am not going to go into details about the support from our lenders, but we see that they have a strong support. We are not considering equity issuance at present stage. We are working more on alternative solutions like, for example, sale leasebacks could be one option. But this is kind of work in progress continues, it’s not easy for us to kind of comment upon it in more detail, sorry about that.
Fotis Giannakoulis
I fully understand and I fully respect that but I am sure you have ran some stress case scenarios and given the weaker market and given the current FFA curve, based on the scenarios and the solutions that you have in mind, how long do you think that the market can stay at the current levels before you need to have some equity support? Is this something that can extend beyond the next 12 months or even 2 years?
Herman Billung
I mean it depends very much on how successful we are on the present actions we are taking. So that will be a little bit too speculate, so I mean our target is obviously to run through ’17 without – given the present market without raising equity, that’s kind of our target, that remains to be seen, but it depends obviously on how successful we are on what we are working on as we speak.
Fotis Giannakoulis
I want to ask about your sale and leaseback. There are -- obviously right now the sale and leaseback is in a territory which is generating negative cash flows. Are there any sorts or have you explored the possibility of arranging the terms at least in the near term probably lowering the rate that we are paying for a couple of years, and then giving some other form of upside to seek finance, is this after that they can come on the table?
Herman Billung
Not at the present moment, Fotis.
Fotis Giannakoulis
And on the market, you talked about – you think that the market is most likely going to be weak for the next 12 months. I want to understand how much of this downturn do you consider part of a cyclicality and how much is because of some structural issues that the steel and coal industry might have? I understand that the fleet is growing still by more than 2% and the demand is pretty much flat, and there is also some excess capacity that needs to be absorbed. Can you give us some steps that you think are necessary for the steel market to start producing more iron ore imports and the coal to start getting in the positive territory?
Herman Billung
First of all, I think right now I mean looking at the commodity prices, I think generally that – if you look at the stock price, I looked at the stock price day before yesterday, and I don’t see any reason for the importers to restock with the present backwardation. I think you need to see some signs of stronger iron ore prices. We saw some macro [ph] that didn’t help the iron ore prices at all, I think somebody was expecting that to happen, but I think right now it’s also believe or not but – it seems that a lot of owners are just sighted out in a way, they give up too easily. So because we feel that right now like yesterday the activity was quite brisk but suddenly you have an owner who is just giving in because they are happy to – when last [indiscernible] was 4.25 on the stock, they have to be 4.40 instead of holding back a little bit. So it’s a combination of a few things, but I think right now there is a potential for some restocking if iron ore prices move, has a shift, and then as I said I think it’s going to be quite interesting to see what’s happening this coming winter on the coal in China that could be within the next six months on the demand side, I think on the positive upside for the way I see it really. Structurally, I think on the iron ore, I think it’s – we cannot expect more than 1% to 2% growth, but on the supply side, Fotis, I think there are – I mean it’s fairly dramatic here what we are facing. So I think there will be further delays and cancellations and people are willing to leave them on the table to escape from contracts.
Fotis Giannakoulis
You mentioned that your order book in your view is much lower than what the brokers are showing and analysts are projecting, I think you said around 10%, 11% versus 17%. Can you give us a little bit more color from your discussion with the shipyards and how much stress is out there from the private owners, obviously this is your company’s, not a typical example, you have a much stronger – the strongest backing that you could have, but what is happening in the rest of the market and if you also think that the asset prices – they have declined dramatically, have a risk bottom or there is a risk of another round of declines in vessel values?
Herman Billung
I mean I think on the vessel values, it’s still under pressure. I think from a risk reward perspective, I would love – if we are in a position to, I’d love to both vessels at present asset prices, but we kind of are not in a position to do that right now. There are so many rumors than what is substance and what is rumors is hard to call but I’d say – I think the order book if you look at it, every year – what is actually delivered compared to the official order book, this year most likely will end up with something like 65%, 66%, you can just look at the order book for the remainder of 2015 and that everybody understands that’s not going to be delivered another 50 million deadweight capacity, who wants to take delivery in November and December. So I think – and then I am afraid that we will have kind of quite a few vessels coming into the market in January and February as we experienced last year but I think again then scrapping will pick up back to levels we saw in between say March and June 2015 or this year. I think it’s a fairly mixed for the entire ship building industry at the moment. I mean it’s not only the dry-bulk, we know other sectors, so we are struggling even more or so, I think and from what I understand some of the Korean arts are under pressure from the authorities, through KDB and what they really – what have you – I think 65% of the private Chinese yard haven’t been divested in 2012, and I think particularly Supras and Panamax that comes from outside, I think there will be a lot more cancellations internally in China.
Operator
And we will now take our next question from [Runa Sen from Nordea Americas]
Unidentified Analyst
I will just have a six fairly short questions. First with respect to the Front Atlantic, is that one of the three vessels that were to be taken back on six to 12 months time charters? Secondly, are there any more impairments or capital losses that you expected to take on the remaining tree Capes that you sold in April, and then thirdly, are there any more –
Birgitte Vartdal
I can take those two parts, yes, Front Atlantic is on six months time charter.
Unidentified Analyst
And then are there any more impairments you expect to take on those?
Birgitte Vartdal
No, we don’t expect any more impairments.
Unidentified Analyst
Do you have any more conversion candidates like the one Frontline deal you recently did, I mean for instance, the vessels you have with the delivery in 2017, can you do something like similar with those?
Herman Billung
At the moment we are not looking at that right now.
Unidentified Analyst
And also in your cash flow statement you have an item there you’d call purchase of investments which is some $12 million, can you give some more color on what that is?
Herman Billung
Not really.
Unidentified Analyst
And then my fifth question is your restricted cash position like $10 million in the quarter, is this equivalent to minimum cash covenants, they also have been down 10 million.
Birgitte Vartdal
This is due to lower debt, so that the cash covenants is 5% of the debt.
Unidentified Analyst
And the final question is, you said 5% off –
Birgitte Vartdal
Interest bearing debt.
Unidentified Analyst
And then a final question is related to the interest bearing debt that you have, so I guess in the long term that you haven’t also included the convertible, but is it included at par or but is it market value and if you were to – you have adjusted it then, if it were to include apart with the long term debt we have.
Birgitte Vartdal
The convertible is up in Q3 around $167 million, it was valued at the time of the merger of $161 million and then we are amortizing it up to 200 million at the time of repayments through an extra interest charge, so there is an effective interest rates of around 6.5%to 7% on the bond.
Unidentified Analyst
But it’s recorded in the balance sheet today of 167 million.
Birgitte Vartdal
Yes.
Unidentified Analyst
So if I were to include at par then at what 33 million.
Birgitte Vartdal
Yes.
Operator
We will now take our next question from Erik Stavseth from Arctic Securities.
Erik Stavseth
My question relates to the debt that you have drawn down the case, I mean you’ve drawn down 27.2 million on Finsbury, 26.4 million on Aso, initially you had indicated that you could draw down as much as $30 million per vessel. Is that indicative of the max amount available to draw down on future vessels?
Birgitte Vartdal
We expect that we can draw closer to 30 million, there is a drawdown test at delivery but there are some discussions around that, so of course it depends on where the values are but we are planning on purpose of study.
Erik Stavseth
And then secondly, was the Aso the last vessel under the $420 million facility?
Birgitte Vartdal
Yes, correct.
Erik Stavseth
And then lastly on the sort of loan to value covenants that you have, the different facilities you have, are any of those sort of closing in on potentially how much those values drop before you may have to pay an additional cash to amend them or to be in compliance with them?
Birgitte Vartdal
There are no loan facilities as of September 30, we are closing in at some point but it’s not significant amount in the near future.
Erik Stavseth
Would you give us an indication of which sort of facilities – first to be breached, is that the $284 million facility or is it the other ones?
Birgitte Vartdal
No, it’s not that one.
Operator
And we will now take our next question from Marius Furiley [ph] from Carnegie.
Unidentified Analyst
Unfortunately Erik from Arctic just asked questions of mine but could you please tell us if you are planning for a potential loan to value covenant breach or not?
Birgitte Vartdal
We are not planning for that but what do you mean?
Unidentified Analyst
I mean Herman told us just recently that he sees downward pressure on lot of these and is it likely that you would need to pay down debt further than your base case?
Birgitte Vartdal
We run scenarios on sensitivities but yes.
Herman Billung
I mean as Birgitte has said there is still some room there, its asset values are under certain pressure but obviously this is – we are not planning on it but we are focusing on it. But we are managing it, to put it that way.
Operator
And we will now take our next question from Magnus Fyhr from GMP Securities.
Magnus Fyhr
Hi it’s Magnus Fyhr. I just had a question on the remaining instalment payments on the newbuilding program. How much of the $632 million are equity payments from Golden Ocean?
Birgitte Vartdal
You have to deduct the 46.2 times 3 that we will receive upon sale, then we have the financing under the 425 facility for 13 vessels, it used to be in the area of 395 but as I said earlier that’s depending on the test. Then we have to finance the 3 Supramaxes and then you can make your assumptions under that I think.
Magnus Fyhr
So if you use about 30 million per Cape going forward, it’s about 70 million I think if you use 27, maybe 100, is that in the ballpark between 70 million to 100 million of cash payments?
Birgitte Vartdal
It’s less than 500 million if you deduct the sale, the sale proceeds from the 3 Capes, then if you say you get close to 400 million on the 13 Capes, you have 100 less but then we also have financing to draw on 3 Supras, so it’s in the range of 50 million to 60 million ish depending on values.
Magnus Fyhr
And you mentioned earlier you have some of the test for – to obtain financing, what are some of these tests, I mean it looks like at 30 million you are close, I mean pretty high level. Basically how much can you borrow on these vessels, I mean 30 million –
Birgitte Vartdal
I refer to my previous response where I said that we expect to draw close to 30 per vessel but discussions are ongoing.
Operator
And we will now take our next question from Amit Mehrotra from Deutsche Bank.
Amit Mehrotra
Just had a few follow ups, first on the remaining deliveries, are all the facilities susceptible to LTV test prior to delivery and is it 60% to 70%, or are some of the facilities higher than that or maybe connected to bareboat leases that are fixed to the contract price, if you can just provide some color on that please?
Birgitte Vartdal
I think I’ve tried to answer that question two times. There are tests.
Amit Mehrotra
Well I am asking again so I guess it wasn’t very clear so that I am asking it again.
Birgitte Vartdal
Okay, I will try again then. We expect to draw close to 30 million on Capesizes, and we are in discussions on that on the 3 Supras, we haven’t concluded any financing yet, so we are not there to give you a specific guidance.
Amit Mehrotra
Let me ask a couple industry questions, one is just on the comments about additional cancellations, we’ve seen others making announcements in terms of productive discussions with the yards, just want to see that how much more room there is for some release there or have the yards basically given all that at this point or was that really just a comment on basically cancellations of orders that really weren’t there to begin with?
Herman Billung
I think on the order book going back to that official order book, it seems to be very easy to add vessels on the order book generally but to take them out is more complicated. So I have been constantly questioning this, I sold the order book. I think still what is – obviously we all make assumption because they have internal transactions particularly say at the yard like Kima body [ph] where they are backed by their own facility, then – and I think what I have just been to Japan and they continue to scale down production and things out in time and they don’t seem to be very desperate but most of what it’s on order in Japan will most likely be delivered one way or the other. Then in China I think still there is --- have in mind that half of the order book of dry-bulk is even more in China and I think quite a few of the internal Chinese deals that will be cancelled still, I don’t see that many conversions any more really because there are not that many yards who can do conversions and if you look at the order book in ’17 it’s early timing and most likely some of what is in ’16 will be delayed into ’17 and even ’18. In Korea, as I said Korea presently are under certain pressure, and what we see now the gap between sale, lease – prices are not official what the yards are offering, it’s massive and I don’t think the yards have much room to be on there. I think it’s very difficult even for a Chinese yard to offer a Capesize newbuilding at much below $45 million or standard 80,000 deadweight, I think it fits the most bearish analysts are right in their assumption in the forecast in the 6000, nobody can live it, as it’s not the sustainable market for anybody really. So that means that it could be a little bit situation around that at the yards and I think the yards are willing to kind of restructure and try to get what they have on the book going one way or the other and do further delays.
Amit Mehrotra
Just one last question related to the industry, certainly the silver lining here is the scrapping can hopefully reach historical levels but I just wanted to get sort of your experience and perspectives on the logistics behind maybe 10%, 15% of the fleet going for scrappage really all at the same time and just wanted to understand is there some level of scrapping capacity that once reached there is a little bit of a pause until that is digested, if you could just provide – I mean I guess there is endless amounts of beaches in this world especially in the Southeast Asia, but is there any level of scrapping capacity that we should keep note of before we think all these ships at once are going to go at the same time?
Herman Billung
Whenever I ask say those who are involved in scrapping it seems that capacity is not really the problem, you saw what happened in April, it was massive but again I think you will see in the market – in the low market that scrapping will start to pick up again and then you have regulations coming into place and I think as the vessel that is going through special survey – they will take a long hard look even at the scrapping price of $250 to $300 instead of investing $2 million to $3 million in steel renewals. But I don’t see scrapping capacity as a major issue.
Operator
And we will now take our next question from Ole Stenhagen from SEB.
Ole Stenhagen
Just very quick question, do you have any ambitions to increase your segment reporting in your future reports compared with the other companies where the same main owners use, that will detail on your relative performance in the various segments?
Herman Billung
Think about time charter per day earnings?
Ole Stenhagen
Per ship type or performance – total performance per ship type or what performance per ship type or whatever you are comfortable with?
Birgitte Vartdal
We will consider it, Ole.
Ole Stenhagen
But you have been considering for a long time.
Herman Billung
Yes but I mean if you like, we are presently working on a different type of reporting.
End of Q&A
Operator
[Operator Instructions]
Herman Billung
Okay. Then I think we end there. Thank you everybody for attending and we catch up again in Q4.
Operator
Thank you. That will conclude today’s conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.
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