Loukas Barmparis – President Konstantinos Adamopoulos – Chief Financial Officer Polys Hajioannou – Chairman and Chief Executive Officer.

Jon Chappell – Evercore Fotis Giannakoulis – Morgan Stanley Magnus Fyhr – Seaport Global James Jang – Maxim Group Harsha Gowda – BlueShore Capital.

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers conference call to discuss the Third Quarter 2017 Financial Results. Today, we have with us from Safe Bulkers, Chairman and Chief Executive Officer, Polys Hajioannou; President, Dr.

Loukas Barmparis; Chief Financial Officer, Konstantinos Adamopoulos; and Chief Operating Officer, Ioannis Foteinos. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session.

[Operator Instructions] Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at 212-661-7566. I must advise you that this conference is being recorded today.

Before we begin, please note that this presentation contains forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, concerning future events, the company’s growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters.

Words, such as expects, intends, plans, beliefs, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward-looking statements.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels, competitive factors in the market in which the company operates, risks associated with operations outside the United States and other factors listed from time to time in the company’s filings with Securities and Exchange Commission.

The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with respect thereto are any change in events, conditions or circumstances on which any statement is based. And I now pass the floor to Dr.

Barmparis. Please go ahead, sir..

Thank you. Good morning. I am Loukas Barmparis, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the third quarter of 2017.

Before I start the presentation, I would like to point out that after several quarters, although on unadjusted basis due to $8.2 million debt write-off, the company is, again, profitable.

We are working to improve our capital structure and further reduce our financing costs, lowering our break-even point and achieve profitability as soon as possible on unadjusted basis. Let’s now continue with the developments in our industry.

The excessive order book of the past years is substantially exhausted, as shown in Slide 3, especially for Panamaxes, where most of our fleet operates. Double digits excess supply is now reduced to 7%, spread out until 2020, as shown in the lower figure. Some limited requests for new orders cannot change the improving outlook for 2018.

The base for an improved market in 2018 is created by cash liquidity and the time lag between the placement of an order and fleet delivery. We expect that technology constraints related to new regulations for ballast water treatment plant and for SOx emissions will also influence the market. Moving on the demand side in Slide 4.

In terms of coal, which accounts for half of the Panamax trade imposed Chinese restrictions, seriously affected trade at the end of 2014 and 2015. Presently, we’re – expectation for 4% growth in ton miles for 2017. In terms of grain, which accounts for 20% of the Panamax trade, expected growth for 2017 is estimated at about 7% on ton miles basis.

Iron ore trade on the basis of ton miles is expected to grow by 5%. One way or the other, it seems that 1% to 2% fleet growth will be outrun by the demand. We believe that the highly sensitive demand supply/balance may push charter rates and consequently asset values upwards rapidly. Asset values are correlated with charter market, as shown in Slide 5.

It seems that until now charter market has not pulled up yet asset values, mainly because of the relative weakness of the long period charter market compared to the spot market. We expect that the strength of charter market in the following months will push asset value substantially higher. The key takeaways of our presentation are in Slide 6.

Order book is spread until 2020 as double digits excess supply is reduced to 7% of the existing fleet. Coal trade, which was seriously affected due to imposed Chinese restrictions, is expected to grow by 4% in 2017 and grain trade about 7% on ton miles basis.

Highly sensitive demand supply balance may push charter rates and consequently asset values upwards rapidly. We expect that the present strength of charter market will push asset value substantially higher. We believe that the prospects for global growth remain overall positive. In Slide 7, we show the comparative strengths of our fleet.

In the top figures, we show – about 1/3 of our fleets consist of relatively larger post-Panamax vessels fitted with New Panama Canal fittings able to trade in new developing routes through New Panama Canal, while 70% of the world’s fleet is of standard or older design.

In the middle figures, we do not have older than 15-year-old vessels, while 12% of the fleet will reach fourth special survey in the next five years and will be guided for scrapping due to new technologies, ballast water treatment, emission regulations and related investment costs.

In the lower figures, more than 75% of our fleet is built in Japan compared to 48% globally, which is our basis for lower operating expenses, vessel reliability and commercial advantages. And a few words about our strategy. In Slide 8, we present our strategy in the past months. We undertook actions to improve our capital structure.

We decided not to invest in secondhand vessels yet, but instead to strengthen our balance sheet without diluting our shareholders, as many of our peers have done so. We have reduced our outstanding preferred by about $50 million and the associated coupon with it is 8%, and the related outflow on annual basis about $2.4 million.

We have bought back two vessels under sale and leaseback agreement from five that we had and the reported debt under such agreements was reduced by $44 million. The related bareboat charter for those was about $4.7 million on annual basis, which represents the savings of this – the cash outflow savings.

We financed the above transactions with cash at hand and new debt at low 200 basis points margin. In such way, we intend to further lower our break-even point and achieve profitability early in a hopefully increasing market. Now our CFO, Konstantinos Adamopoulos, will present our quarterly financial results..

Thank you, Loukas, and good morning to all. Let’s now move to Slide 9 with our quarterly financial highlights for the third quarter of 2017 compared to the same period in 2016. Net revenue increased by 38% to $37.3 million from $27.2 million, mainly due to an increase in charter rates.

Our time charter equivalent rate per vessel increased by 36% with $10,419 per day from $7,637 during the same period in 2016. Daily vessel running costs increased by 6% to $3,830 compared to $3,614 for the same period last year.

Daily G&A expenses, which include daily management fees payable to our managers and daily costs associated in relation to our operation as a public company, decreased by 3% to $1,166 for the third quarter of 2017 compared to $1,196.

Our adjusted EBITDA for the third quarter of 2017 was $18.9 million compared to $9.3 million for the same period in 2016. We may still remain unprofitable.

However, our adjusted loss per share for the third quarter of 2017 is reduced to $0.05, calculated on a weighted-average number of 101.5 million shares compared to $0.15 during the same period in 2016, calculated on an average weighted number outstanding of 83.6 million shares.

Slide 10, we present our quarterly fleet data and average daily indicators compared to the same period last year. Liquidity in a cyclical industry like ours is a key point, and I will show you in the next slide what we have achieved. In Slide 11, we focused on our expenses, both OpEx and G&A.

The aggregate figure for the third quarter of 2017 was $4,993 from $4,813 per day in Q3 2016. Our OpEx numbers include all items like dry-docking and initial supplies. Compared to our peers, on average, we have achieved about $1,150 in daily savings during the first nine months of 2017.

Daily OpEx and daily G&A representing about $20 million in annualized savings or $0.20 per share in savings. Slide 12, the light blue bars show that the effect we have achieved by our cost-cutting efforts were sustainable during 2016 and through the first nine months of 2017.

The dark blue bars represent our TCE and show the improvement of the market from its lows during 2016 and our relevant performance. At this point, we would like to emphasize that we have positive operating cash flows of $35.4 million for the nine months of 2017 as compared to $6.8 million for the restricted period of 2016. This is present in Slide 13.

And we have controlled the refinancing and investment cash outflows. As shown in Slide 14, we have only one remaining newbuild in our order scheduled to be delivered in 2018.

This will be financed through issuance of $15.9 million of preferred shares at the level of the vessel owning company through an unrelated investor at a dividend of 2.95% per annum. In total, we have CapEx outstanding of $27.8 million and we need to spend less than $11 million from our liquidity for that.

As of October 27 – 25, 2017, our liquidity was $80.2 million. Overall, we believe that the company with this liquidity, with positive cash operations and controlled outflows for investing in the financing activities is well positioned to take advantage of improved market conditions when the shipping markets turn sustainably.

Our press release presents in more detail our financial and operating results. And we are now – thank you, and we’re open to take questions..

Thank you very much indeed. [Operator Instructions] So your first question from Citigroup comes from the line of Chris Wetherbee and your line is now open sir. Mr. Wetherbee, your line is open sir..

This is William on for Chris. Thank you for taking my question. So we’ve seen iron and coal demand continued to rise from previously low levels.

And I’m just wondering how dependent you believe that industry incremental demand in your charter rates will be on commodity price going forward into the remainder of 2017 and into 2018?.

Yes. The iron ore and coal movement is the two single most important commodities in the drybulk market. The third one is the grain. But the two most important is the iron ore and the coal. And are the two commodities that widely fluctuate movements in the transfer of these commodities, both because their prices is very volatile, going up and down.

It could go 50% up or down in a single year. And, of course, our industry and the charter rates are directly related to with what’s happening with those commodities. The last few years, also, we have seen that there are environmental sensitivity around coal trading, which is also affecting sometimes the movement.

On the other hand, the third commodity, the grain is a more stable source of demand. And we see generally as the population increases and their living standards are increasing, we expect most of the years a steadily increase of that trade..

Right, thank you. That’s very helpful. I just have another question on – this is on the expense side. So in this quarter, we saw daily operating expenses grow roughly 6% year-over-year.

And I’m just wondering if this is kind of a reasonable rate of growth to expect going forward? And any factors you think that can influence this metric and also on the daily general and administrative expense side as well?.

Look, as the market improves, it is expected that OpEx will face some pressure to the upside, especially from suppliers, people who have reduced their costs and reduced their prices for our company. But this – I think it will take some time before we see OpEx above the previously or anywhere near to the previous level.

So I think it’s quite comfortable to feel for 2018, at least that numbers should not deviate too much from the current OpEx rate, which is roughly $3,800. So I think for 2018, the company has done its work. And we will not be – there will not be many, many differences from present number.

But as years go by, I think we – it is reasonable to expect some increases..

Great, that’s very helpful. Thank you for taking my questions..

Thank you very much indeed sir. Now your next question from Evercore comes from the line of Jon Chappell and your line is now open sir..

Thank you. Good afternoon. Just one from me guys on the strategy laid out, what you’ve been doing over the last several quarters as far as paying down the preferred and the sale and leasebacks and putting your capital structure in a strong position.

So as you think about your excess liquidity going forward and your cash flow from operations, how do you balance continuing to make those improvements in the capital structure with something you talked about early in the presentation, which is the asset value is not representing kind of the current market conditions?.

Yes. I think that we continue in the same path. And basically, our intention is to withdraw about $10 million of preferreds in – until July 2018. And also, we may want to reduce further the sale and leaseback agreements in September of 2018, which is a decision we will take substantially later.

I mean, the intention is – generally is to deleverage the company and have comfortable preferreds. And with this actions, we try to give a value basic – we try to push the value to our common shareholders.

Of course, as the market – as we do all these things, you understand that associated cash outflows, which are higher on the levels of 8%, are substituted by cash flows of – let’s say, margins of new debt of about 200 – low 200 basis points. And this is very profitable for the company, because in this way, we reduce our break-even point.

Of course, at certain point of time, as we go along, we may also consider acquisition of secondhand vessels, but this is something that we’ll also discuss the following year..

Yes. And I agree and I think it is prudent to focus on the capital structure that has certainly been beneficial to you in the recent past.

It just seems that there is this kind of consensus building among all players that the asset values are not reflecting current market conditions and I think it will be impossible – not impossible, but difficult for the type of volatility we saw in the first quarter of 2017 to repeat itself, but are you a little bit afraid that by waiting and focusing on your own capital structure that you may miss the opportunities on the assets? Or do you think that, that may still take some time?.

No, no. We’re not afraid at all. The issue for us is that what – we measured the return on each of our actions. So what we’re doing is the right thing to do for the long-term strategy of the company.

The company – I just want to remind you that the company has grown in the last two, three years even without any other further acquisition quite substantially with more than eco-design Japanese ships. And still we have one more to take delivery of in the first half of 2018. So we have plenty of, let’s say, power – gun power.

We have many open days for 2018. And we can take the advantage of the spot market. Presently, we work a lot with the spot market, because it operates [indiscernible] against the period time charter, which is not yet developed. If we don’t manage to buy secondhand vessel, that’s still fine.

I mean, we have about 14,000 days of operations, which could give substantial profits to the company. On the other hand, we will have an opportunity and we may look at something which suits to our technical specification, so we may do so..

Completely understand. Thanks for your time, Loukas..

Thank you very much indeed, sir. Now from Morgan Stanley, your next question comes from the line of Fotis Giannakoulis. Your line is now open, sir..

Yes. Hi gentlemen, and thank you. I would like to follow up on Jon’s question about your strategy and the next steps going forward. The market has turned profitable in the fourth quarter. So the cash flow – the free cash flow is not a concern anymore for any of the companies in the sector.

I’m just wondering, you mentioned about the sale and leasebacks acquisitions.

I also want to introduce the discussion about the dividend? And can you prioritize that and try to put them – give us a time line of when do you expect each of these steps will take place? And also, if you can clarify, what type of vessels or age or size you would consider of acquiring?.

Look, I would like to speak on behalf of Polys. Polys is the biggest shareholder of the company. And this company is probably the only company, the only shipping company that have maintained shipping dividend until a certain point, I think, the end of 2010 – we cut – 2015.

So we cut the dividend only when we’re completely convinced that the market has such a downturn that it is irreversible at that stage and that we had to take care of the company and not of the [indiscernible] the wealth of the shareholders. I mean, this is why we cut the dividend.

The wealth of shareholders right now is increasing through the increasing price of the common stock as we may have seen in the last months. And I think that our stock increased more than anyone above peers. And, of course, we will consider dividend policy based on our ability to secure steady cash flows for the following periods.

This means that we need to further better develop a period time charter market. So at certain point of time in the future when we have booked a number of vessels at profitable levels for a year or so, then, of course, I tend to believe that our board and Polys himself would like to see a dividend policy established. We don’t want to be premature.

We know other companies sometimes rush to state – reinstate the dividend just for, I mean – for their own reasons. We don’t feel any pressure. Our pressure is first to make strong the company as we have already achieved that point. I think we are fine with our capital structure, then secure period time charters and then reinstate the dividend..

Thank you, Loukas. Can you give us an idea of how many – what part of your fleet are you planning to put in time charters when this become available? And also, explain to us why we haven’t seen time charters yet? The spot market has shoot up significantly, but we haven’t seen a lot of contracts by the customers..

Yes, Polys speaking now. So the charters mentality because they’ve lost a lot of money from period charters in the previous crisis in the last three years when they had to perform – the good namesake had to perform expensive charters for some period of time.

Are always moving when they are convinced that the market – the spot market will keep performing at higher levels. So if the current levels, we see Panamax is trading the Pacific, which is $13,000, $14,000, $15,000 per day. Can be – and definitely the fourth quarter is looking strong. And these rates can develop into 2018.

Charter, as I believe, within the next six months, will start considering fixing in ships, modern ships of period at $13,000 or $14,000 a day for a year, instead of paying $15,000 or more in the spot market.

So we have to wait for the confidence to come back to the market and for charterers to not believing that they will save money by fixing period as opposed to their spot market. At the moment, they take the hit by fixing ships at higher rates in the spot market. And this will change, I believe, in the next six months..

Thank you, Polys.

And as an extension to your answer, can you also give us your view of why vessel values, especially secondhand vessel values, they have a lag considerably the time charter market? If you think that the return of the period market and by the time that we will have a few time charters, we will see an appreciation in vessel values? Or we are in an environment where shipowners are not willing to pay more for their assets and there is a higher risk premium that is associated to shipping vessels?.

Yes. At the moment, the prices, indeed, they’re lagging behind the freight market. And there are basically, four reasons, I believe, for that. First of all is the scarcity of period charters, availability of period charters that we just discussed. Secondly is that many owners have already big fleets.

And the big owners have already big fleets and enough debt in their hands. So they want first to reduce the current debt they have and so to reduce it, they need profitable years. And then to add and make their fleets even bigger. You have to remember that the last three years, everybody has been losing money.

And in some cases, well-known companies were not able to manage to get over the current crisis. Many people stopped paying the banks. And many people had – didn’t get agreement with their banks on covenants or other issues. And the fourth reason is – so three reasons is the lack of period inquiry at the moment.

The big fleets that they already have, the money that everyone lost. And the fourth reason is the current lack of liquidity from the scarce liquidity from their financing banks.

So if the banks are not there to finance, and as we said in the past, most of the banks they’re happy to lend money when things are sky high and they shy away when things are very low. So right now, we have low asset prices that are safe investments. And we have a market that is turning and hopefully the next two, three years will be very strong.

And then you still see the banks they cannot take a decision because they had big losses in the previous three years or four years. So all these factors play a role into why asset prices have not moved up.

If you remember in 2012, when we had similar move from low freight market into a good freight market by the end of 2015, the five-year-old Panamax jumped up from $18 million to $28 million. Today, we have similar jump in the freight market, but the five-year Panamax is still jumped up to $20 million, it didn’t move higher.

So confidence have to come back to the market and liquidity. These two things are missing..

Thank you, Polys. One last for me. Usually, you’re focusing on buying newbuildings.

I understand from what you’re describing, you would look as your next step of expansion, probably secondhand, is that correct? And also, if you can tell us what is your plan for the older vessels, although your fleet is pretty young, there are a few vessels, which are above 10 years old historically? I know that you have been focusing on very young vessels and trying to sell the mid-age vessels before they reach a critical age.

What is your plan to do right now?.

Yes. I don’t think that our company will order newbuildings in 2018. I think it’s something that we should consider after regaining a good part of the losses we had in the previous three years. So 2018 will be a recovery year, a year we’re fixing the balance sheet, a year that we’ll start doing profitable charters.

So hopefully, newbuilding ships will come into the question in 2019 or 2020 for us for replacing ships that will be getting older and at a certain point will be approaching 20 years old.

We don’t intend to sell any of our ships, despite currently some of them approaching 14 years or 15 years old simply because those are ships we have built ourselves to very high specifications in the 2003, 2004 and 2005.

These ships we know, and we have been trading them from day one, we know exactly what they need, and we keep them in very good condition. And we believe we can earn more money by trading the ships for their economic life of up to 20 years instead of selling them in the current environment or even in an improving environment.

If the freight market improved so much in the next two years to three years that even the older ships will catch up, and we will see their prices moving up, then we may change this policy. But for the time being, the policy is not to sell any ships and just enjoy the better freight market..

I know I said it was the last question, one final for me.

Can you remind us up until this time of the quarter at what levels you have fixed your Panamax vessels? And given the fact that your fleet is Japanese built fleet, is there any premium that is associated with chartering your vessels versus what we see the $12,000 that we see in the Baltic Panamax Index?.

There is certainly a premium for Japanese built ships. And traditionally, we have been outperforming the market by more than $1,000 a day. This is because the ships are more efficient, they burn less fuel, they’re more shallow drafted, they carry more cargo on the same draft.

So these ships are in demand, and they’re always getting premium, especially in the spot market. Now we have around half of our fleet in the spot market, which is when we mean spot is a market that they can enjoy immediately the higher rates. And the other half of the fleet is coming off charters in the next six months.

So technically by mid 2016, all the fleet will be in the spot market. So right now, every month goes by, we see this $10,400 that was reported for the third quarter has already improved and have gone higher. And it’s very fast approaching the levels that the company will be turning profitable even on adjusted income basis.

So we’re getting close to that number. And I mean, the fact that we have half of the fleet steamships or thereabout earning currently $14,000, $15,000 a day or $13,000 a day, which are profitable rates, which is the average of the fleet to profitable levels..

Thank you, Polys..

Thank you..

Thank you very much indeed sir. Now your next question from Seaport Global comes from the line of Magnus Fyhr and your line is now open sir..

Hey, good afternoon. Just a follow-up to Fotis’ question on the chartering. With – you said 36% of the fleet will be in the spot market in six months.

Have your chartering strategy changed at all with the recent strength in the market? Or you going to – are you going to be willing to keep more ships in the spot market? Or you’re going to take advantage maybe of the upcoming seasonal strength and lock in a few ships on longer-term charter? And what level would that be?.

Yes. We’re not afraid to keep all the ships in the spot market. The period charters, they don’t come in from the names we want and at the rates we want. We’re happy to fix $13,000, $14,000, $15,000 in the spot market. So we recently fixed a ship post-Panamax at $13,200 for 1.5 years. This vessel reported also in our press release, Venus Heritage.

So when we see profitable period charters to good names, of course, we will be fixing them, but we’re not afraid. We have a very organized chartering department, both in Cyprus and also in Monaco. We have more than 100 clientele list, 100 charter as well doing business with. And that the duty of the Panamax comes from post Panamax.

It means that there is very diversified. You have many charters and many cargoes to fix in the spot market. So we’re quite happy to keep the ships employed in the spot market until reasonable period charters become available from the good charterers..

Okay, thank you. And just one more question. You mentioned the shipyard deliveries are somewhat limited going out in 2019 and 2020. But as we all know with the sport rates moving up, they’d probably be more ordering activity.

What do you see from the shipyards now as far as them getting more aggressive with pricing? And what’s the earliest you can get delivery now from a Japanese versus a Korean and Chinese shipyard?.

In generally, the slots are available for 2020 and beyond. I know this is not good enough for owners who want – everybody believes that the market will be good in 2018, 2019 and 2020, we’d have to see what the demand will be looking like. So owners, I don’t think they will pay a premium and go and order ships for 2021 or 2022 or this sort of year.

So there are some Chinese hopes from sales of berths that there are some yards still able to offer 2020 delivery years. But I think, generally, the owners are more mature and they’re more conservative because a lot of money have been lost in the last two years.

And there’s this lack of finance, and they don’t think – apart from very few owners, I don’t think that their priority is the newbuilding market. The S&P secondhand market is – has enough ships coming in the market every week. People can really pick up alternatives.

At least for the next year, I mean, don’t expect many owners would be rushing to the shipyards for the new ships for delivery in three years time because the two good years that everybody expects enjoy the next three years. And the order book is 1.5% roughly every year, the new supply.

So 2020 or 2021, why to go for the ships, especially since most of the designs, they don’t take into account the new regulations, not only the Tier 3, the Tier 3 for the NOx emission and also the regulation that will come for the SOx emission in 2020.

This – there are no designs available yet from the shipyard at reasonable cost to take care of this issue. So I think that is also a bit premature and a bit naive to go in order newbuildings for the next generation. When these newbuildings at the time of delivery, they will not be complying with the new regulations.

And within five years, you will have to face the extra cost yourself to convert those ships suitable for the SOx emission regulation. So this factor alone is enough for big companies not to consider newbuildings at this stage. We have to wait the next 12 months to see what the shipyards, how they will upgrade their designs and what they will offer.

So this year, a few orders were placed at very low prices, they were not even dealing with NOx emission, the Tier 3 standards. So this, I think, is very, very short-term thinking. And a company like ours cannot apply short-term thinking. We study the regulations. We prepare the company accordingly.

And when we have to seek a regulation, we’ll make a very complete check of the market, and we take usually decisions for the whole fleet..

Okay, thank you. The low sulfur emission is two years away.

But how does, say, focus plan, what’s your strategy and what are your current plans to address these? Or you’re just going to wait and see?.

Look, there’s still some time to go there. We believe that the retrofitting of older ships would be quite expensive and difficult, not only expensive but also difficult.

As Polys said, yards whatever they have prepared in terms of new designs, they may – they say SOx ready, which means, basically, nothing that you have some room to some equipment that you have not started and you don’t do exactly the regulations. So we will wait for that.

Although our company has proven in the past and always we’re in the forefront of technologies, we’ll always be in the forefront of technologies, but when the technologies are suitable..

Okay. That’s it for me. Thank you..

Thank you very much. Now from Maxim Group, your next question comes from the line of James Jang. And your line is now open..

All right, thanks, guys. Yes, most of my questions have been answered. But if you can give us an update on where your vessels are trading? Do you have any trading, I guess, in the U.S.

Gulf right now?.

Yes. We have some ships loading grain out of the U.S. Gulf, yes..

Has there any been – has there been discussions with the U.S. Coast Guard in terms of the ballast water management systems? Or when they want ships to have some type of ballast water treatment system onboard in U.S.

waters?.

Yes. The company, we are in advanced talks about the installation of ballast water treatment plant, and we take the regulation very seriously because no – we are convinced that there will be no further extensions by the U.S. Coast Guard. We consider the U.S.

market very important for our type of company for the operation of our Panamaxes and Kamsarmaxes, especially, on the grain loading areas of U.S. Gulf and not Pacific like Seattle and that sort of places.

So we are going to comply with regulations in good time and – as the ships they become due in the next five years each one according to their next dry-docking day. So from 2018 – from next year, each one of the ships irrespective of age, as they come here for drydock will be installed with ballast water treatment.

The company is in advanced talks with the suppliers. And we’ll very soon be able to announce our action – our decision of which system we will favor..

Okay, great. Thank you. And one final one.

In terms of fleet expansion, would you look at additional Capesize tonnage if there’s a project attached?.

Yes. We don’t exclude to look into Capesize. We don’t exclude. It’s not our specialization, but we don’t exclude it, if we find good quality tonnage bid from Japanese gas. As we said, we will concentrate on secondhand tonnage in the next couple of years. So we don’t exclude to have a look into the Capesize market.

But mostly, our company is focused on Panamax to post-Panamax. And I think we can make better synergies and better efficiencies out of investments in that sector..

Great. All right, thank you guys..

Thank you..

Thank you very much. [Operator Instructions] Now from BlueShore Capital, you now have a question from the line of Harsha Gowda. And your line is now open, sir..

Good afternoon, gentlemen. I have a few questions for you. Number one, you mentioned earlier in the call that you expect the asset values to increase. And you also talked about how newbuilding orders have not picked up significantly. And therefore, prices also have not picked up significantly.

So I’m wondering how do you reconcile the two because I would imagine that newbuild prices are a cap on prices of secondhand vessels.

So how do you see asset values increase when newbuild prices are unlikely to increase materially?.

Yes. The reply to this question is that at times like this that we expect a good freight market to materialize in the next two years. Nobody can pay a premium for a newbuilding that will be delivered after 4.5 or 3 years. So I believe that if the strong market develops into period charters, asset prices of secondhand ships will increase.

And when I say increase, they will increase substantially from the current level, whilst newbuilding prices will increase by even less than 1/3 of what the secondhand prices will increase simply because of the delivery lag between ordering and delivery.

So any owner who wants to take advantage of the better freight market will move for secondhand ship or a promptly sale of a new ship, will not move for a newbuilding further down the road..

And in light of that, do you see – I know scrapping has decreased substantially, but do you see a much greater decrease in scrapping to the level where we see maybe the fleet growth the next two years instead of being 1% or 2% maybe being 3% or even more because of very strong slowdown in scrapping?.

No. We will not see 3% next year or the year after. We definitely see hardly 1.5% increase in both years because there are ships getting to the 20-year level. 7% of the fleet is already 20-year plus, which the ships, they cannot face the new regulations. And they will be scrapped as soon as they have to meet the deadline of a new regulation.

So I don’t think that scrapping will stop. Of course, will be – would not be like 2016, but we will be similar to the level we have seen this year. So I think all this are factoring into the assumption that the net fleet growth will not be more than 1.5% for the next – for each of the next two years..

And when I’ve been speaking to a few other owners, they’ve been telling me that the actual hidden order book, including options, et cetera, has pushed up the percentage to – maybe closer to 10% or 11% from the nominal 7%, 8%.

Would you say that’s accurate?.

These are people who want to buy ships, and they want to keep the market low..

Okay. And finally….

They’ve been around long enough to know the game. They tend to say these things in order not to inflate prices..

My last question is that, I saw Vale report numbers last week, and there was some speculation that a good amount of tonnage has been held in their inventories and not being shipped something amounting to maybe 20 million tons.

And the reason I bring that up is, when you look at the fourth quarter pick up in rates, this year, it’s been a very steady increase and a very stable increase in vessel, especially in the larger vessels. As compared to the past, it should have very sharp spikes.

And you think that there’s some correlation maybe due to a very slow release of tonnage out of Brazil? Is that – do you think that’s a reasonable assumption?.

I think what’s happened there was a lot of criticism on the Vale losses. The older – the converted tankers into Vale losses after a fatal accident earlier in the year. And there were a lot of ships put outside of the market for inspections or even repairs, or even some of them, they went for earlier – early scrapping.

But there was some distraction from that point of view. But I think the main reason why the market moved up in the third quarter and is continuing now in the fourth quarter is that you can take like out of China, for example, they have released the data now for the third quarter. You have industrial production 6.6% up year-on-year.

You have the electricity production 5.3% up year-on-year. Retail sales in China 9.8% up year-on-year. [indiscernible] transport overall, 9.8% growth. All exports and imports in China increased and maintained strong growth. And, of course, coal imports increased. And iron ore imports increased as well.

So it’s a very strong functions – numbers coming out of China in the third quarter. It even surprised us how strong the market was in the third quarter. This is continuing now in the fourth quarter.

Of course, there will be some volatility towards the end of the year and early next year as there will be certain slowdowns in the movements of coal because of the environmental reasons that everybody knows and everybody is factoring. It goes into our calculation.

But I think as soon as this calculation – this restriction start to apply in beginning – in middle of March of 2018, the market should continue on the same path simply because the world economies are performing.

And at the same time, we have very good performance not only of the advanced economies but also emerging economies in places like India, Brazil and other countries, we see their economy is performing. I’m very optimistic myself, especially on – for the coal trade.

We see India stocks of coal, they are at – almost at all-time lows and worse for the last three years. So I think that there will be volatility, but I think that the market will be surprising us positively in the next year..

Great. And sorry, one last question. You brought up the India coal. One of the arguments given in the past years with how Coal India was supposed to ramp up production over to 2020. I think the coal minister in India was talking about 1 billion tons of production.

It looks like that’s not going to happen, because that changed the dynamic on the coal trade in the medium term, say, the next one to five years, also in light of China’s increased demand because it looks like the increase in both sides has kind of destroyed the bears argument of drop in the coal trade.

How do you feel about that? And thank you again for taking my question..

Yes. Thank you for the question. Yes, we believe that India will surprise us positively the next two, three years on the coal movement. I don’t think that the changes in India are happening very fast, okay? They may want to do changes, but they are not – are not happening that fast. So I think that the population is increasing a lot.

The quality of standards of life is increasing in India. So people, they need the air condition, they need the power supply, they need the refrigerators, they need all these things. So I don’t think that India will be finished any time soon. Of course, I don’t know what will happen in 20 years time.

But I don’t think that for the immediate future, we will see India not becoming a – not continuing to be a big player in the coal movement, in the coal imports. And you have to remember that India – Indian coal is imported. At least 50% of Indian coal is imported in the – in Panamaxes and post-Panamaxes. So this is very good for our company.

Now China, already the worse is over as far as the coal imports. Their imports increased significantly this year. They’re already running at an annualized rate of 325 million tons from below 200 million tons we reached in 2016. And it’s approaching the highs we had before 2014. So 400 million tons annualized rate.

And this is only a small part of what China is consuming in coal. China is consuming 3.8 billion tons a year of coal. So the imports is just a small fraction, 7%, 8% of that volume. Imagine what may happen if for environmental reason, the Chinese take a decision to import higher-grade overseas coal.

So there are reasons to be optimistic there as well, at least for the next three years or four years..

Thank you very much..

And the most important reason is that when you invest with [indiscernible] in this market, you have seen out of four months our past performance, we have seen that we have not done reverse splits in the past as most of the other peers did. And that also our intention is to grow the company with – presently with our own resources.

And we don’t expect any dilution – any issuing dilution of the shareholders. So basically, we have substantial inflows right now. We can do our business with the cash that we collect. And there is not – there isn’t any need whatsoever to do any dilutive actions..

Yes. That’s clear..

Thank you, sir. And at this point, there are no further questions, gentlemen. So I’ll pass the floor back to you, sir, for closing remarks..

So thank you very much for being again with us. I mean, we’re quite happy in this first profitable quarter, and we hope this will continue. And we are looking forward to see you again and discuss again with you in our next conference call for the fourth quarter. Thank you..

Thank you very much, sir. And with many thanks to both our speakers today, that does conclude the conference. Thank you all for participating. You may now disconnect. Thank you, gentlemen..