Question-and-Answer Session
Operator
All right. Thank you, sir. (Operator instructions) Our first question is from the line of Jon Chappell with JPMorgan. Please go ahead.
Jon Chappell – JPMorgan
Thank you. Good morning, guys.
Morten Arntzen
Good morning.
Jon Chappell – JPMorgan
Morten, you made it perfectly clear that you are not ready to do anything on the acquisition front today. Just wondering – is that because there are not a lot of opportunities available? Is it because the returns that you’re seeing on the time charters don’t really make sense now given asset prices? Or is it because you see some potential kind of desperation sales for the next couple quarters as things play out as bearishly as you’ve kind of laid out?
Morten Arntzen
I think it’s a combination of things. You’ve actually hit on some of them. But in many respects, this financial crisis, the shipping industry is not that old. We have yet to see the kind of spectacular shipyard bankruptcies that we saw back in the early ’70, the last time the industry had a real tough time, or in the mid ?80s. We expect there will be more pain to come. You talk to very good ship owners across the world, and they are unable to get their traditional banks or new banks or any banks to finance their newbuilding commitments. And that is a big problem for a huge part of the industry. You bring all those factors together and there will be added pressure. And when things – when levels fall – when values fall to levels that we think make no-brainer spends, that’s when we will be moving.
Jon Chappell – JPMorgan
As far as the asset prices are concerned, I know there is a lot of illiquidity in the market still, but by best estimations, dry bulk assets fell – cut up 70% from their peak and maybe tanker asset prices never got to the lofty levels of dry bulk. But do you think that the tanker prices can fall that 60% to 70% level as well?
Morten Arntzen
No, I don’t think so, I mean, really for a variety of reasons. One – I think any asset, in any class, in anything, anywhere in the world when you don’t have a banking market, is going to fall. So, we’re not suggesting things haven’t fallen. One, the tanker earnings have continued to be reasonably strong, reasonably strong. Secondly, the outlook is, because of the single hull phase-out, is for much healthier tanker market than what you had in dry bulk, it continues [ph], for example. We didn’t have the benefit of the structural support of the single hull phase-out. And that is real and it will happen. I think that’s the big difference. And then within the tanker market we have owners, big owners with very strong equity basis. And thirdly, the yards are simply not quoting prices for newbuildings today. There is no indication of that. The yards are going to wait a year or two I think before they start closing and I think it will be before them – before owners start ordering new vessels.
- To read the full transcript on Seeking Alpha, click here »
