In the New York-quoted operator’s fourth-quarter conference call Simeon Palios argued that a rebound won’t materialise until more private equity funds exit the space.
“As long as there are many private equity funds willing to invest and take an interest in dry bulk shipping, the markets will unfortunately remain at relatively unprofitable levels,” he said.
Palios argued that private equity firms are their own worst enemy. He noted investments in newbuildings, in particular, have taken a toll on asset values by disrupting the balance between supply and demand.
When values fall other funds want to join the race to cash in on the decline and end up sinking more money into the market, which, in turn, pushes prices down even further.
Palios fears the vicious cycle that has seen private equity plough billions into bulkers will continue until these firms lose interest.
His hope is that, a result of the subsequent disappearance of capital, more operators would be forced to exercise restraint on the ordering front.
Despite Diana’s bleak near-term forecast for the dry-bulk segment finance chief Anastasios “Stacy” Margaronis borrowed a line from ‘Richard III’, a play penned by William Shakespeare, to put investors at ease.
He noted the play begins with a soliloquy in which the protagonist, a deformed hunchback, celebrates the relief that follows his brother’s ascension to the throne:
“Now is the winter of our discontent made glorious summer by this sun of York; And all the clouds that lour'd upon our house in the deep bosom of the ocean buried.”
Margaronis pointed out that, when the quote is recited in full, the audience is led to believe that Richard’s unhappiness is coming to an end.
He likened Richard to “the poor bulk carrier owner” and assured investors that the downturn will be “quickly succeeded” by better days when private equity abandons the dry-bulk market and balance is restored.
“Then, as Richard said, all the clouds that lowered upon our house in the deep bosom of the ocean will be buried,” Margaronis continued.
While Diana believes freight rates will remain depressed in the foreseeable future it still intends to pursue more expansion opportunities in the months ahead.
Ioannis Zafirakis said his company is interested in purchasing five modern, second-hand vessels by the end of this year to complement its current fleet of 40 bulkers.
TradeWinds caught up with Sierra Ryan, who studied Renaissance Literature at the University of Massachusetts, for more insight about the opening scene in Richard III. Click HERE to see what she had to say.
