Pacific Basin Shipping Stock

Welcome to today's Pacific Basin 2026 Interim Results Conference Call. I am pleased to present Chief Executive Officer, Mr. Martin Fruergaard; and Chief Financial Officer, Mr. Jimmy Ng. [Operator Instructions] Mr. Fruergaard, please begin.

Yes. Thank you very much, and thank you all for your patience, and welcome, and thank you for attending Pacific Basin's 2026 interim results call. We will start by highlighting the key points in the published presentation followed by Q&A. Please turn to Slide 2.

Dry bulk freight market strengthened year-to-date, supported by geopolitical disruption and trade inefficiencies, particularly those arising from the conflict in the Arabian Gulf. We were well positioned to benefit from the progressively improving freight market while continuing to outperform the market and deliver strong financial results in the first half of 2026.

During the period, we generated an EBITDA of USD 197.8 million, an underlying profit of $94.9 million, and a net profit of USD 105 million. This represented a year-on-year increase of over 300% in net profit, reflecting both strong market conditions and continued commercial outperformance.

Our balance sheet remains robust. As of 30th June 2026, we had a net cash of $157.2 million. We had available committed liquidity of $673.6 million, and operating cash flow of $143.5 million.

Please turn to Slide 3. We remain committed to delivering value to shareholders through dividends and share buybacks. For first half 2026, the Board declared an interim dividend of HKD 0.155 per share amounting to USD 102.2 million.

This is consistent with our revised dividend policy, which allows us to distribute up to 100% of annual net profit, excluding vessel disposal gains where the company is in a net cash position. In addition, we repurchased approximately 9.5 million shares or USD 3.5 million during the first half of 2026 under our share buyback program of up to $40 million for the year. As our shares continue to trade below our fair market value NAV, we will continue to evaluate further buyback opportunities.

Including the interim dividend announced and the share buybacks completed year-to-date, Pacific Basin will return approximately USD 106 million to shareholders, equivalent to 103% of our net profit for the period, of course, excluding vessels disposal gains. This reflects our continued commitment to delivering sustainable shareholder return.

Please turn to Slide 4. As of end June 2026, we had a total of 254 vessels in operation, comprising 107 owned vessels, 13 long-term chartered, and 134 short-term chartered vessels. In terms of fleet renewal, we reshaped and expanded our newbuilding program during the period, and we now have 10 newbuildings in our order book, comprising 6 Handysize vessels from China and 4 Ultramax vessels from Japan.

We also hold the option on 2 dual-fuel Ultramax newbuildings. Including these 2 options, we have in total 12 newbuildings on order with delivery between 2028 and first half of 2029.

In addition to our newbuildings and after declaring purchase option on 2 Handysize TCE vessels for delivery in second half 2026, we still hold purchase options on additional 13 long-term chartered vessels, which are declarable between 2026 and 2031. During the period, we completed the sale of 1 Supramax vessel, and we have committed to sell another with delivery in August 2026. We will continue to look for different ways to renew and grow our fleet. We maintain a disciplined approach to cash and debt and capital allocation, balancing fleet investment, financial strength, and returns to shareholders.

We take a long-term countercyclical approach in fleet renewal while maintaining our flexibility when considering fleet ownership versus chartering in. This enables us to shift between owned vessels, long-term charter and short-term charters as market conditions evolve and allow us to have the maximum optionality to grow our fleet.

Our fleet is a result of many years of disciplined investment, which has created substantial earnings capacity and underlying value. Given the cyclicality of the industry and high asset values, it is important for us to maintain discipline and flexibility in managing our fleet and deployment of our capital.

I'll now hand over to Jimmy for an overview of the interim performance and financial review.

Thank you, Martin, and good afternoon to everyone on the call. I will share with you the highlights of our business and financial performance in the first half of 2026.

Please turn to Slide 6. The market saw strong but also volatile freight rates in the first half of 2026. Geopolitical disruptions continue to be the key driver of the market throughout the period.

In particular, the conflict in the Arabian Gulf, the temporary closure of the Strait of Hormuz, the resulting vessel rerouting, and the fluctuations in bunker prices, all contributed to market uncertainty and increased tonne-mile demand. During the period, market spot rate for Handysize was approximately USD 12,200 per day, which is 40% higher year-on-year, and the rate for Supramax was approximately $14,180 per day, which is 62% higher year-on-year.

FFA for the remainder of the year remained strong, which suggests market expectations of a favorable freight market conditions to continue.

Please turn to Slide 7. In the first half of 2026, our average daily TCE earnings for Handysize was $14,150, and for Supramax was $16,550. Now these numbers represent a year-on-year increase of 29% and 35%, respectively.

Our TCEs outperformed the average spot market rates during the first half by $1,950 per day for Handysize, and $2,370 per day for Supramax. Now this equates to outperformance of 16% for Handysize and 17% for Supramax.

Looking forward, for the third quarter of 2026, we have already covered 78% and 82% of our committed vessel days for Handysize and Supramax core fleet at $15,810 and $18,680 per day, respectively.

Complementing our core business, our operating activity generated a total daily average margin of $1,060 per day over a total of 12,650 operating days in the first half of 2026. Now this would represent a 49% increase in operating activity margin year-on-year.

Please turn to Slide 8. We continued to maintain our cost competitiveness of past years, reflecting disciplined vessel management, effective procurement and continued focus on efficiency.

Looking to the composition of vessel cost in the chart on the right-hand side of this page, you would see average daily OpEx for both Handysize and Supramax were broadly stable at around USD 4,790. The increase in depreciation for Supramax vessels was primarily attributable to higher dry docking costs, whereas you will also see the average daily finance costs decreased by 15% to around USD 110.

Now this is mainly due to a reduction in outstanding borrowings year-on-year. Long-term chartered vessel daily costs for Handysize remained substantially unchanged, while that for Supramax was 5% higher, mainly due to higher long-term charter hire cost.

Please turn to Slide 9. We delivered solid interim results, benefiting from strong execution in an improved freight market. Revenue increased 9% year-on-year to USD 1.1 billion, while TCE earnings rose 20% to over USD 660 million.

As mentioned earlier, owned vessel costs remained well-controlled and broadly in line with the previous year. Chartered vessel costs increased by 10%, and that was mainly due to the stronger freight rates during the period for our short-term chartered-in vessels.

Operating performance before overheads increased to USD 138 million compared with $62 million in the first half of last year. With the robust performance, underlying profit increased to USD 94.9 million, and profit attributable to shareholders rose to USD 105 million, demonstrating the resilience of our business model in this highly cyclical market.

Please turn to Slide 10. We continue to be disciplined with our capital allocation, and our financial position remained very robust with net cash of USD 157.2 million, and available committed liquidity of around USD 674 million as at the end of the period.

As of 30th of June, the total net book value of our 107 owned vessels was approximately $1.6 billion, while the estimated market value of our owned vessels, based on independent brokers' estimates was around USD 2.1 billion. Our strong financial position provides a solid foundation for us to pursue a wide range of growth opportunities while retaining the flexibility to capitalize on attractive market opportunities as they arise.

Please turn to Slide 11. Our operating cash flow for the period was USD 143 million, inclusive of all long and short-term charter hire payments. We also realized $9.5 million from the sale of 1 Supramax vessel.

During the period, with a strong operating cash flow, we repaid certain loans of $88.9 million in total. CapEx amounted to $57.3 million, and that included $19.3 million for 1 Ultramax vessel that was delivered into our fleet in January, along with $20.1 million for dry dockings and other additions.

And also in January and April, we paid an initial amount of around $18 million out of a total consideration of $179 million for the 6 contracted conventional fuel Handysize newbuildings. During the first half, we also paid a total of $39.5 million for the 2025 final dividends.

Now with that, that takes our closing position as of 30th of June to $207 million with cash in hand. And in addition to that, we have $467 million undrawn facilities, and that takes our available liquidity to a total of $674 million you see on this page. Now all in all, our effective commercial execution and capital management enabled strong cash generation and allow us to have the liquidity for future opportunities.

Now with that note, I will now hand you back to Martin for the updates on the market and our strategy.

Yes. Thank you, Jimmy. And please turn to Slide 13. Minor bulk demand remained resilient as ongoing disruptions and inefficiencies in the market led to longer voyage distances. Although minor bulk volumes declined by 6% during the first half, vessels rerouting due to geopolitical conflicts and tensions offset some of the decrease, limiting the decline in tonne-mile demand to just 1%.

Growth in bauxite was strong as expanding output, mainly from Guinea, mainly benefiting the larger bulk vessels.

Grain volumes increased as a result of favorable harvest in most major exporting regions. Iron ore was supported by Chinese import and stockpiling, and Brazil and Australian mining majors recovered strongly from the weather-related disruptions last year. Coal tonne-mile demand was up, given the closure of the Strait of Hormuz, constraining LNG deliveries to Asia, and a spike in natural gas prices.

Please turn to Slide 14. The global dry bulk net fleet growth is forecasted to increase to 3.9%, while the combined global fleet of Handysize and Supramax vessels is forecasted to grow by 4.2% in 2026.

The total dry bulk order book currently stands at 14% of the existing fleet, while the combined Handysize and Supramax order book is at 12% of existing fleet. Both remain moderate by historical standards. Recycling remains historically low since 2022, leaving a large pool of potential scrapping candidates, with approximately 14% of Handysize and Supramax fleet capacity now over 20 years old.

Please turn to Slide 15. Turning to the situation in the Middle East. The conflict has continued to create volatility in both the commodity and shipping markets. Following a brief reopening, the Strait of Hormuz was closed again with around 1% of the sub-Capesize fleet remaining trapped within the Arabian Gulf.

Bunker prices, which rose sharply at the onset of the conflict, have come back down, but continue to be very volatile. The conflict also led to a spike in both natural gas and coal prices.

While the increase in coal demand in Europe was somewhat short-lived, we continue to see a widening premium of gas over coal in Asia, prompting some power utilities to increase coal purchases, and providing support for coal trade. For Pacific Basin, we currently do not have any vessels trapped in the Arabian Gulf, and the direct impact on our operations have been limited.

Please turn to Slide 16. Looking ahead, although geopolitical disruptions will remain a key influence on the industry, we maintain a positive outlook for the dry bulk market. IMF forecasts global GDP to grow by 3%, and China by 4.6% in 2026, reflecting resilient global economic activity.

In terms of market dynamics, although supply growth is outpacing demand growth, freight markets continue to be supported by disruption-related inefficiencies, including high bunker prices, fuel supply constraints, longer voyage distance, adverse weather, and congestion, and so on.

Overall, we expect dry bulk market conditions to remain resilient. At the same time, we remain mindful of key uncertainties, including geopolitical developments, the pace of fleet deliveries, and, of course, the weather-related disruptions.

Against this backdrop, our strategic priorities reflect our agility in operations and commitment to shareholder return. We will continue to grow and renew our fleet in a disciplined countercyclical manner, advance our fuel transition strategy, leverage digital and AI capabilities to enhance commercial and operational performance, strengthen our cost competitiveness, and strive to enhance our performance and shareholder return.

Please turn to Slide 17. Our consistent outperformance is underpinned by the integrated platform we have built over many years. Our global network, long-standing customer relationships, and deep market knowledge enable us to secure better employment opportunities for our fleet, and respond effectively to constantly evolving market conditions.

Our extensive in-house capabilities, deep in-house fleet management expertise, and relentless focus on efficiency and safety enable us to deliver reliable transportation service to customers worldwide, while maintaining a competitive cost base.

Disciplined capital management is another important pillar of our resilience. We take a long-term countercyclical approach to investing in, renewing and growing our fleet. By maintaining financial flexibility and asset optionality, we can adapt to and manage changing market conditions.

Altogether, these strengths form the foundation of our outperformance, enabling us to consistently outperform the freight market, generate attractive and sustainable returns through the cycle, and create long-term value to our shareholders.

With that, I conclude our 2026 interim result presentation, and I hand the call back to the operator for the Q&A session. Thank you.

[Operator Instructions] Our first question is from Nathan Gee.

Congrats on the strong results. Maybe a few questions from me. Firstly, on Hormuz, are you able to sort of size the boost to dry bulk markets from Hormuz? And so I guess, what's the net impact if tensions ease?

Secondly, just in terms of forward cover, it seems like you have about 80% of 3Q covered this year. I think this time last year, for 3Q, you had about 95% covered. So is this just a deliberate strategy given your market view?

And then thirdly, potentially within El Nino, can you be talking about the potential impacts from the Panama Canal dry bulk markets, and just remind us what happened last time?

Yes. We'll try first the impact of the Strait of Hormuz. I have to say it's actually amazing that the market has been so resilient and so strong, when you look at, actually, the 6% cargo volume we lost in the beginning of the conflict.

But even then the market has actually been strong. And that's, of course, a clear indicator that we lost a lot of cargo, mainly fertilizers, and cement clinkers, and aggregates. But at the same time, of course, all these commodities had to be supplied from longer -- over longer distances. And of course, that has been very helpful for us.

So when we say volumes are down 6%, and I think we say the tonne-mile is down 1%. And then we have an increase in market, that can seem a little bit confusing. But there, of course, you have to remember that 2% of the smaller ships were actually trapped in the Arabian Gulf.

And at the same time, you had lots of disruption around where we had to go to other places, we are creating congestion, longer tonne-mile, higher bunker prices. So you have one of those scenarios, once again, where we see all this disruption happening in our market, that is very helpful.

I think actually, if it opens up again, yes, there is still about 1% of the smallest, the Capesize fleet in the Arabian Gulf. So it opens up, of course, they will start trading again.

I think for the bulk market, you could also say that it would actually bring a lot of tonnes back to the market, maybe tonnes that the world is still missing because you actually see now that the cargo volumes are coming up again, but it's sourced from somewhere else.

I think if the Arabian Gulf opens up again, I think there is a pent-up demand somewhere that still has to be covered. So it's not necessarily a bad thing if it opens up for the dry cargo space, but let's see.

The forward cover, you're absolutely right. I think what's really amazing -- what I think we've done really well this year is that we have actually positioned ourselves very optimal this time. It is actually quite difficult to outperform the market in an increasing market.

And I think still our outperformance is -- it's a quite big outperformance, and we've done that even though the indices have continued to go up during the year. And that is, of course, also done by being less aggressive on taking contract cargo, when we entered the year, and also during the year. So we do have, I think, about 10%, 15% less cover.

I would actually say the cover we didn't have is actually quite well-paying. And it's still -- even though it is quite high numbers, it is still -- especially for Handysize, there's a lot of backhaul voyages included in it. So I actually think we're in a super good position on that part. And of course, when you look at the FFAs, and the outlook is actually quite good for the rest of the year.

The final one is El Nino. That is a good one. It has so many impacts on it, that it's probably hard to where to start and where to end. First of all, the Panama Canal, it's a combination also that there's a lot of tankers and gas ships going to Asia with hydrocarbons from the U.S.

So that is actually pushing out the bulk carriers. But also there, you see now a reduction in the allowed draft of the ships, and that is, of course, due to less water in the lakes that actually feeds the Panama Canal. That's probably the situation we saw some years back, a situation that probably will continue.

Of course, we see the weather impacts in Europe at the moment with the high temperature. And what does that do? Well, the water level in the rivers are historically low. That actually means that the transport of the commodities in and out of the ports are limited.

But it also means that maybe nuclear power plants are running a little bit less because of lack of water. It also means that the hydropower will also be less. And the replacement for that is, of course, coal and other things.

And it links again into Ukraine, where we see much more shooting on ships and ports between Russia and Ukraine. That means, how will Ukraine and Russia get the grains out? It's definitely not out of Black Sea, because no ships at the moment, or very limited ships, wish to go there.

So what's happening now is that normally, they would have done it through the rivers. They don't now. That is actually not possible right now because of the water level. 7% less waterfall in the monsoon in India, that will have an impact on the hydro.

So I can continue and continue and continue. I think the harvest in Europe is very poor, quality of it is very poor. So Nathan, I can continue, continue. It remains to be seen of all these things, but El Nino will have a major impact on the trade. That might be also some negative for us. But overall, again, it's just disrupting the market.

Our next question is from Deepak Murali Krishna.

Congratulations on a strong quarter. In a rising market, you've outperformed. So definitely kudos to your team. My questions are around the cover for the second half, a follow-up. We see that, so far in 3Q, the spot rates are trending sequentially higher.

So is it fair to assume that we could see a seasonally stronger second half versus first half given that you've already covered significantly in the third quarter already and there's more to come in the fourth quarter? That would be my first question.

Yes. I think that is definitely correct. If you look -- we don't give forecast, of course, for the market. But I think what's important to remember is that, for first half, it was a progressive increase in the freight rates to where we are now. And again, if you look at the indices, you can see they are even higher than our cover is on that part.

And indices, of course, do not have an outperformance included. And again, as I said earlier, the cover we have, there is actually a little bit of backhaul included in that part of it. So yes, it is -- I think there's a good support in the market actually going forward at the moment. There's nothing indicating -- nothing that we can see that indicating rates will go down.

Okay. And then with respect to the coal demand, Clarksons and several other industry commentators and your peers who have reported have mentioned that coal could be a swing factor in the second half given the disruptions to the gas supply and also given the hydropower deficit potentially because of the El Nino effect.

Have you already started seeing an uptick in coal cargoes, which you handle? Any color on that, whether it is just expectation, or is it something which is translating into reality? That will be my second question.

I think we -- not -- maybe less on our ships. I think we are actually quite busy with other things than the coal. But of course, our focus is probably somewhere else at the moment. But I think on the Panamax, as you see that, you also see that the Pacific market is actually quite strong also on the Capesize and Panamax ships. So I think that they are benefiting mainly from this business.

We see the numbers, and we can see there is an increase. It's also both India and China is, of course, using coal to gas part of it. And as you say, the gas prices are high, availability is low. It has to be coal as a replacement. And again, the temperature is very high. The weather is brutal. And yes, the electricity requirements are up. So it will probably be coal doing that.

And maybe as a follow-up, given the different diverse cargo which you handle, if you could help us understand during the first half and so far, right, which are the cargoes which you are seeing a greater momentum? Or is the outperformance mainly driven by supply disruptions rather than the demand growth as such?

Well, I think actually, when you look at -- if you look at our numbers, I think on the attachment when you have time to do that, you can actually see that our total volume moved in first half is somewhat down compared to last year. Of course, we have a little bit less ships all in all.

But reality is, this is a reflection of that we are sailing longer, and there's more disruption in the trade. So I think that is also showing -- our volume moves also indicate a little bit what's happening in the market. It is becoming a little bit more cumbersome to move the cargoes, and it's longer voyages, and it takes more time to do it.

But otherwise, I think the trading for us is we did have one time charter ship in the Arabian Gulf, which we got out without any cost to us on that part of it. So our ships actually been quite busy moving around, and we are busy with the usual stuff. Maybe we do a little bit more breakbulk, a little bit more steel cargoes and others, which actually also is part of the outperformance of our ships that we can combine doing parceling and other things that is also quite helpful in our outperformance of the market.

Okay. And finally, on the fleet expansion or fleet momentum, right? Secondhand prices are high, at the highest levels since 2010; perhaps newbuild prices are not cheaper either. In this scenario, will you be more of a seller of older vessels?

Or would you look to acquire any vessels given that this could be a structural deficit in the fleet expansion for the entire market? And if you could also help us understand, given the options which you have, I think on slide -- I'm not sure which slide this is -- you mentioned something about 2 already declared and 3 more to be delivered. So net-net, how many more options do you have left?

Good question. We always -- we spend a lot of time discussing that every time. But anyway, so our view on the -- first of all, our view on the newbuilding market is, yes, prices are high. I think the yards have good margins on the ships.

But they also have -- they are fully used until '29-'30. And even the new capacity coming in has been a lot of orders of cruise ships, VLCCs, Newcastlemaxes, and very large tankers, and car carriers. So the yards are actually quite busy until '29 and 2030. But it's true prices are high.

So what we have done in our growth is that, of course, we have done some newbuildings when we thought we had the right timing to do it. There's also a limited amount of yards actually willing to build our smaller ships. So it becomes a little bit specialized when you want to have especially Handysizes, but also Ultramaxes.

But we have placed some orders, and I think we've got the timing somewhat okay on those orders. And then on top of that, we have taken the long-term charter deals with purchase options. And what we have is we have -- we actually have 16 long-term chartered ships, of which [indiscernible]. We have...

13 long-term charter ships.

13 long-term chartered ships, of which we have declared purchase option on 2 of them. Two ships will be delivered end of this year. On top of that, we have 3 more ships coming: 1 Ultra and 2 Handysizes. One is coming this year, and 2 is coming next year. They also come with purchase options on it. So that actually brings our purchase options up to 13 ships on that part of it.

So if you take the time charter deals we have with purchase options, 13 ships, we take our newbuildings with 10 ships, plus the 2 options we also have on newbuildings, combined, we actually have 25 ships that we can buy -- that we have to buy, but we only committed to 10 of them.

[Indiscernible] '29, right? Between '28 and '29.

The options of these ships are declarable from basically now until '31.

Okay. Okay. And once you declare these options, how soon can you get delivery of those vessels into your fleet?

Immediately. So all these ships also comes with options to extend the charter, all of them with option 1 year. And also every year, there is a purchase option at a fixed price. And we have designed this a little bit on purpose because, of course, of the newbuilding prices, it's a good way to keep some optionality in our business.

So should the market continue to go up, we will declare the option. At the same time, we are selling, as you also asked about, we will keep selling the older ships. The value of those are quite high at the moment, and it's a good hedge for us to do that way. And then we have the purchase options that we can declare instead of.

Okay. And then a quick clarification. For the long-term charter vessels, which you have the option to purchase, the prices of those vessels have already been fixed? Or will they be determined at the time of declaration?

They are fixed. And again, we have multiple options on the same ships every year, 1 year ago by it, and it's actually reducing over time with the age of the ship. But both the option to extend is at fixed time charter rates, and the option to buy the ship, first option is also a fixed price.

Okay. Okay. And fair to assume that those are all in the money if you choose to purchase?

That depends a little bit on how you look at it. This is a moment in time, but as we also report, we did declare 1 Ultra that we got delivered early this year. And as I said, we just declared 2 options for 2 Handys.

So there, of course, we would have done that were in the money, and we have option again next year. And I also think that is in the money. But again, the optionality is the important thing. So it can go up and it can go down, and we can react to that part. And I think that in a very cyclical business is a super important thing to have.

Thank you, Deepak, for the question. I'll read a question from the online platform. So the question is about CapEx. So what is the CapEx for the next few years?

Yes. Thanks, Luna. If I can take this question. So I'll start with CapEx for this year. If you look at our CapEx over the past few years, I think we are -- in terms of maintenance CapEx, particularly in dry docking, we have been fairly consistent.

So if you look at our past 4 years numbers that would range anywhere between $40 million to $50 million per year for dry docking. Now in the slides that we already described the first half, we spent $20 million on dry docking. So I think it's safe to assume that we will continue to perform our dry docking fairly consistent with our historical pattern.

Now the other part is the expansion CapEx. We mentioned we have 10 newbuildings in the pipeline. And we also mentioned we have paid certain deposits on some of these newbuildings. So the outstanding amount for these newbuildings to be paid is around $280 million.

And when we signed these newbuildings contract, we disclosed the payment schedule, and you would have noticed in those payment schedule that is a staged payment depending on the progress of the construction. So if you take reference to that, this $280 million will be paid in the period from the second half of 2027 and gradually to 2028 onwards.

I mentioned we are very well-capitalized. We have -- we are in a net cash position, and we have ample committed liquidity. In terms of our overall committed liquidity, we have $674 million as of June 2026, which will be more than enough to cover that $280 million expansion CapEx.

And also with our strong operating cash flow, I think we're a very good position to utilize our cash, both to meet our committed CapEx and also to take opportunities on the market when they arise. So I hope that helps you on our CapEx plan or our CapEx schedule in the next few years.

[Operator Instructions]

We have one more question online. So the question is about slow steaming. Is the industry or PB adopting slow steaming to cut bunker costs? And is reduced speed one of the factor to contribute the high freight rates in the current market?

Yes. Thank you for that question. I don't think -- we don't do anything to cut bunker costs. But of course, it is an area where we, through digitalization and AI, are spending some time to make sure we optimize speed consumption on all our ships and use the right ships for the right cargoes and so on because there's, of course, a big difference between a modern ship and an old ship in respect to this part.

But if you step back and look at the industry and so then actually, this year, we have not reduced speed on the fleet. It's actually gone up. The data says about 0.1%. So it's very little, but it has not reduced. Even though it has actually reduced for the last 4-5 years, it has not reduced this year. And of course, that might also be with an improving market that actually when you do the calculation and so on, then it didn't make sense to keep the speed.

I don't think the reduced speed is a factor contributing to high freight rates as such. I think the volatility in the bunker prices and availability, and risk of availability or not, has actually also added some congestion in the bunker ports at certain stages and so on. And I think those are just one of the additional disruptors that sort of added to limiting the supply, and that has helped on that part. But it's not reduced speed that is driving the market at the moment.

[Operator Instructions]

One more question from the online platform. Should we be expecting outperformance to continue?

Well, I think we have the data to show that we have always. Of course, quarters when the market changes quite rapidly, that it looks a little bit different. And there are ups and downs in that. But reality is we go over time, we do keep the outperformance going in it.

And of course, it's our aim all the time to maximize the value of our platform to maximize that outperformance. But I think in all fairness, I would say, historically, we have had an outperformance, and I think we will continue to have that going forward. So you should expect that to continue, yes.

As there are no further questions, we will now begin our closing remarks. Please go ahead, Mr. Martin Fruergaard.

Yes. Thank you. So overall, earnings have improved progressively during 2026, and we are well positioned to maximize earnings in the anticipated positive freight environment for the rest of the year. As we navigate market volatility arising from existing and potential new disruptions, we will remain focused on enhancing our operational excellence, maintaining a disciplined capital allocation, and preserve maximum optionality in our growth ambitions, ultimately, with the aim to deliver sustainable returns to our shareholders.

Thank you again for joining the call today. If you have any further questions, please feel free to contact us. Thank you very much.

Thank you. This concludes our conference call. Thank you all for attending. You may now disconnect.

Welcome to today's Pacific Basin 2026 First Quarter Trading Update Conference Call. I am pleased to present Chief Executive Officer, Mr. Martin Fruergaard; and Chief Financial Officer, Mr. Jimmy Ng. [Operator Instructions]

Mr. Fruergaard, please begin.

Yes. Thank you. Welcome, and thank you for attending Pacific Basin's 2026 First Quarter Trading Update Call. We will highlight a few key points in the published presentation before we proceed to Q&A.

Please turn to Slide 2. Despite ongoing geopolitical disruptions and operational inefficiencies, including the outbreak of war in the Arabian Gulf in early March, our dry bulk freight markets have strengthened year-on-year. As a result, we delivered improved TCE earnings and strong market outperformance in the first quarter. Our Handysize and Supramax fleets recorded average net daily TCE earnings of $12,130 and $13,970, respectively, making year-on-year increases of 11% and 14%. These results reflect significant outperformance with Q1 earnings exceeding the relevant indices by $1,030 per day for Handysize and $2,050 per day for Supramax.

Looking ahead to the second quarter of 2026, we have covered 70% of our committed vessel days for Handysize and 90% for Supramax at $14,000 and $17,080 per day, respectively. For the second half of the year, coverage stands at 22% for Handysize and 35% for Supramax at $10,430 and $13,840 per day, respectively. In addition to our strong performance, we have taken steps to further enhance and modernize our fleet. Today, we converted our existing order for 4 dual-fuel Ultramax newbuildings announced in 2024 to 4 conventionally fueled Ultramax newbuildings with an option to acquire 2 dual-fuel Ultramax newbuildings all to be constructed in Japan. Separately, we increased our newbuilding orders order with JNS in China from 4 to 6 Handysize vessels.

Now I will hand over to Jimmy for a quick overview of the first quarter performance and market review.

Thank you, Martin. Good evening, ladies and gentlemen. I will share with you some observations on the market and a snapshot of our operational performance for the period.

Please turn to Slide 4. Freight rates increased in the early part of the first quarter of 2026, supported by strong dry bulk commodity flows. Market conditions remained volatile during the quarter, driven by the war in the Arabian Gulf as well as route disruptions and bunker fuel price fluctuations. During the period, market spot rate for Handysize at an average of approximately USD 11,100 per day was 39% higher year-on-year and the rate for Supramax at an average rate of around $11,920 per day was 51% higher year-on-year. Overall, despite ongoing volatility and elevated geopolitical risk, freight market conditions across both segments remained healthy during the first quarter of 2026. FFA rates for the remainder of 2026 also points to a positive outlook.

Please turn to Slide 5. Now this page provides an overview of dry bulk trade developments for the period from January to March 2026. Beginning with minor bulk, total loadings declined by about 3% year-on-year. Volumes were led by -- were lower by aggregates, cement and steel-related cargoes, driven in part by disruptions in the Arabian Gulf and new licensing rules for Chinese exporters. This was partially offset by continued growth in bauxite and minor metals as China's fast industrial sector continued to attract ever greater imports. Fertilizer volumes softened in the period with prices increased, signaling a more cautious outlook for grain-related trade later in the year.

Now turning to grain. Loadings increased by about 15% year-on-year. Export performance was strong across most major growing regions, supported by large harvest, particularly in East Coast South America. Export volumes from Ukraine and Russia, however, declined, continuing the trend observed in recent months. On the import side, China led demand growth supported by a stronger renminbi despite the escalation of geopolitical conflicts since late February. In coal, volumes declined by 5% year-on-year. In addition to the long-term structural downtrend, Indonesia shipments declined due to tighter export quotas, while Chinese and India coal imports also softened. However, coal prices increased following a spike in LNG prices across Asia, which provided temporary support for power-related demand. Prospects for coal trade for the remainder of 2026 have improved, notwithstanding long-term trends to phase out coal usage.

Now finally, on the rightmost column, you would see iron ore loadings increased by about 7% year-on-year. Chinese steel mills continue to demonstrate strong appetite for iron ore imports and stock building, aided by a strong renminbi. Economic indicators also suggest that property-related steel demand in Asia, in China, in particular, may be stabilizing. Australia and Brazilian export volumes performed strongly, recovering from adverse weather in the same period last year. Pelletizing plants in Oman and Bahrain, however, led losses in the period. Now in summary, although trade volumes were resilient in the first quarter of 2026, the evolving geopolitical landscape, particularly the Iran war is expected to continue to reshape global trade floats and drive dislocations across dry bulk markets. These would add additional support to freight rates.

Please turn to Slide 6. In the first quarter of 2026, as Martin mentioned earlier, our daily average TCE earnings of USD 12,130 for Handysize and $13,970 for Supramax represented an increase of 11% and 14% as compared to the same period in 2025, respectively. Our TCEs continued to outperform average spot market rates by USD 1,030 per day for Handysize and $2,050 per day for Supramax. For the second quarter of 2026, we have currently covered 70% and 90% of our committed vessel days for our Handysize and Supramax core fleet at $14,000 and $17,080 per day, respectively. Now complementing our core business, our operating activity generated a daily average margin of $340 per day over 6,240 operating days in the first quarter.

I will now hand you back to Martin to run you through market dynamics and outlook.

Thank you, Jimmy. Please turn to Slide 8. Global dry bulk net fleet growth is forecasted to increase from 3% in 2025 to about 3.6% in 2026, driven by higher scheduled newbuilding deliveries across the sector. By comparison, Handysize and Supramax net fleet growth is expected to moderate to about 3.8% in 2026 as newbuilding activity remains more concentrated in larger vessel classes. Around 15% of Handysize and Supramax capacity is now more than 20 years old and about 30% of total dry bulk capacity falls into this age category. The fleet age profile highlights both the ongoing fleet renewal needs and a growing number of older vessels that eventually will be scrapping candidates.

Please turn to Slide 9. As I mentioned at the start, we have finalized agreement to replace our existing order at Imabari in Japan for 4 dual fuel Ultra newbuildings with 4 conventionally fueled Ultramax newbuildings, featuring the latest fuel-efficient design. This adjustment significantly reduces unnecessary near-term capital expenditure and reflects a financially prudent approach in light of renewed uncertainty surrounding the timing and final form of the global maritime green fuel transition regulations, especially after the failure to adopt IMO's net zero framework in October 2025 due to political divisions among member states.

To maintain flexibility, these new agreements include an option to acquire 2 dual-fuel methanol Ultramax newbuildings, allowing us to reenter the low-emission vessel market if regulatory clarity improves within 2026. Beyond this, we have also reached an agreement with JNS to order another 2 Handysize newbuildings, which will be built to the same latest generation fuel-efficient open hatch and lock-fitted design as the 4 vessels we ordered in December last year. With these transactions, our current order book consists of 6 Handysize and 4 Ultramax newbuildings, plus an option for 2 additional dual-fuel Ultramax newbuildings.

We also hold purchase options that we can exercise between 2026 and 2031 for 15 long-term chartered-in vessels, 12 of which are already operating in the Pacific Basin fleet today with the remaining 3 scheduled for delivery in the second half of 2026 and into 2027. These strategic moves helps to position us well to adapt to regulatory developments, manage capital prudently and maintain fleet flexibility for the future.

Please turn to Slide 10. The war has significantly disrupted trade flows leading to a tighter supply of available vessels. In the short term, we are seeing around 2% of the sub-Capesize fleet currently trapped in the Arabian Gulf, which further restricts vessel supply. Meanwhile, global dry bulk cargo volumes have shifted noticeably. Before the conflict, volumes were growing at about 1.4% year-on-year. But since the outbreak, we've seen a sharp decline of roughly 6.6% year-on-year. This drop reflects a fear fixing in the market as stakeholders remain cautious amid ongoing fluctuations in commodity prices, freight rates and fuel prices. However, as the market begin to adapt to the new price levels and end users look to restock inventories, we anticipate that pent-up demand will be released. Additionally, power utilities across Asia and Europe are expected to switch increasingly from LNG to coal, which should add further demand to the dry bulk sector.

Looking to the future, if the war in the Arabian Gulf continues and energy prices remain high, we may see higher inflation and ultimately slower global economic growth. So far, the impact of -- the impact on Pacific Basin has been limited. We currently have chartered vessel in the Arabian Gulf, and we are maintaining ongoing dialogue with both the owner and our charters. So our exposure remains limited. We also received solid support from our fuel suppliers and have covered most of our fuel price exposure through hedging and pass-through mechanisms. On the operational side, we are able to capitalize on our investments in energy-saving devices, silicon applications and voyage performance optimization through digitalization, all focused on improving vessel speed and consumption profiles. Moreover, our relatively high number of open days in the second half of 2026 allow us the flexibility to maximize earnings as freight rates continues to rise.

Please turn to Slide 11. As we look ahead to the rest of 2026, it's clear that we will be navigating another year marked by substantial market disruptions. From a broader macroeconomic perspective, economic growth is likely to slow down largely as a result of the aftermath of the Iran war. The IMF have already revised their growth forecast downwards, but the ultimate trajectory will depend on ongoing discussions between Iran and the U.S. as well as the timing of the reopening of the Strait of Hormuz. In the dry bulk sector, we anticipate that supply growth both from -- both for minor bulk and total dry bulk will outpace demand growth in the near term. This is primarily due to increased newbuilding deliveries and limited scrapping activities. Despite these challenges, market disruptions and inefficiencies are likely to provide ongoing support to dry bulk market conditions.

Notably, freight forward agreements are holding at elevated levels for the rest of the year with FFA averages for 2026, suggesting rates of around $14,080 per day for Handysize vessels and $16,230 per day for Supramax vessels. Of course, volatility is expected to persist given slower economic growth, multiple ongoing disruptors and heightened geopolitical uncertainty. I am pleased to highlight our continued TCE outperformance, which demonstrates the strength and resilience of our operating model this is underpinned by a fleet that is both growing and modernizing, our proactive fleet management and our sector-leading cost efficiency. Coupled with our robust balance sheet and disciplined approach to growth, these strengths position Pacific Basin exceptionally well to manage near-term uncertainty and to seize exceptionally well to manage near-term uncertainty and to seize opportunities as they arise. Here, we would like to conclude our 2026 first quarter trading update presentation by thanking our Pacific Basin colleagues at sea and ashore for their contribution to our results.

I will now hand over the call to the operators for Q&A. Thank you.

[Operator Instructions]

First question comes from Nathan Gee.

Maybe 2 questions from me. Firstly, I just want to clarify the impact of the war on dry bulk. And maybe -- I missed the first 10 minutes of the presentation, so apologies about that. But I just want to confirm, has the war -- do you see it as having played as more of a positive or a negative for dry bulk market so far? So that's the first question.

Second question is just in terms of fuel availability. Your ships go into smaller ports. Are you seeing any evidence of fuel shortages anywhere and any risks over the next few months around that?

Yes. Thank you, Nathan, and thank you for asking a question. I was getting a little bit nervous. First of all, about the war and the impact on the market and I think it's important to remember that we had the start of the year as we normally do in -- where the market goes down before the Chinese New Year and then it starts going up, and that's also what happened this year. And then the war starts. And we actually had -- so at that time, we were actually on -- the market was actually on the way up. And when the war started, we actually had a month where rates actually came down a little bit for the Handysize and the Ultramaxes.

And I think the reason for that was actually that all this uncertainty, everybody was stepping back and sort of trying to figure out what was going on. And of course, fuel prices were peaking immediately. So I think everybody was stepping back, waiting a little bit to see with all this volatility, waiting a little bit to see if things will settle down or when -- if the war would end soon or if it was only a short duration. But then the war continued. And after a while, I think people are stepping in again and having to replenish and get the cargoes moving. So we're actually now seeing an increase in the market. And we also see the FFA actually looking quite active. It's, of course, a super change of commodities moving around.

Before the war, there was yearly about, I think, about 30 million tonnes of fertilizers going out of the Arabian Gulf that has to be replenished somewhere else, probably can't replenish it all. But you see a lot of changes in the trading patterns. And these are, again, these disruptors that drives our market going forward. So as we say, we still have quite a bit of ships delivering, but all this disruption actually changes the trading pattern has been very helpful for us, and the market looks very positive at the moment.

And on top of that, you can say if coal has to replenish gas and so on, there's actually some upside. I think that's a space to watch going forward, what's happening on the coal front. And then about fuel availability, clearly, in the beginning, lots of concerns about fuel availability. It seems now that things have settled down a little bit. We have had -- we haven't had any issues with delivery of fuel because we had challenges with the price of the fuel. It went up quite a lot during March. Things have settled down. And I think that maybe also brings the customers a little bit back in the market. The bunker prices are still high, but they're settling a little bit compared to -- and actually prices now are about, I think, $350 below the highest price we had in March.

We don't see an issue with availability for our fleet. And I think we have had many of our loyal suppliers who have actually been quite loyal to us during this period. I think that the challenge sometimes it's probably more with the refined products. So it's probably more in the gas oil, more the jet fuel for the planes and these things where the refineries are having some challenges. And we also see that the gas oil, which is a refined product, the prices are very high still and availability is tight. But so far, so good.

Perfect. Maybe one quick follow-up, if I can. Just in terms of the buyback, is there any update in terms of whether you've started that so far? And just general thoughts on buying back at current levels?

Yes. But I think it's also important, we haven't said so much in the presentation, but asset values are also going up. And actually, secondhand values are now probably the highest they've been, if you take out '22, it's actually the highest they've been since 2016. So it's actually the highest prices for 10 years, just taking out the -- well, it's actually probably higher than it was in '22. So secondhand values are very high at the moment. And of course, so when we look at our share price and we compare it to the fair market value of our assets, we are trading again below that part of it. And we are evaluating all along if and when the right timing is to do the share buyback.

We have $40 million as we also had the last couple of years, we also have $40 million or announced $40 million this year. But this year, we have said up to $40 million. And of course, we follow a little bit the market to see if and when the right time is to go in to buy.

[Operator Instructions]

So there are a couple of questions coming from the platform as a written questions. So this question is about, are you concerned that demand destruction due to weak industrial activity from inflation, fuel availability risk could outweigh ton-miles and coal demand uplift?

Yes, I'm always nervous about these things. But the world seems at the moment at least quite resilient. And we also just saw numbers from growth in China this morning of 5%, which is quite impressive. But it's clear that if we -- if the -- for instance, the war in the Arabian Gulf continues for longer and the Strait of Hormuz is closed and the oil price stays high, that will definitely have a negative impact on the world economy in the longer run and it will probably create some inflation in the market. That I don't think will be good for us.

But on the other hand, in the short term, all this disruption, which is enormous actually, is actually quite positive for the earnings and for the activity level for the dry cargo space. But it's, of course, true that in the longer run, we would prefer to have more growth, global growth would be good. And the situation at the moment is probably not very supportive around the long-term growth if the situation continues for long.

Okay. Thank you, Martin. There's one more question from the platform. Do you expect any one-off loss related with the vessel in the Gulf?

Well, it all, of course, depends -- we are quite balanced on the contractual liability on that ship. But of course, if the situation continues for long, there will, of course, be losses in that connection. But for us, considering our size and our contractual obligations in this contract, it is minimum. -- on that side of it. The exposure we basically have in respect to the situation we have now and the high oil price of these things and the situation in Arabian Gulf is probably that the lube oil prices will go up a little bit. And then, of course, cost of flight tickets is up. And of course, we have a lot of crew members flying around the world. But in the biggest scope of it, it's minimal compared to the upside we see in the market.

Thank you, Martin. There's one more question from the platform. Could you elaborate on the CapEx reduction from the shift to conventional fuel-powered new vessel orders?

Yes, we can. We announced the order for the dual fuel ships in '24 and the price we announced was $46.5 million per ship. And the new ships that we have acquired, they are priced at $39.2 million. So the difference between that is [ $7.7 million ] for each of the 4 ships in it. It will not have an immediate 2026 impact on our cash flow because we have already paid the first installment on that. But as the ships are progressing on building and being delivered, that's a reduction in the CapEx on these 4 ships. So for each ship, [ $7.7 million ].

As there are no further questions, we will now begin closing remarks. Please go ahead, Mr. Martin Fruergaard.

Yes. Thank you very much for listening in to our Q1 trading update. Should you later have any questions after having studied the material, then please feel free to call us. and call our Investor Relations team. Thank you very much, and have a good evening.

This concludes our conference call. Thank you all for attending.

Welcome to today's Pacific Basin 2025 Annual Results Announcement Conference Call. I am pleased to present Chief Executive Officer, Mr. Martin Fruergaard and Chief Financial Officer, Mr. Jimmy Ng. [Operator Instructions] Mr. Fruergaard, please begin.

Yes. Thank you, and welcome, ladies and gentlemen, and thank you for attending Pacific Basin's 2025 Annual Results Earnings Call.

Assuming you have already gone through the presentation, we will highlight key points discussed in it before we proceed to Q&A.

Please turn to Slide 2. 2025 was a year with various evolving geopolitical and market challenges. 2026 has begun with an escalation of these challenges, not least the outbreak of war in the Middle East over the weekend. However, it was gratifying to see that our integrated platform again demonstrated agility and resilience, leading to a solid financial performance in 2025.

During the year, we generated an EBITDA of USD 263.1 million, underlying profit of $39.2 million and net profit of $58.2 million. Our balance sheet remains strong, and we closed the year with a net cash of $134 million and an undrawn committed facility of $485.5 million, illustrating our strong liquidity. All in all, we delivered solid shareholder value in 2025 with a total distribution of $19.5 million through share buybacks and dividends declared for the year. Total shareholder return for 2025 was 46%.

Please turn to Slide 3. We remain committed to returning value to our shareholders through both dividends and share buybacks. The Board has declared a final dividend of HKD 0.06 per share, which together with the interim dividend of HKD 1.6 per share distributed in August 2025, amounts to approximately USD 51 million or 100% of our net profit for the year, excluding vessels disposal gains. In addition to the dividend we completed in 2025, our announced share buyback of $40 million. All in all, our committed distribution reached 179% of 2025 net profit, excluding vessels disposal gains. This demonstrates our ongoing commitment to return meaningful value to our shareholders.

I will now hand over to Jimmy for a quick overview of 2025 performance and financial review.

Thank you, Martin. Good evening, ladies and gentlemen. I will share with you some observations on the market and a snapshot of our financial performance for the year.

Please turn to Slide 5. The industry faced significant macro headwinds in 2025. Geopolitical risk has remained elevated at the start of 2026 and heightened with the situation in the Middle East developing over the past few days. Market freight rates fell significantly in the first half of 2025 as supply outpaced demand and then gradually picked up in the later part of the year.

During the year, market spot rates for Handysize and Supramax vessels averaged about $10,570 and $11,610 per day, representing a decrease of 5% and 10% year-on-year, respectively. However, the FFA saw an uplift since the beginning of 2026. Average at $13,730 per day for Handysize and $15,580 per day for Supramax. FFA for the remainder of 2026 points to a stable outlook. There is no suggestion yet that the most recent increases in FFAs are due to the war in the Middle East. The conflict could tighten markets by creating new efficiencies -- inefficiencies. But equally, it could lead to cargo cancellations and discounted vessels.

Please turn to Slide 6. In 2025, our average daily TCE earnings of $11,490 for Handysize and $12,850 for Supramax represented 11% and 6% decrease as compared to the rates in 2024, respectively. Despite the decrease year-on-year, our TCEs continued to outperform the average spot market rates by $910 per day for Handysize and $1,220 per day for Supramax.

For the first quarter of 2026, we have covered 88% and 100% of our committed vessel days for our Handysize and Supramax core fleet at $11,890 and $14,450 per day, respectively. These rates are higher than the current market spot rates as well as the FFA. Our operating activity margin also improved and contributed $22.9 million in 2025. Operating activity days increased 1% year-on-year to 27,850 days and generated a margin of $820 per day, which represented a 30% increase year-on-year.

Please turn to Slide 3. In terms of vessel costs, we continue our leading position in cost efficiency. Our core daily operating costs for both Handysize and Supramax vessels remained well controlled. Average daily OpEx for both segments were broadly stable at around $4,780. Depreciation costs rose slightly by 2% for Handysize and 6% for Supramax, respectively, mainly reflecting drydocking and fuel efficiency upgrades. Average daily finance costs decreased by 13% to around $130, mainly due to lower average borrowings.

Long-term chartered vessel daily rates also improved. Cost for Handysize remained substantially unchanged, while Supramax were 12% lower, mainly attributable to the redelivery of vessels that have been chartered at higher rates. Overall, our costs remain stable with our own fleet breakeven at approximately $4,820 per day for Handysize and $5,020 per day for Supramax.

Please turn to Slide 8. Overall 2025 freight market was softer than last year, but our performance has been resilient. Our top line decreased due to the softer market, and our owned vessel costs were lowered by 3%, mainly due to the disposal of 8 older vessels. A 24% improvement in chartered vessel costs was due to the weaker freight markets. And as a result of the changes in revenue and cost items, our operating performance before overheads decreased by 28% year-on-year to $142 million.

One-off items also had an unfavorable change in 2025, mainly due to expenses related to the structural changes we implemented during the year for compliance with USTR. Profit attributable to shareholders was $58.2 million for 2025.

Please turn to Slide 9. We continue to be disciplined with our capital allocation and remain debt-free on a net basis with a net cash position of USD 134 million. We have available committed liquidity of $756 million at the end of 2025. The total net book value of our 107 vessels was $1.6 billion, while the estimated market value was higher at $1.96 billion, reflecting a healthy buffer above book values based on composite broker valuations. The financial flexibility is further enhanced by the new $250 million sustainability-linked facility secured in July 2025. The facility helped strengthen both our liquidity position and also our ability to respond quickly to market developments.

Please turn to Slide 10. Our strong balance sheet, high liquidity and fleet optionality positioned us well to continue executing our strategy and capturing opportunities in a dynamic market environment and we're confident that this will continue in the current disruptive environment.

Our operating cash flow for the year was $229 million, inclusive of all long and short-term charter-hire payments. We also realized $66.8 million from the sale of 5 older Handysize and 3 Supramax vessels. During the year, we closed a new $250 million revolving credit facility, as mentioned on the previous page. Our CapEx amounted to USD 116 million, which included $59 million for 3 Handysize vessels delivered into our fleet in 2025 and one Ultramax vessel purchase options exercised in late 2025, which subsequently delivered in January 2026, along with $57 million for dry dockings and other additions.

We paid a total of $44 million in dividends, which included the 2024 final dividend of HKD 0.051 per share, totaling $33.4 million. and also the 2025 interim dividend of HKD 0.016 per share, totaling USD 10.7 million. We also spent USD 40 million to repurchase our own shares under our buyback program announced last year. And our net cash outflow from borrowings was USD 97 million in 2025. The strong cash generation ability allowed us to have an improved liquidity for any future opportunities.

Please turn to Slide 11. We will continue to focus on maintaining a robust balance sheet and optimizing our cost structure. The Board has conducted a review of the company's long-standing dividend policy of paying out at least 50% of net profit excluding disposal gains and having considered the needs of the business and the best practice capital allocation, the Board has decided to expand the policy to enhance shareholder returns.

So with effect from 2026, the company's amended dividend policy is to pay dividends of 50% of annual net profit, excluding disposal gains and increasing up to 100% of annual net profit also excluding disposal gains when the company is in a net cash position at year-end. The Board may also decide to make additional distributions in the form of special dividends and/or share buybacks. We will continue with our share buyback program and to purchase up to USD 40 million worth of shares in 2026, subject to market conditions.

I will now hand you back to Martin to run you through the market dynamics and update on our strategy.

Yes. Thank you, Jimmy, and please turn to Slide 13. So before running through the -- through last year's volumes, we should say that ports and countries within the Strait of Hormuz accounts for approximately 2% of total dry bulk cargoes. Taken together with the Red Sea and Suez Canal, 5% of dry bulk shipping transits these choke points. This is lower than in the tanker and container shipping sector, but it's still enough to create significant new sources of market inefficiencies if voyages are diverted.

Pacific Basin's own fixtures in 2025, 3.6% of our total cargo volumes loaded first -- loaded within the Strait of Hormuz and 1.3% of our total cargo volumes discharged in the region. In 2025, minor bulk demand remained resilient, ton mile demand grew 4% as supported by China's export of cement and fertilizer and it's important -- imports of minor metals, ores and concentrates.

Flows of semi-processed materials from China to developing market continued to rise sharply supported by China's structural production surpluses and ongoing demand from Build and Road partners' economies, leading to more parceling and longer loading discharge times. Grain loadings decreased 6% year-on-year, mainly due to the sharp reduction in exports from Ukraine and Russia. At the same time, major exporters such as the U.S., Brazil and Argentina entered 2026 with strong momentum with forecasting agency predicting large harvests ahead.

Coal loading also decreased 6%, reflecting changes in China's policy targets and a shift in stockpiling dynamics. India has become the world's largest buyer of metallurgical coal and with its steel sector aiming to nearly double its output by 2030, it is expected to play an increasingly important role in future coal demand.

Iron ore loading fell 2%, impacted by weather-related disruptions in Australia early in the year. Looking ahead, volumes are expected to be supported by the ramp-up of Simandou in Guinea from 2026, which could displace high-cost production in China and Australia and extend average sailing distances adding to shipping demand.

Please turn to Slide 14. We continue to adopt a disciplined approach to fleet growth and renewal, seeing increasing vessel values and strong market interest in modern efficient tonnage. The chart on the left shows the upward trend in both newbuildings and secondhand values for Ultramax and Handysize vessels, reflecting healthy sentiments in the asset market.

As at 31st December 2025, our core fleet stood at 120 vessels, comprising 107 old vessels and 13 long-term chartered. Throughout the year, we actively renewed and optimized the fleet by selling 3 Supramax and 5 Handysize vessels while exercising 3 Handysize process options and took delivery of 3 long-term time charters in TC newbuildings from Japan.

For 2026, we will have delivery of additional long-term TC newbuildings and our own 8 newbuildings to be delivered in 2028 and 2029. We also retained additional purchase options on a number of our long-term TC in Handysizes that can be exercised or extended subject to market conditions.

Please turn to Slide 15. In December 2025, we committed to the acquisition of 40,000 deadweight Handysize newbuildings for a total consideration of USD 119.2 million with delivery scheduled for first half of 2028. These competitively priced ships with early delivery will add meaningful value to our fleet. They incorporate the latest fuel efficient designs, including open hatch and logs fitted configurations with enhanced tank top and deck strength. This provides great flexibility and upgraded cargo handling capability which allow for a more triangulated trading, support stronger utilization and TCE outperformance.

In addition, these vessels are significantly more fuel efficient than the older single-fuel vessels, they will replace, and we secured them at competitive pricing with early delivery slots.

Looking to our order book, we have 4 Handysize vessels to be delivered in 2028, 4 Ultramax LEV vessels scheduled between late 2028 and '29. And at the moment, 14 long-term chartered vessels with purchase options stretching to 2032. Altogether, this represents 22 potential additions to our core fleet over the next few years.

Please turn to Slide 16. Looking ahead, our segment has proven resilience with stable growth in demand to the recent market disruptions. War in the Middle East could tighten the market if ships are diverted, but equally, it could lead to canceled cargoes in the area. Our focus cargoes are estimated to rise by about 3.5% in 2025 and a further 2.5% in 2026, reinforcing the structural demand support for our segment. Overall dry bulk market in the coming years will be affected by geopolitical and energy transition, but we expect our segments will remain resilient.

Please turn to Slide 17. In 2025, global dry bulk net fleet growth remained steady at 3%, with Handysize and Supramax supply at roughly 4.1%. Handysize and Supramax newbuilding deliveries were up year-on-year. Total dry bulk newbuilding deliveries increased 7% year-on-year, and supply growth peaked in 2025. New ordering has slowed and the combined Handysize and Supramax order books remained manageable at around 11% of the fleet.

The scrapping pool continues to increase. Around 50% of Handysize and Supramax capacity is now over 20 years old. Total dry bulk and minor bulk supply growth is expected to exceed demand growth in 2026 driven by higher newbuilding deliveries and limited scrapping activity. This was also the case at the same time last year.

Please turn to Slide 18. The IMF expects global GDP to grow 3.3% and China at around 4.5%. But tariffs, political uncertainty and shifting geopolitics will continue to affect trade flows. If the war in the Middle East proves protracted, a sustained rise in global energy costs could hamper economic activity and create downside risk to the base case scenario, particularly for those countries -- for those economies that are more dependent on energy imports.

On the commodity side, geared bulk segment should benefit from steady growth in minor bulk and grains, supported by green energy infrastructure and urbanization in developing markets. Chinese export of semi-processed materials under the Build and Road Initiatives also remain an important driver. From the fleet perspective, around 50% of the Handysize and Supramax fleet is now over 20 years old, though, high delivery volumes and limited scrapping means supply is expected to outpace demand in 2026.

Overall, ton mile demand is forecasted to rise by about 2.1% for minor bulk and 1.9% for total dry bulk against a net fleet growth of 4% and 3.5%, respectively. But ton-mile demand rise will be impacted by the ongoing disruptions that continue to impact trade routes. Freight forward agreements indicate a healthy market going forward with FFA curves over the next 2 years being at or near 12 months high. Yesterday was the first trading day since the war in the Middle East started and FFA rose further. So overall, the current spot market is strong and outlook appears positive despite the war and supply seeming outgrowing demand during 2026.

Please turn to Slide 19. Against this market backdrop, our strategic priorities for 2026 remain very clear and focused on areas where we can drive the most value. We will continue to renew and expand the fleet selectively and in a disciplined way through modern secondhand vessels, targeted newbuildings, long-term charter with purchase options that are accretive opportunities that offer a strong strategic fit. We continue to focus on improving our cost structure and leveraging our productivity tools and initiatives to further improve our cost competitiveness while striving to grow our fleet.

As the decarbonization rules will drive the gradual transit to green fuels, we are transforming our fuel team into a sustainable energy solution team to drive further decarbonization as well as monetizing of our investments. We will continue to build on our excellent progress in respect to digitalization and our AI-enabled technologies to further ramp up our fuel and voyage optimization drive for improved efficiency cost savings, TC outperformance and sustainability. And finally, we will continue to reinforce strong performance management, leveraging our integrated platform and strong balance sheet to grow our business, improve customer service and maximize total shareholder return.

Please turn to Slide 20. Our platform is well positioned to deliver sustainable shareholder value. We operate one of the world's largest modern Handysize and Supramax fleets with 250 vessels, [indiscernible] global commercial platform and supported by a diverse base of more than 600 industrial customers. Over the years, we have continuously delivered outperformance with the support of our strong platform, disciplined capital management and sector-leading cost efficiency. As Jimmy noted earlier, we have expanded our dividend policy effective from 2026. The improved policy will enable us to deliver better shareholder return.

Here, we'd like to conclude our 2025 annual results presentation by thanking our colleagues at sea and ashore for their contribution to our results. I will now hand over the call to the operator for Q&A.

[Operator Instructions] Our first question comes from Nathan Gee.

[Audio Gap] returns. Can you talk about the thinking behind sort of proceeding with another $40 million buyback? We like the buyback, but just help us understand the thinking given that your market cap, I think, is now above NAV. So that's the first question. Second question, just in terms of outlook. Just help us reconcile the strong rates that we're seeing right now versus those headlines of supply likely exceeding demand. So maybe a little bit more just in terms of the disruptions that are sort of helping the market despite some of that headline demand supply.

Yes. If I try first and Jimmy can add to it. First, Nathan, thank you for the questions. Thank you for listening in. First, in respect to the up to $40 million buyback that we announced, I think the key word is up to. So I think the other years, we were a little bit more precise that we would do that investment. This time we say up to. We agree that if you make the calculation, we are trading above fair market NAV. But on the other hand, we also think our platform has some value and of course, we also want to signal that we still believe -- we believe in our business and in our market. And if we find that it's a good time to buy, we will definitely buy that.

So we're also trying to signal a little bit to you that we are ready to buy if and when we think it's the right thing to do. I think the buybacks we've done in the last 2 years has been very good actually, but we are ready to do more. But I think the key word is up to $40 million on that part. And then you asked a little bit about the outlook, it's -- I feel a little bit because it was a little bit the same last year. I think 4% growth in supply and 2% growth in demand. These, of course, are Clarksons figures.

And I would also say this year, it's -- that's the base that we have. But -- and again, when you look at the disruption and, of course, the disruption we just saw this weekend, when you look at the FFA market, also going forward, of course, the market looks much better I must say at the moment. And I think if you look at our -- we, of course, covered for first quarter and we covered a little bit for the short term, but we do have quite a bit of open tonnage going, open days going forward. So I definitely hope that the market will continue to improve.

I think we'll have to see a little bit the impact of the Arabian war and how long it will last and all these things before we sort of conclude on that part of it, but right now, it looks very positive, I must say.

Our next question comes from Deepak Murali Krishna.

I hope I'm coming through well?

You are. Yes, absolutely.

So when we look at the dry bulk market, right, we've seen that the TC rates have held up pretty well. And as you alluded earlier, right, last year also, we had about 4% to 5% supply growth in the sub-Cape segments and about 2% to 2.5% growth in the demand side. And something like that is also happening this year, where supply is at around 4%, but the demand growth is likely slowing down based on the slide which you shared for the minor bulk ton-mile. So in that context, what is it that is holding up the rates in your view? And how sustainable is it?

I think in the predictions that we are using that come from some of the big broking houses and they also struggle, of course, with predicting the disruptors, it's nearly impossible. And I think to a certain extent, they also maybe had expected that the Red Sea would open up and ships could start proceeding through the Red Sea. I think there was some, at least on the container side, that had started that part of it. That's all closed now. Again I think we have a little bit the same situation. Last year was probably also other things like USTR. I think we all step back, not just us, but also others step back a little bit from sending ships to the U.S. that created again disruptions in it.

And now of course, it's the war in the Arabian Gulf and then again, the closure. For sure, the closure of the Red Sea is just a new major disruptor. So -- and that, of course, means I think that the commodities will have to be moved for somewhere else. So let's see how it goes. Arabic Gulf is a big exporter of fertilizers and aggregates, cement -- sorry, cement and clinker, that has to be sourced from somewhere else, and that will definitely be longer ton-miles and I think that impacts the market immediately.

Okay. Okay. And if I may ask about your plan about shifting half the fleet under the Singapore flag and -- under the Singapore operations. And then you -- Jimmy alluded to some costs related to that exercise. I just wanted to get a sense of has that excise been completed? If not, then should we expect any additional costs this year as well on that front? And then how do you see that impacting your operations? Or is it more of a structural change only on the organization front, but operationally, there's not much?

Yes. Thank you, Deepak. Thank you for the question. So the transfer is ongoing. And we -- as we announced last year, the aim is to transfer a number of our vessels to Singapore. So that exercise is ongoing. Of course, the USTR and Chinese special port fees is currently under 1-year truce. So we do have a bit of time to complete the move that we set out to do.

Now in terms of the cost that you see there is certain project costs incurred in 2025. We would expect a similar cost to be incurred in the coming year to complete the exercise, although the cost is likely to be less. As you could imagine, when we started off with the exercise, there is a certain amount of initiation costs. So the ongoing exercise would naturally have a smaller impact in terms of the cost. Now you also asked about the impact on operation. I think as we -- when we did the announcement, I think we also mentioned this is a change that wouldn't affect our operation, but it's more on the corporate organization.

Yes. I think I could add for 2025. And of course, when USTR was implemented and also leading up to it, we did step back from calling the U.S. or at least limited somehow. And I think that had an impact on our earnings last year because that was actually a very strong market. For that reason, I would say, not because we didn't do it because I think many people stepped back from the U.S. So we didn't get the full value out of that part in third quarter and into fourth quarter. But going forward, that has stabilized, and things are back to normal.

Okay. And then my last question is about the performance versus the index. When we look at the quarterly trend the last couple of quarters, at least for the Supramax versus I think we were lagging behind. So what's your take on how soon could this be bridged and probably resulted in outperformance?

I think all in all, last year, of course, we had a total outperformance. So we did very well in the first half. And as I said, in second half also because of USTR, the market was quite divided. So the Atlantic market, very strong, very high and the Pacific actually not so good. And that, of course, also impacted our earnings. And the usual story is, of course, that when the market increases, we will also run a little bit after the market before we catch up with the market.

I think we did catch up with the market here in January, February, but -- and now again, the market starts going up, which is a good thing. But again, that will also mean we'll run a little bit after the market in the short term. So -- but -- but if the market stays at these levels, we will definitely benefit from that in our earnings, but it will take a little bit of time for us to catch up with the index and do the outperformance on that part. Does that make sense?

Yes, it does Martin. And then just sort of another question if I can. When we look at the vessel acquisition, right, you previously used to order vessels at the Japanese yards and then we see an order on the Chinese yard. And given that you have about 32 vessels -- with optionality for 32 vessels, do we think that the new ordering would probably take a step back and you will more exercise the optionality?

We like to have both. I think we like to have as much optionality on our books as possible. But we also, of course, like to have access to quality yards, both in China and in Japan for our own newbuildings. So I think our strategy is to do so -- to keep all doors open for us. And of course, when we do the newbuildings, of course, we also get a design that we really want that gives us something that we can't get in the market. And for instance, on the Handysize, they are open hatched and give some special features that actually enables us to do more parceling and big cargoes or these things, which is area how we can sweat or optimize the earnings on our ships better.

If we take ships on time charter, it's more standard ships in it, but we like the optionality of these long-term time charter deals as well. But I think it would be fair to say that we want to keep all doors open, we want -- we do like very much the optionality in the market. And we are fundamentally positive about our market going forward. Also when you look at the age profile of the fleet and so on. So we like the -- also our newbuildings getting delivered in '28 and '29, we think that's a good time to get delivery of ships as well.

Okay. Makes sense. And then one clarification for these 20-plus vessels which you could potentially add, will this be also to replace some of the vessels which you might look to sell down as you did last year?

Yes, we will -- our plan, of course, we follow the market now and see how it's developing. I think I explained in the past as well. We always do sale versus continuous trading calculations on all our ships. And we have sort of not a rule, but we tend to look at the ships when they become 20-year-old say, well, it, should we sell or continue to trade. Right now, of course, we do have -- I think we have 8 ships this year that is above 20 or will turn 20. They are, of course, candidates to sell.

Of course, at the moment, when we look at the market, we are not in a hurry to do so, and we will have tried to take advantage of the market as possible. So it's not a rule that we have to sell and we don't regret what we've done in the past. But at the moment, we will follow the market a little bit to see how it develops and we are not in a hurry to do anything in this market at least.

[Operator Instructions] There are currently no further live questions.

There is a question coming in from the online platform. So the question is, is there any view on how the ongoing geopolitical situation in the Middle East might impact the group's business.

Yes, first of all, when we look at our fleets and where we are located, we do not have any of our own ships in the Arabian Gulf or Persian Gulf. So in that sense, we are not exposed in that way. We do trade in that area, but at the moment, we don't have a ship in the area. We have one ship on its way, but of course, that will probably divert to somewhere else and not go into the Arabian Gulf. So I think right now, we are also just looking at what's happening, and it looks like things are escalating. And for sure, we believe the Red Sea will be closed for longer. And then of course, we follow to see what's going to happen both in respect to oil price and longer prices and so on.

But all in all, it will not have any sort of negative direct consequences for us. We probably see it will change the supply chains and they will be longer and then there will be more ton miles coming to the market going forward. But it's early days, so let's follow and see how the situation develops.

There are no further questions. We will now begin closing remarks. Please go ahead, Mr. Martin Fruergaard.

Yes. Thank you very much. Thank you very much for listening in, and have a good evening. Thank you very much.

Welcome to today's Pacific Basin 2025 Third Quarter Trading Update Conference Call. I'm pleased to present the Chief Executive Officer, Mr. Martin Fruergaard; and Chief Financial Officer, Mr. Jimmy Ng. [Operator Instructions]

Mr. Fruergaard, please begin.

Thank you. Yes, and welcome, ladies and gentlemen. Thank you for attending Pacific Basin's Third Quarter Trading Update Call. My name is Martin Fruergaard, CEO of Pacific Basin, and I'm joined by our CFO, Jimmy Ng. At this time, we are with you from our office in Singapore. Assuming you have already gone through the presentation, we will highlight key points discussed in it before we proceed to Q&A.

I'll first hand over to Jimmy for a quick overview of the third quarter performance and market review.

Thank you, Martin. Good evening, ladies and gentlemen. I will share with you some observations on the market and a snapshot of our business performance for the third quarter.

Please turn to Slide 3. In the third quarter of 2025, Handysize and Supramax market freight rates showed good upward momentum post Chinese New Year, especially sharply in the Supramax segment. Market spot rates for Handysize and Supramax vessels averaged about $11,600 and $14,300 net per day, respectively, representing a decrease of 1% and an increase of 4% compared to the same period in 2024. The Baltic average Handysize FFA for the remainder of 2025 is $13,090 net per day, and the average Supramax FFA rate is $14,140 net per day.

Please turn to Slide 4. In the first 9 months of the year, global minor bulk loadings rose 4% compared to the same period last year, mainly driven by bauxite, fertilizers, minor ores and concentrates. Chinese steel exports were up 10% year-to-date as demand from emerging markets remained resilient. Bauxite loadings from Guinea into China continued to be strong. If we exclude bauxite loadings, year-on-year growth of minor bulk would be around 3%. Grain loadings on the other hand decreased 9% year-on-year. Grain imports to China dropped by 15% on the back of China's record high domestic harvest. China has switched soybean sourcing from U.S. towards Brazil, at the same time, reducing corn purchases. Even so, U.S. grain exports were up 12% year-on-year as there were buyers in the Middle East, North Africa, Southeast Asia and also Latin America.

Next, if we look at coal. Coal loadings reduced 6% year-on-year due to weaker demand from China, South Korea, Taiwan and India. China seaborne coal imports fell by 15% because of higher stock levels, migration to renewables as well as overland trade from Mongolia. The drop in imports to North Asia and India was partially offset by increase in coal imports into other emerging Asian countries such as Bangladesh, Vietnam and Malaysia.

Finally, on the right most column, iron ore loadings also dropped 3% year-on-year with bad weather impacting Australia imports in the first quarter as well as a reduction in the exports from India. Although Australia has been trying to catch up with its targets in exports, Australian exports were still down 3% year-on-year. India also saw exports dropping by 27% in the third quarter.

Please turn to Slide 5. Our core business generated average daily TCE earnings of $11,680 for Handysize and $13,410 for Supramax in the third quarter, representing a year-on-year decrease of 15% for Handysize and an increase of 10% for Supramax. When comparing to the market, our average daily TCE earnings outperformed the BHSI Handysize Index by $90 per day in the period, but we underperformed the BSI Supramax Index by $900 per day. This was mainly because of the strong uptick in market rates in the third quarter, especially in the Supramax sector.

We typically underperform in fast rising freight markets due to the time lag between spot market fixtures and voyage execution. However, when we compare our year-to-year performance with the market, of which our average Handysize and Supramax TCE earnings have outperformed by $1,540 and $1,960 per day, respectively. For the fourth quarter of 2025, we have currently covered 72% and 87% of our committed vessel days for our Handysize and Supramax core fleet at $12,380 and $14,060 per day, respectively.

In addition to our core business, our operating activity generated a daily average margin of $750 per day, over 6,830 operating days in the third quarter. Our operating activity complements our core business by matching our customers' spot cargoes with short-term chartered vessels, making a margin and contributing positively to our results throughout the cycling.

I will now hand you back to Martin for market update and strategy.

Thank you. Please turn to Slide 7. Looking at Clarksons' latest forecast for 2025 and 2026, forecasted coal and iron ore volume growth continue to be weak. On the other hand, minor bulk and grains are expected to see healthy growth going forward with especially bauxite, alumina, manganese ore and scrap steel growth anticipated to remain robust.

As Jimmy said, the decrease in coal volumes are mainly due to China, the world's biggest coal consumer, already has stockpiled for energy security and is expected to source more coal overland from Mongolia. Soybean volumes are expected to be strong with Brazil projected to achieve a record crop in 2025, while China continuing to reduce its reliance on imports. Overall, in the dry bulk segment that we are focused on, trade volumes are expected to remain resilient.

Please turn to Slide 8. According to Clarksons Research, the combined global fleet of Handysize and Supramax vessels is estimated to grow 4.3% in 2025 and 3.9% in 2026. Newbuilding vessel deliveries account for 4.8% and 4.4% in the growth forecast, while scrapping is estimated to remain low with 0.4% and 0.5% for 2025 and 2026, respectively. The order book stands at 10.3% of the existing fleet, but newbuilding ordering dropped by a significant 76% year-on-year, given the concerns arising from the latest decarbonization rules and the ongoing uncertainties in respect to various port fees schemes.

Meanwhile, the global fleet of Handysize and Supramax continues to age with nearly 40% of the ships being 20 years or older. Minor bulk fleet supply passed peak growth in 2025, and with supply growth apparently manageable going forward, we remain positive about the minor bulk supply and demand outlook in the longer term.

Please turn to Slide 10. Vessel values have remained high since 2021, and we continue to maintain discipline in managing our fleet renewal. Our core fleet currently consists of 120 owned and long-term chartered vessels. During the quarter, we sold 1 Supramax vessel and exercised the purchase option on 1 Handysize vessel, which was delivered from our long-term charter fleet into our own fleet. We exercised another purchase option on 1 Ultramax vessel that is yet to be delivered in the coming months. And we have taken -- we have also taken delivery of 2 long-term chartered Ultramax newbuildings of 64,000 deadweight.

Looking ahead, we maintain fixed price purchase options on 13 long-term chartered vessels. And in addition, we will take delivery of 1 Ultramax and 1 Handysize long-term charter newbuilding during first half of 2026. Our 4 low-emission dual-fuel methanol Ultramax newbuildings from Japan will be delivered 2028 onwards. Our focus is to strategically renew and grow our fleet and continue to expand our growth optionality.

Please turn to Slide 11. In preparation for the implementation of new port tariffs, we have taken all required proactive steps within our control to protect our business and position Pacific Basin to continue serving our global customers freely and competitively across all safe ports and countries, including China and the United States. This includes expanding our Singapore company structure, which holds our Singapore-owned and flagged vessels. We have already transferred several vessels on an initial plan to transfer about half of our own fleet to Singapore ownership and flag.

In addition, responsibility for the company's overall and ultimate strategic leadership and commercial decision-making along with responsibility for technical management of our Singapore owned fleet are located in Singapore. And our Board composition has changed as announced 13th of October for the purpose of compliance with the regulations.

Pacific Basin is the independent, publicly listed company with approximately 99% publicly traded shares with no controlling shareholder. As such, the company shares are traded freely every day and are broadly held by investors across the world. Based on public beneficial ownership reports filed with the stock exchange as of October 15, 2025, Pacific Basin does not believe that 25% or more of its equity interest is held directly or indirectly by either U.S. or Chinese entities or persons.

We do believe the special port fees under both the U.S. and Chinese schemes are not applicable to us. In an abundance of caution, we continue to work with our advisers to analyze the rules and their revisions, while also engaging with authorities to clarify and mitigate any applicability or impact they may have on our company, our vessels and our operations. For further details, please refer to the third quarter trading update as published to the stock exchange website.

Please turn to Slide 12. Our commitment to returning value to shareholders remains intact. With respect to our share buyback program, we have so far used approximately $26 million out of the announced $40 million to buy back and cancel about $109 million of PB, or Pacific Basin, shares. As about 65% of the targeted share buyback program completed, and it is our intention to execute the remainder of the program within 2025.

Please turn to Slide 13. The dry bulk market is firm, and while seasonality as well as volatility and uncertainty due to shipping tariffs actions are to be expected, near-term market conditions are expected to benefit from steady minor bulk demand growth and likely increased supply disruption, which would support tighter freight rate -- freight market conditions going forward.

Supply fundamentals are also favorable. And overall, the age profile of the global minor bulk fleet, combined with limited newbuilding orders, driven by industry uncertainties suggest a potential structurally undersupply in minor bulk shipping in the future. We are prepared for continuing general macroeconomic and industry uncertainty and volatility, remaining vigilant and nimble to safely navigate the challenges that arise and continue to capture opportunities along the way.

Our financial strength, low cash breakeven level, agile business model, enhanced growth optionality and the experience of our global team, position us very well for the changing market conditions. We thank our customers, our shareholders and advisers for their ongoing loyal support to Pacific Basin. And I also like to thank our skilled team of colleagues all over the world for their dedicated efforts and hard work dealing with multiple complex external challenges during the year.

That concludes our 2025 third quarter trading update presentation. I will now hand over the call to our operators -- operator for Q&A. Thank you.

[Operator Instructions] Our first question is from Parash Jain.

Congratulations on a good set of data. I would appreciate if you can talk a bit more on the congestion and the disruption related to the port retaliatory tariff. And help us clarify again, is the headquarter being in Hong Kong does not qualify to be a Chinese corporate? And what measures you have done with respect to fleet and flag to Singapore? And hypothetically, if that has to be attracted, if you can share your exposure to the U.S. market as we speak?

I didn't get the first question...

More with respect to congestion, where are we -- which pockets where we are seeing congestion, and particularly because of this retaliatory port tariffs, how your peers who are affected by this are coping? And is that creating a congestion?

I don't know if it's creating congestion. I think what we've seen so far and especially here in the third quarter is, of course, that everybody has probably stepped back a little bit from decoding the U.S. sort of trying to figure out exactly what will happen. So when you look at the market, the market has actually been -- since the summer has actually just improved quite a lot actually, and that's very positive. It's been a little bit of a split market.

So Atlantic has actually been the main driver of it, but also, of course, the Pacific has been good, but there's a big difference. Atlantic has been higher than the Pacific. And we think that is partly due to the uncertainty about the U.S., which have created people sort of trading there -- or changing their trading routes, which, of course, again, creates some volatility in the market.

In respect to our headquarter, maybe we say it in a little bit of a funny way, we are saying that our strategic leadership and also ultimate commercial management or decision-making that is now in Singapore, and that's the definition of your main office or your headquarter. So that has also changed.

Fair enough. That's fair.

And in respect to the last part about -- was that about the exposure to the U.S., so we -- what we saw in October is only a few days ago, but of course, U.S. has always been about 10% a few days ago. But of course, U.S. has always been about 10% of our business -- in the last 4, 5, 6 months, and we, as so many others, have also scaled down a little bit on our U.S. trading, but have been focusing mainly on servicing our long established customers in the area and waiting a little bit to see how the rules will be implemented.

And Martin, maybe I'll take an opportunity to ask 1 follow-up question. Given the IMO meeting is ongoing in London, what is your expectation? And if it goes through as per plan, what would it do due to the supply dynamics come 2027 for the sector? Presumably, it will be quite beneficial, but I'd like to hear your thoughts.

First of all, I think you're predicting what's going to happen at the IMO meeting, that is probably a little bit too much for me to do. That would actually, I hope is...

No, only 2 outcome, right? Yes or no. So it is hypothetically.

Yes. I think, Parash, maybe there's is -- maybe 3, maybe things are just being postponed. That is not the first time that is happening. But I think our vision, our hope is, of course, we will be proud if shipping could be the first mover in respect to have the regulation of decarbonization. So that I think will -- that's our hope that, that is, of course -- that, that the rules are being rectified. I think that will be a good thing.

And of course, it will be supported to the newbuildings that we have in Japan and the things we have been doing the last couple of years. And of course, it would also start supporting a little bit the green fuels, and also, of course, supporting that we have to get different ships into our fleet over time. So I think if they were rectified, so it will be good for the climate, it will be good for our business, and of course, also good newbuildings.

The next question is from Qianlei Fan.

I think I'll ask a follow-up question following Parash's question. I think his first question was about the potential disruptions from China's port tariffs towards U.S.-linked vessels. We heard from like some media reports that there are some vessels already on the sea. But after China announced the new regulation or new port fees, actually, those vessels are now waiting outside Chinese ports to clarify whether they need to pay for the port fee or they want to do some like unloading in nearby countries and then transship cargo to China. Have you seen any of these kind of things happening in the market? Do you think that could lead to some disruptions to the overall like trade flow and vessel, like effective supply? So this is the first question.

The second question is about the U.S. holding. I think on Bloomberg, they have categorized like your share stakes by like stakeholders' nationality. I think that data shows you have like more than 50% of shares held by U.S. investors. So just want to double confirm when you said your U.S. holding is below 25%, did you take into consideration of those like secondary market investors who might be U.S. investors? And also want to confirm, I mean, even if there are like more than 25% of U.S. investors, I think you can get exemption from China as long as you use like Chinese-built vessels to ship cargo to China. Is that right?

Yes. So first question in respect to disruption, and of course, that China implemented similar rules as the U.S., so I think we've been so busy following up on our own thing and making sure we are ready for that. So I think there's a lot of rumors going on at the moment, but I have not followed up on, and I do not know about transshipment and these things. But there's no doubt, of course, that all these things has created some concerns. And normally, in our business, we all hold back a little bit, and I'm sure some people have stopped their ships until they understand exactly how the rules are to be understood. So of course, this creates disruption and inefficiencies, and that is, of course, normally very good for our market. So I think it will have a positive impact on the market, depending a little bit on the overall outcome of all these things.

And yes, the last question you asked, it's also correct that the Chinese built ships seems to be able to call China without any tariff. I think that has been confirmed. In respect to the U.S. holding, we've seen different medias and others quoting shareholding in Pacific Basin. And I think it's important for us to say that our shares are hold by custodians and funds and other investment vehicles. And I don't think -- we do not have access to know who the ultimate owners are of our shares in that -- and I don't think anybody else has that. And that is the case that we have presented, and that's also what we see others in similar situation in the market is saying. So I don't think it's possible for anybody to predict or say what our shareholding is on that side.

We ourselves have looked at it. And, of course, if there's anybody who has shareholding above 5%, they would have to -- that I think it's called public beneficial ownership, they have to report to the stock exchange, the ownership side of it. And we looked at all these things and we have concluded that as we see, we do not believe we have anybody above 25%, neither Chinese or U.S.

Got it. So may I follow up on the question? So do you have enough Chinese-built vessels in case that you're like viewed as a company like over 25% held by the U.S.?

Yes. We do, of course, also have Chinese. I think we have 70:30. I think we have 70% Japanese built and 30% Chinese built. But our ambition is still the way we look at it is to be able to trade freely globally to service our customers. So depending on how the rules are, whether the rules are changed or anything like that, we will, of course, be waiting for that, as we always are. But at the moment, we are trading our ships freely, both in China and the U.S.

Last question. So your China exposure is also roughly 10% -- 9%, 10%, right?

Yes. If you look at the last year's trading, the volume-wise, I think it's volume we calculated, it's 10% U.S., and similar in China.

[Operator Instructions] There are currently no questions.

There are some questions through the -- over the portal. So this question is about the Red Sea opening. So the question is, is Red Sea open now? Is Pacific Basin able to transit? And will the market drop when Red Sea is back to normal?

We are, of course, following the situation, and I think it's still fairly new. And one thing we look at as an indicator is the insurance prices. And at least until early today, I was not informed that there will be any reduction in the insurance premium to transit the Red Sea. So -- and I think it will take some time. I think everyone just wants to see that is all is in a stable situation. And I think the first indicator is when you see insurance premium coming down.

I think we said all along that it has an impact, of course, on the supply part. But for minor bulk, for the smaller ships, maybe less than for the bigger ones and probably less than for other segments, like containers and others. But it's clear that if Red Sea opens up, we will create more supply in the market. But with the number of disruptors we see at the moment, I'm sure something else will happen or something else has already happened that will take that over. We're not so worried about that part of it. And we also just like to see there has actually been a number of attack on ships not so long ago. I think it will take a little bit of time before things are opening up again, but let's see.

The next question is from Qianlei Fan.

I think maybe if there are not too many people in the queue, maybe I can ask another 2 questions. So I think the spot market of Handysize and Supramax has been like much stronger than expected since third quarter to date. What's the reason? I mean, what's driving that really? And also going forward, if we look at like normal seasonality, also taking into consideration of what's driving the third quarter-to-date rally, what's the outlook for the rest of the year?

And the second question is about the outperformance. So I think we have some like underperformance in Supramax in the third quarter of this year. The outperformance for Handysize remained positive, but slightly narrowed. What's our outlook for our outperformance in the fourth quarter of this year?

Yes. Good questions. Thank you for those. First of all, the market, of course, for minor bulk segments being demand has actually been positive. We see still a lot of steel out of China and a lot of activity around. Growth has not been as high as the new supply. And I think early in the year, we were a little bit nervous about that part of it. But what we've seen during the year on top of actually some positive demand growth, even though it hasn't been as high as the supply -- new supply, what we've seen is all these disruptors. They just keep coming and impacting the market. And I think that is a part of it. So I think the conclusion is that this continues, then if you have 1% growth in demand, you definitely need more than 1% growth in supply to cover that. And I think that's probably a trend we will see going forward.

I think outlook-wise, we are -- first of all, I think we are probably getting a little bit more optimistic about the world economy. Looks -- things look maybe a little bit better than they did early in the year. On top of that, I think for the short term, and when I talk to the commercial people, the commercial team we have, they are actually quite -- they are quite optimistic about the market for the rest of the year. And of course, everybody expects there will be the normal seasonality leading after Chinese New Year when we get into the new year.

Demand for some of the minor bulk segment looks fine actually. And you can say supply this year has peaked -- new supply has peaked this year, and it will be lower next year. So I think fundamentally, there's some positive things in the market. But I think we still need these disruptors or these multiple disruptors in the market. But so far, in the last couple of years, we have had plenty of those, and it's hard to see a world where they will not continue at the moment.

In respect to our performance, I think as Jimmy said earlier, quite normal that in a market that goes up, we will always sort of run after the market. And what you see this time, especially on the Ultras is that the market in June -- sorry, in July, actually went up about 50%. And, of course, we fix our ships forward a month or 2. So there will be a delay in that and that very naturally, especially when it increases so fast and so much, we will always, you can call it, underperform. But I think more we are running after and trailing trading the market.

I usually say to my colleagues, I will defend any day to the market and to the investors if the market continues to go up that we are not performing or not outperforming a lot. But normally, when the market shifts again, then, of course, we catch up with the market, and we start outperforming again. So I think when you look at the outperforming the last 9 months or the last 12 months, it's a solid outperformance. And let's see what the market is doing. I think we will continue to do our outperformance going forward. I hope that answered the question.

Yes, yes, indeed. May I clarify, you said when there is a 1% growth in demand, there is more than 1% like need of vessels. What's the reason behind that?

I think -- well, many things. But one thing is, of course, that the speed of the ships has decreased this year compared to last year same period, the speed of the ships is down 2%. And since 2021, the speed of the ships -- the average speed of the ship is down 6%. And every year since 2021, speed has reduced every year. So I think that is one reason for, of course, you need more supply to compensate for that part. And then on top of it, you have the disruptors. And then, of course, trade, we have to start trade the ships differently, maybe more grain out of Brazil than the U.S. Gulf. People hesitant to call -- some ships can call U.S., others cannot. So the efficient supply chains, they are broken. And therefore, we probably have to save a little bit longer, and that, of course, takes supply out of the market. And that is -- if it's not the Red Sea or Panama Canal or different wars or congestion or now tariffs, there's plenty of those who take supply out of the market because of inefficiencies.

Got that. Got that. So do you think the vessel speed decrease has -- is mainly because environmental, like policy requirements or it's because of some other reasons?

Yes. I think that is definitely because of the decarbonization, the regulation, lots of -- also the disruption has also been, we have had a lot of ships in dry dock actually, more than normal. That's another thing that takes supply out. And also many ships, of course, of the rules, have equipped their ships with this power limitation devices. So reality is that, that has reduced the speed of the ships when they come out due to compliance with the regulation. So you're absolutely true -- it's actually true that, yes, that's happened because when you look at the freight rates, and actually, the oil prices are actually coming down somewhat. So the logic would, of course, be in a good market with a lower oil price, we would speed up that, that just make economic sense. But that is not happening to the extent that -- so that has to be because of the decarbonization and environmental rules.

So you mentioned more ships in the dry docks. It's also because of the regulations.

Partly regulations, but also partly, I think, because a number of ships were built at the same time back in probably 2016 or earlier, so it's just a timing thing on that part.

So you mean that's because of the overall global fleet has been aging.

Yes, no, it's actually more -- it's more because every ship has to go to dock with a certain interval. And if you have 1 year in the past where many ships were built in the same period, many ships have to go in dry dock at the same period here. So it's just a technicality.

The next question is from Parash Jain.

Sure. Now Martin, could you also remind us on your CapEx plan for this year, potentially next year? But more importantly, with the improved rates and probably shipyards opening up the capacity for '29 onward and probably container rolls over, do you see the dry bulk operators get back to the newbuild market? Or you think that even despite the improved rate, the returns are not justified to see a surge in new ordering?

Yes. So, Parash, I probably will answer the CapEx question first. So typically, in our CapEx, we will have certain dry dock expenditures. And as you know, we also will look at a number of our purchase options to see if there is potential to exercise. And in terms of our cash usage, we also will use some of our cash for share buyback. We covered in the presentation that we set out to do USD 40 million this year. We have completed $26 million. So there's a remaining $14 million that we would aim to complete in this year. So that's our basic use of cash.

Now, of course, we will maintain and keep an eye on the secondhand market and also M&A opportunities, see if there are opportunities for us. But as we said in the presentation, the secondhand market currently, the way we see it is still at an elevated level. So that is something that we need to bear in mind as well. So that's on the CapEx side.

And with respect to the yards and newbuilding, secondhand prices and so on, what we see right now is, of course, that the secondhand -- not of course, but secondhand prices are actually coming up. And I think that is, of course, partly an impact on the spot market. And I think people have a little bit more positive view on the future of the market. Of course, the rates at the moment, they are getting close to be able to justify buying a secondhand ship, but I think there's still a little bit of a gap in it that we have to see how sustainable the rates are. But I think overall, people are getting a little bit more positive about the outlook.

The newbuildings, if you want a newbuilding today, you probably have to say 2028, and I also hear somebody saying 2029, but probably in 2028, you can still get newbuildings in the minor bulk segment. Prices have come down somewhat. There is -- not a lot, but it has come down in the last year. China seems -- steel prices have been low in China, and that gives China a benefit compared to Japan on the steel cost. And therefore, they can probably be more competitive on the pricing.

As we also said earlier, the new ordering is down quite a bit compared to last year. I think it's clear that the market -- many of the owners and players in the market has good balance sheets, and similar to us, wants to, of course, grow the business. So let's see what happens. I think we're all sitting waiting a little bit for the IMO to make up -- hopefully, deliver on the decarbonization part. That will also guide us a little bit on how to do it.

And also, it is important to say that the yard capacity also because of minor -- of course, the feeder container ships and so on, which is actually the same size as our ships, many of the yards will prefer to build those ships. I think the margin is better on those kinds of ships than our ships. So there is pressure on the capacity at the yards. So I think in some ways, it's -- we sort of always say we are very disciplined in our buying and selling ships, and -- but we also, of course, like to grow. But on the other hand, we have a core fleet of 120 ships, increased high asset prices is also good for us.

I think what is positive for us at the moment is, of course, also that our gap between fair market value and our share price has also closed quite a bit. So we are probably in a position where we have a nice balance sheet, we have a good share price or better share price at least. We have the LED ships coming in newbuildings, that design we know. We are waiting for IMO. And then, of course, we have to see what we do and what the share prices are doing. I hope that answered the question, Parash.

There are currently no questions.

Okay. There is one more question on the portal. May I know if the U.S. and China port fees is a positive or negative factor to the shipping rate and potential company earning impact?

I think definitely in the short term because it does create this disruption, then of course, it has -- it will have a positive impact on the market. I think everybody, including ourselves, we have also asked both in the U.S. and China for clarification on some of the regulation. We've been totally transparent with them with both the challenges we have in reading the agreements, and we've been seeking advice on different things. So there's, of course, a lot of uncertainty in the market at the moment that, that, of course, creates this disruption, and that is definitely good for the market, that's usually how it works in achieving.

In the longer run, I have to say we hope that -- we are doing -- we are transforming. We are living off global trade. So, of course, we have to hope that it doesn't take overhead and has a negative impact on the global trade for sure. But in the short term, it's definitely a positive for our market.

[Operator Instructions] As there are no further questions, we will now begin closing remarks. Please go ahead, Mr. Martin Fruergaard.

Yes. Again, I'd like to thank you again for joining us today and for your continued support to Pacific Basin. If you have further questions, please contact Luna Fong of our Investor Relations department. Have a great evening, and thank you again.

This concludes our conference call. Thank you for all attending.