U.S. Markets open in 7 hrs 1 min

Edited Transcript of SALT earnings conference call or presentation 28-Jan-19 4:00pm GMT

Q4 2018 Scorpio Bulkers Inc Earnings Call

Monaco Feb 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Scorpio Bulkers Inc earnings conference call or presentation Monday, January 28, 2019 at 4:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Cameron L. Mackey

Scorpio Bulkers Inc. - COO

* Emanuele A. Lauro

Scorpio Bulkers Inc. - Co-Founder, Chairman & CEO

* Hugh Baker

Scorpio Bulkers Inc. - CFO

* Robert L. Bugbee

Scorpio Bulkers Inc. - Co-Founder, President & Director

================================================================================

Conference Call Participants

================================================================================

* Amit Singh Mehrotra

Deutsche Bank AG, Research Division - Director and Senior Research Analyst

* Gregory Robert Lewis

BTIG, LLC, Research Division - MD

* Jonathan B. Chappell

Evercore ISI Institutional Equities, Research Division - Senior MD

* Magnus Sven Fyhr

Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst

* Max Perri Yaras

Morgan Stanley, Research Division - Research Associate

* Randall Giveans

Jefferies LLC, Research Division - Equity Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Hello, and welcome to the Scorpio Bulkers Inc. Fourth Quarter 2018 Conference Call. I will now like to turn the call over to Hugh Baker, Chief Financial Officer. Please go ahead, sir.

--------------------------------------------------------------------------------

Hugh Baker, Scorpio Bulkers Inc. - CFO [2]

--------------------------------------------------------------------------------

Thank you, operator. Thank you all for joining us today. On the call with me are Emanuele Lauro, our Chairman and Chief Executive Officer; Robert Bugbee, our President; and Cameron Mackey, our Chief Operating Officer. The information discussed on this call is based on information as of today, January 28, 2019, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release that we issued today as well as Scorpio Bulkers' SEC filings, which are available at www.scorpiobulkers.com.

Call participants are advised that the audio of this conference call is being broadcast live on the web and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. Now I'd like to introduce Emanuele Lauro.

--------------------------------------------------------------------------------

Emanuele A. Lauro, Scorpio Bulkers Inc. - Co-Founder, Chairman & CEO [3]

--------------------------------------------------------------------------------

Thank you, Hugh, and good afternoon or good morning to all. We are confident in the outlook for dry bulk. We have continued to buy back stock during the quarter, believing our own stock to be the best investment for excess liquidity. Supply-side factors in our industry remain benign and as such, long-term fundamentals continue to remain positive. However, we acknowledge the macroeconomic factors have put pressure on sentiment and prospect for a short-term market recovery.

As I stated before in previous earnings commentary, we must respect the tone of negative macro commentary and the risk of a global trade war, leading to a broader policy-driven short-term slowdown. I do not have much to add in this, except that we continue to be vigilant and watchful. We were pleased to have the opportunity to invest in Scorpio Tankers last quarter. This financial investment will give some volatility to our quarterly earnings, but it is already bearing some fruits with a near 14% appreciation in value or an unrealized $40 million profit mark-to-market since the fourth quarter close.

We're pleased with the fourth quarter operating performance of Scorpio Bulkers, and note that the forward bookings we have provided are higher than the current fixing levels, as demonstrated by the current indexes. Fixing on term contracts for 13 ships during the fourth quarter has proven to be the right decision in hindsight. Of course, we are not happy about the market correction, but should current market weakness persist, we're well-positioned to withstand these conditions for a sustained period. With this, I will turn the call back to Hugh Baker.

--------------------------------------------------------------------------------

Hugh Baker, Scorpio Bulkers Inc. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Emanuele. During the fourth quarter, the company made a net loss of $7.4 million, which is $0.11 a share. This loss included a net loss of $0.10 a share on the investment in Scorpio Tankers and $0.03 a share of deferred financing costs. Without these nonrecurring items, we would have achieved a net profit of $0.02 a share.

In the fourth quarter, we made EBITDA of $23.4 million. In the fourth quarter, we earned $13,148 on our Kamsarmax fleet and $12,213 per day on our Ultramax fleet. We are advising you that the Kamsarmaxes we have booked $12,913 per day for 60% in the first quarter and for Ultramaxes, we have booked $11,072 per day for 56% of the days in the first quarter.

As mentioned by Emanuele, the present market is weak and below these levels. In the fourth quarter, we booked 13 vessels on time charters that extend into the first and second quarters of 2019 for rates of between $14,500 and $16,500 a day, and as Emanuele has commented, with the benefit of hindsight, these fixtures seem to have been favorable. We paid a dividend of $0.02 a share for the quarter and have declared a dividend of $0.02 a share for the first quarter of 2019.

As of January 25, 2019, the company's investments in Scorpio Tankers had a fair market value of $110 million. We are increasingly becoming more optimistic about the fundamentals of this investment. We believe that our own stock is currently the most attractive and accretive opportunity to invest in the dry bulk sector, and during the fourth quarter, we purchased $27 million of our own stock at an average price of $6.05 per share.

This is not only the equivalent to the value of a brand-new bulk carrier, but more significantly, it represents 6% of the company. On January 25, 2019, the company's board voted to authorize a new share repurchase program to replace the previous program. This new program authorizes and allows buybacks to the value of $50 million.

As I mentioned earlier, we continue to view buybacks as the most accretive use -- attractive use of capital for the company at this time.

During the fourth quarter, we announced agreements to purchase scrubbers for 28 of our vessels. These agreements will be part of the company's overall scrubber program for all 56 of its vessels. This program is well developed, and in our earnings press release and presentation, we have provided full details of the expected scope and cost of this program. We currently anticipate the installation of scrubbers will cost around $127 million, and we expect to install scrubbers on 18 vessels in 2019, 36 vessels in 2020 and 2 vessels in the first quarter of 2021.

The majority of the 36 vessels that we will install scrubbers in for 2020 occur in the first half of the year. We expect to finance substantially all of the cost of our scrubber program through secured financed -- financings, which we expect to announce in the first quarter. As of 25 January, the company had $74.3 million in cash. I'd now like to open up the call to questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question is from Amit Mehrotra with Deutsche Bank.

--------------------------------------------------------------------------------

Amit Singh Mehrotra, Deutsche Bank AG, Research Division - Director and Senior Research Analyst [2]

--------------------------------------------------------------------------------

So just first question, I just want to understand the confidence in the dry bulk market, particularly with respect to China. Other larger companies have highlighted the deteriorating China market as early as this morning, 2 large companies have done that. And then also, you have the coal headwinds, the BDI is now below 1,000, it was 1,600 in October. You obviously have a smaller fleet now, but I just wanted to see if you could talk about the risks you see in China right now and maybe what your commercial people are seeing with respect to the demand for dry bulk commodities?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [3]

--------------------------------------------------------------------------------

Sure. I think, Amit, that -- I mean we're quite clear that the present spot market is weak. And obviously, that's further exacerbated, not the least of which is we're approaching Chinese New Year, which is traditionally a weak point too. And we're obviously all awaiting the trade discussions between the United States and China, and the weakness is probably even further added to because you would've had some -- prebuying some, getting ahead in the Chinese markets when people thought that tariffs were going to go on, there would have been early buying. So right now, it's probably the darkest. People are worrying about the trade positions, we're in the middle of Chinese New Year.

But we are expecting that fundamentally, the supply side here in check as we go over time that despite the presence of a China slowdown, it is still a growth that the world's largest economy, the United States, has a good position, low unemployment, and it would be rational for the participants between China and the United States to try and get themselves a negotiated settlement that would result in a win-win and greater stability. And that's our fundamental position.

We're also very cognizant to the weakness, so we are making steps. And shortly, we'd hope to announce pretty significant increases in liquidity. And we also do believe that the company is also discounting in its stock price already, a sustained tremendous slowdown in dry cargo. The company's stock is trading significantly below its net asset value. And so that's why we think the best use of proceeds is to -- or surplus cash is to buy back stock. And it also has a big investment. It's the largest investor in Scorpio Tankers, where the product market is just going from strength to strength. And that market, in this first quarter, will be the highest -- is already the highest that market has been for the last 10 years. And every day, it's getting closer to 2020.

--------------------------------------------------------------------------------

Amit Singh Mehrotra, Deutsche Bank AG, Research Division - Director and Senior Research Analyst [4]

--------------------------------------------------------------------------------

Right. If I could just ask one follow-up question. You talked about maybe with the markets discounting, the risks that there are a lot of uncertainties out there, but yet you're buying back a significant amount of stock, and you're also talking about liquidity levers that you may or may not pull. So I'm just trying to understand -- I mean, I understand the fourth quarter when the market maybe took a bigger dip than you would've expected, you want to be opportunistic and certainly, the equity value is well below in the half.

But as we look out prospectively, I mean, are you guys going to conserve the liquidity as opposed to spending that much money on the buyback? And the other question I have is that, how should we think about the capacity of the buyback, given that rates are still low, you're going to be drawing down significant amounts of debt to pay for the scrubber investment plan, which is a net debit to your capital structure? Just help us out there in terms of what the plug is for the buyback?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [5]

--------------------------------------------------------------------------------

Well, I think as indicated in the press release itself, and Hugh has clearly stated and we've clearly stated that we are working on measures and sources of liquidity that are beyond that that is needed to fund the scrubbers themselves. We're clearly not ready to detail that, and we've said that shortly, we will detail that -- the -- yes.

--------------------------------------------------------------------------------

Amit Singh Mehrotra, Deutsche Bank AG, Research Division - Director and Senior Research Analyst [6]

--------------------------------------------------------------------------------

No, I understand. One last quick one for me. Just on the open loop versus hybrid-ready?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [7]

--------------------------------------------------------------------------------

(inaudible) everything. When you're this far apart on your NAV, and it's huge. I understand that most analysts look at the NAV of SALT marking STNG but mark-to-market but if -- and come up with an NAV of something like $8.50, $9 or whatever. But if we were to use where we think STNG is, STNG's own NAV is, and bring that back into where SALT is, the NAV of SALT becomes, without getting into an accurate figure, is $10-plus. So when you have this much of a discount to enter real NAV, we're going to take nothing off the table. [We'll stay with that].

--------------------------------------------------------------------------------

Amit Singh Mehrotra, Deutsche Bank AG, Research Division - Director and Senior Research Analyst [8]

--------------------------------------------------------------------------------

Discount on a discount, right? No, I get it. No, that makes sense, I get it.

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [9]

--------------------------------------------------------------------------------

Yes. You'd be better off selling assets and you could sell assets at 10% down and still make an extraordinary position. So...

--------------------------------------------------------------------------------

Amit Singh Mehrotra, Deutsche Bank AG, Research Division - Director and Senior Research Analyst [10]

--------------------------------------------------------------------------------

Yes, I was just hoping to get your perspective on the -- some of the ports are banning the open-loop scrubbers. I know there is -- obviously, most of the exhaust is created out at sea. But are your orders, I guess, hybrid-ready -- I mean not hybrid-ready, but ability to convert to hybrid, I think that's maybe coming at a cost of 50% more. Just what are you thinking about the new bans that have propped up all across the place, and how should we think about it?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [11]

--------------------------------------------------------------------------------

Well, let Cameron.

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [12]

--------------------------------------------------------------------------------

Sure, Amit. Even before IMO 2020 came on to the radar of the general population, you had restrictions in most ports about the type of discharges vessels could make within port limits and the type of fuel they could burn within port limits. And so we see this as say a natural or a continuation of an evolution, that as you point out, is not material from a voyage consumption point of view, and therefore, not really material from the point of view of scrubber economics or return characteristics. But will there be a day where the IMO may address open-loop scrubbers in the open international waters? Sure, we think that's years away, however, and there is every indication that that's still years away. So it doesn't really affect our plans or the return characteristics of the scrubber investment.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Our next question comes from Randy Giveans with Jefferies.

--------------------------------------------------------------------------------

Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [14]

--------------------------------------------------------------------------------

All right, so hey, 2 quick follow-up questions on the IMO-compliance strategy. What spread in dollars per ton are you assuming through 2020 to determine your payback period for the scrubber?

--------------------------------------------------------------------------------

Hugh Baker, Scorpio Bulkers Inc. - CFO [15]

--------------------------------------------------------------------------------

From 2020, we're assuming around $250.

--------------------------------------------------------------------------------

Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [16]

--------------------------------------------------------------------------------

Okay. And then, with that, is the scrubber strategy driven more by economics because of this spread and the likely rate premium or more of an operational decision just because of fuel compatibility concerns for the [VLSFO blend]?

--------------------------------------------------------------------------------

Hugh Baker, Scorpio Bulkers Inc. - CFO [17]

--------------------------------------------------------------------------------

The answer is yes and more. In other words, it's not just those 2 sort of parameters that you presented but other ones too. We did a rather comprehensive assessment of a number of things, including the risk of regulatory changes, risk to the technology, the movement of the spread on fuel availability, compatibility, all. And this is where we came out, we're very confident and still quite comfortable with our decision.

--------------------------------------------------------------------------------

Randall Giveans, Jefferies LLC, Research Division - Equity Analyst [18]

--------------------------------------------------------------------------------

All right. And then switching gears just for kind of a market question. So obviously, with the tragic, kind of, Vale dam collapse in Brazil, dozens of lives lost, put things kind of into perspective. But for the purpose of this call, any early thoughts on how this will impact the dry bulk market overall, not just Capesizes, I'm sure there'll be some trickle-down effect?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [19]

--------------------------------------------------------------------------------

Just to play on to that question, we go back to the question previously to Cam. We do have the perspective also here from the products market. And what we're seeing every day from the products market is the customers in the products, the refiners, the traders are taking actions that are very positive towards the idea that low sulfur fuel will be a premium, and the decisions we've made in the Scorpio Bulkers in regard to not just the investment in Scorpio Tankers but the scrubber investment themselves will pay off in the sense that those guys are trying to get along in the product market every day by taking in charters, and they are willing to pay premiums to secure scrubber-fitted vessels going forward. And that's pretty important when the actual refiners may not be making this stuff but going forward and putting their dollars where they are putting their words.

With regard to the Vale position, I mean, look, it's terrible and people are assessing the situation at the moment. I think that it's very hard to assess exactly because it's linked into what will the government do there in terms of making them check other facilities, et cetera, et cetera. That's on one hand and on the other hand, the actual mine itself is a minor part of the total production. So it may not be -- end up being so significant, especially right now in this short term, when you are waiting for the big mine to come up, Samarco mine, and you do have this sort of short-term weakness in the market itself already.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Our next question is from Jon Chappell with Evercore.

--------------------------------------------------------------------------------

Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [21]

--------------------------------------------------------------------------------

Hugh, a couple questions for you. I just want to be clear, the schedule that you've laid out on the scrubber investment, super helpful. But that's obviously, for the entire fleet, and you had noted in the press release that there were still options for '18. So as we think about CapEx spend, should we just assume that all those options are going to be exercised and then follow that table that you put in the press release?

--------------------------------------------------------------------------------

Hugh Baker, Scorpio Bulkers Inc. - CFO [22]

--------------------------------------------------------------------------------

Yes. I think the reason we put the table in the press release is to really make everyone understand our scrubber -- to fully disclose the extent of our scrubber program, and that means put in -- how much we think it's going to cost and also, the dates at which -- the quarters at which each -- vessels are going to get installed with scrubbers. And it is very much as per the schedule, and you should use that to guide you.

--------------------------------------------------------------------------------

Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [23]

--------------------------------------------------------------------------------

Okay. And then, understanding that there will be an announcement on financing, most likely in this quarter, should we still think about the financing though as the full program, assuming, once again, all options are exercised? Or is it going to be kind of a piecemeal financing, where you get financing for maybe the 2019 CapEx and then, a different solution for 2020 or it's all in one bucket?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [24]

--------------------------------------------------------------------------------

I think we'd have to wait on that other than -- it will be exit to the requirement. And the -- but I keep -- I think we have to leave it at that.

--------------------------------------------------------------------------------

Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [25]

--------------------------------------------------------------------------------

Okay. And then, Robert, you had mentioned the liquidity levers. Clearly you've been in the sale-only spec market a little bit, I'm just wondering if that market is still there? And that's an alternative you're looking for or is it straight debt? Or is it just straight asset sales looking to play the [hour], potentially on where the asset prices are today and where the stock is trading?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [26]

--------------------------------------------------------------------------------

I just -- as a company, we'll look at all alternatives, whether it's the opening up some of the bank finance, because the balance sheet itself is strong, the investment, the vessels in the new fleet, so you could do that. You -- to a company that is sound and fair and with relationships we have with the lessors, then yep, you're going to look at that. And obviously, as stated before with the ob word is, you'd be willing to look at sale too. So it's all of above.

--------------------------------------------------------------------------------

Jonathan B. Chappell, Evercore ISI Institutional Equities, Research Division - Senior MD [27]

--------------------------------------------------------------------------------

Okay. Final one from me. You guys mentioned coal a bunch of times in the press release as it related to kind of slowdown in the end of fourth quarter and even start to the first quarter. There's these import quotas that China has put in, is there any kind of history that you have with these quotas or are they relatively new? And as far as what your commercial guys are seeing right now, has there been a significant step back early in the year where we can maybe anticipate a bit more smoothing out of the coal imports in 2019 relative to 2018?

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [28]

--------------------------------------------------------------------------------

Jon, our expectation, it is so early in the year that we're getting up to speed in the short-term weakness. What we expect later on is a smoothing out, and so resumption of normalized demand. But right now, it's very early to say. Our experience in the past with import quotas is that they are very unevenly applied and enforced from province to province in China, but more to follow. Probably in our second quarter call, we can go into greater detail about what we're experiencing year-to-date.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Our next question comes from Greg Lewis with BTIG.

--------------------------------------------------------------------------------

Gregory Robert Lewis, BTIG, LLC, Research Division - MD [30]

--------------------------------------------------------------------------------

As we look at freight rates, clearly, you guys highlighted, obviously, we're heading into the Chinese New Year, rates have come down. I guess historically, this has been led by Capes, just given China's focus on iron ore, demand for iron ore, which is more of a Capes trade than an Ultramax trade. But could you talk a little bit about why -- I mean, it looks-- not it looks, it's happening in the market, the smaller vessels seem to actually be underperforming relative to the Capes. Just kind of talk a little bit about what you're seeing, maybe in the Atlantic basin that's kind of driving this disconnect between where we are today, even though Chinese need -- the smaller vessels typically tend to do better in the Chinese New Year?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [31]

--------------------------------------------------------------------------------

I think it's pretty -- it's early days because the smaller vessels were largely outperforming in a lot of that period before. So we don't know whether or not people were getting ahead of things as I explained earlier, whereby the rate strength was slightly inflated in, let's say, September, October, November and now it's down and it's a -- you'll get a smoother balance. So it's pretty hard to look at in such a short data stream right now. And you simply know in the bigger picture that you have a calendar event of Chinese New Year going on.

And you have this, sort of, the more -- the bigger picture of waiting to see and the slowdown related to concerns of the U.S. and Chinese trade. And we are in a position where we'll be able to watch. It's not as if we're going to -- even if we started buying back stock immediately, and as soon as we can after this conference call, it doesn't mean we're going to fire off all our balance sheet and debilitate the position. You're going to be doing a process over the next weeks and you'll be able to look and see. And the first indication will be where will the market be a week, 10 days, after Chinese New Year and how will the U.S. trade discussions go. [We are still looking in] real short-term right now.

--------------------------------------------------------------------------------

Gregory Robert Lewis, BTIG, LLC, Research Division - MD [32]

--------------------------------------------------------------------------------

Okay, great. And then, just another question. We're hearing that some of the Newcastlemax or VLOC conversions are potentially starting to be discriminated against. Is that something that you're hearing in the markets or is there anything to that? I'm just kind of curious.

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [33]

--------------------------------------------------------------------------------

Well, I'd direct you to the widely publicized case of Polaris, the South Korean company, owner of the Stellar Daisy. But that's all -- it's public information. What is a bit more up to conjecture is how port states and customers may make blanket decisions on the back of that singular case on that company, which we don't really have a view on at the moment.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

Our next question is from Magnus Fyhr with Seaport Global.

--------------------------------------------------------------------------------

Magnus Sven Fyhr, Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst [35]

--------------------------------------------------------------------------------

Most of my questions have been answered, but just one follow-up on the IMO 2020 as it relates to the economics. I'm sure with more port states banning closed -- or open-loop scrubbers and you report that you still have a good margin there. How many days do you currently calculate to use your scrubbers? I think you had said 200 days but just wanted to confirm.

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [36]

--------------------------------------------------------------------------------

Yes, it's about 200 days, Magnus.

--------------------------------------------------------------------------------

Magnus Sven Fyhr, Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst [37]

--------------------------------------------------------------------------------

And has that changed anything with the recent announcements?

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [38]

--------------------------------------------------------------------------------

No.

--------------------------------------------------------------------------------

Magnus Sven Fyhr, Seaport Global Securities LLC, Research Division - MD & Senior Shipping Analyst [39]

--------------------------------------------------------------------------------

And you mentioned it's probably years out but logistically, what needs to happen for the industry to go to closed-loop scrubbers, I mean, with the waste disposal and everything in ports?

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [40]

--------------------------------------------------------------------------------

It would be a big stretch. Bear in mind, of course, there's adjustments that have to be made to a vessel's infrastructure to accommodate so much recycled and retained wash water. And then, there is, let's call it, exogenous to the vessel adjustments, where you're referring to reception facilities for that wastewater or wash water. And it's pretty clear that both of those things are incredibly limited or scarce at the moment. It would take another wholesale change in the industry to get there, something that would take years.

So first, if you look at the history of IMO 2020, you're talking about something that took more than a decade to come to fruition. A similar step change, with regards to open or closed-loop scrubbers, we believe, would take a similar timeline, another 10 years-plus.

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [41]

--------------------------------------------------------------------------------

I think it's also important to sort of understand when it comes to Scorpio Bulkers is that, as Cameron points out, we don't think it's going to happen but it will be fantastic if people -- if actually scrubbers couldn't be used at all, and you have to use the low sulfur immediately from January 1, and that's for 2 reasons: One, Scorpio Bulkers has a really modern fleet and low fuel consumption, and you'd gladly -- at an increased price for the low sulfur fuel, you would gladly sacrifice the CapEx that you could have spent on scrubbers for all of that saving relative to the market.

And then on top of that, it's investing in the company that is going to benefit most in -- or likely to benefit most in shipping from the increase in low sulfur fuel usage. So there's a little bit of reluctance when we say that the scrubbers, at the moment, we're happy with the decision that we've made.

--------------------------------------------------------------------------------

Operator [42]

--------------------------------------------------------------------------------

Our next question is from Max Yaras with Morgan Stanley.

--------------------------------------------------------------------------------

Max Perri Yaras, Morgan Stanley, Research Division - Research Associate [43]

--------------------------------------------------------------------------------

The table detailing scrubber installations is helpful. Just wondering if you have estimates on dry dock days maybe by quarter or year as well?

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [44]

--------------------------------------------------------------------------------

Max, I think we are internally, and I stress the word internally, I think budgeting for around, I think we'd say, 3 weeks for the installations to take place. I'm looking across with a little extra time for those vessels that are going through statutory dry docks. So that's really what I can give you.

--------------------------------------------------------------------------------

Max Perri Yaras, Morgan Stanley, Research Division - Research Associate [45]

--------------------------------------------------------------------------------

And then, if they had to go back in to be converted to closed-loop, how long would that be on top of that?

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [46]

--------------------------------------------------------------------------------

We haven't finished an analysis on that. It would take another several weeks at least. But that type of further conversion would be years down the line, it wouldn't be something we're -- we didn't take this option to come back into dry docking next year or the year after. This is optionality that we're looking at for the next 5 to 10 years.

--------------------------------------------------------------------------------

Max Perri Yaras, Morgan Stanley, Research Division - Research Associate [47]

--------------------------------------------------------------------------------

Sure, that's fair enough. Just one last question. We focused on Capes in iron ore trade. What is your, kind of, estimate for what minor bulk trade does in 2019 or what other drivers of growth do you see out there besides iron ore?

--------------------------------------------------------------------------------

Cameron L. Mackey, Scorpio Bulkers Inc. - COO [48]

--------------------------------------------------------------------------------

Well, we're still looking at a global economic picture that has growth in ton miles for bulk generally in single-digit percentage terms and a supply picture that looks at something very low, maybe 1% net. So we still see a very positive supply/demand picture for the next several years. Notwithstanding that, of course, things have decelerated in the last half of -- last month of last year and the first month of this year. So as Emanuele said, it's short-term weakness in the broader picture of longer-term pretty good fundamentals for the dry bulk space.

--------------------------------------------------------------------------------

Robert L. Bugbee, Scorpio Bulkers Inc. - Co-Founder, President & Director [49]

--------------------------------------------------------------------------------

And I think that this is something also that's -- in a bizarre way, what's been happening in those last 2, 3, 4 months with dry cargo and the fear of the equity capital markets and the constraints on the debt side to weaker players. It is just further strengthening what we believe can happen in the mid to longer-term here, because it's really going to put this continued choke on new building orders, and that's a pretty good part of this equation. And as Cameron said, as long as we continue to have growth, at some point, it's going to play through into those fundamentals.

And so far even the worst -- economists that we read, even if there is a -- even if Trump and the Chinese go at each other, we're still talking growth here in the Chinese and the developing countries. And therefore, growth in trade for the asset classes that we have, and it's really great that you've got this slowdown on the supply side.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, this concludes our Q&A session. I would like to turn the call back to Hugh Baker, CFO, for his final remarks.

--------------------------------------------------------------------------------

Hugh Baker, Scorpio Bulkers Inc. - CFO [51]

--------------------------------------------------------------------------------

Thank you, operator. I have no final remarks. Thank you, everyone, for your attendance on the call, and we look forward to talking to you soon. Thank you.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect.