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Star Bulk Carriers Corp (SBLK) Q1 2019 Earnings Call Transcript

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Star Bulk Carriers Corp (NASDAQ: SBLK)
Q1 2019 Earnings Call
May 23, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the Star Bulk Carriers Conference Call on the First Quarter 2019 Financial Results. We have with us Mr. Petros Pappas, Chief Executive Officer; Mr. Hamish Norton, President; Mr. Simos Spyrou; and Mr. Christos Begleris, Co-Chief Financial Officers of the Company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today. And we now pass the floor to one of your speakers, Mr. Simos Spyrou. Please go ahead, sir.

Simos Spyrou -- Co-Chief Financial Officer

Thank you, operator. I'm Simos Spyrou, Co-Chief Financial Officer of Star Bulk Carriers, and I would like to welcome you to Star Bulk Carriers conference call regarding our financial results for the first quarter of 2019. Before we begin, I kindly ask you to take a moment to read the Safe Harbor statement on Slide number 2 of our presentation.

Let us now turn to Slide number 3 of the presentation for a summary of our first quarter 2019 financial highlights. In the three months ending March 31, 2019, TCE revenues amounted to $99 million, 21.3% higher than the $81.6 million for the same period in 2018. Adjusted EBITDA for the first quarter 2019 was $43.9 million versus $46.4 million in the first quarter of 2018. Adjusted net loss for the first quarter amounted to $8.5 million or $0.09 loss per share versus $11.9 million adjusted net income or $0.18 gain per share in Q1, 2018.

Our time charter equivalent rate during this quarter was $10,624 per day. And if we include the realized profit from freight and bunker hedging, our time charter equivalent rate in Q1, 2019 amounted to $11,192 per vessel per day.

During the first quarter of 2019, our average daily operating expenses were $4,015 per vessel per day. Since the beginning of the year, we have drawn and agreed to refinance approximately $329 million of debt, reducing the average margin of these facilities by 217 basis points. Over the past 9 months, we have agreed to refinance approximately $1.04 billion of debt creating savings of about $10 million annually in interest expenses or $250 per vessel per day.

Following the share purchase program announced last November, the Company has purchased during 2019, 1,535,322 shares at an average of $7.45 per share, all of which were cancelled and removed from our share capital. In total, we have bought back since November 1,876,685 shares and we have spent $14.6 million so far. Currently, we have 91.75 million common shares outstanding. During 2019, we have drawn 22.4 million of scrubber debt with another 112.2 million in place to be drawn at a later stage during the roll out of the program. Pro forma total cost today stands at $170 million with zero remaining equity CapEx at this stage.

Slide 4, graphically illustrates the changes in the Company's cash balance during the first quarter. There was negative free cash flow of $20.1 million during the quarter. After including debt proceeds and repayments from our refinancing activities, CapEx payments for our acquisition and scrubber installment, sale proceeds and share purchase expenses, we arrived at a cash balance of $160.2 million at the end of Q1.

Please turn now to Slide 5, where we summarize our operational performance. Operating expenses were at $4,015 per vessel per day for the quarter. Net cash G&A expenses were at $971 per vessel per day versus $1,101 per vessel per day in the first quarter of 2018, a decrease of 12% year-on-year, primarily attributed to synergies from the increase in the size of our fleet. The combination of our in-house management and the scale of the group enables us to provide our services at very competitive costs, complemented by excellent ship management capabilities, which Star Bulk consistently ranked among the top five managers, evaluated by Rightship.

Slide 6, highlights that Star Bulk is the lowest cost operator among our US listed dry bulk peers based on latest publicly available information. Star Bulk's operating expenses are approximately 17% below the industry average.

In slides 7 and 8, we are providing an update on our scrubber program, which is proceeding as scheduled. Our early decision to equip our fleet with scrubbers enabled Star Bulk to acquire them from experienced, high quality European manufacturers, as well as secure berths at major shipyards creating a no-lean scrubber pocket at competitive costs. 101 of our vessels will be scrubber fitted during 2019, and we expect to have 40 scrubber towers installed by the end of this month. We expect to have 60 scrubber towers fitted by the end of next month with installations taking place in China and Europe. In order to reduce retrofitting time at the shipyards, we employ a 120 specialized technicians that are deployed onboard, our vessels and complete some of the installation at sea. Total remaining CapEx today is at approximately $100 million, which would be covered entirely from secured financing.

The graph in Slide 8, illustrates the estimated breakdown of the payments by quarter based on current forward FX rates and expected milestones. It is important to note that we have secured approximately $135 million of debt financing for the program, which we will be drawing down gradually within 2019. As of today we have drawn $22.4 million of scrubber debt and have no remaining equity that needs to be invested.

Slide 9 illustrates Star Bulk's employment coverage for the second quarter of 2019. We have fixed employment for approximately 76% of the days in the second quarter at average TCE rates slightly above $10,000 per day.

I will now pass the floor to our CEO, Petros Pappas for a market update and his closing remarks.

Petros Pappas -- Chief Executive Officer

Thank you, Simos.

Please turn to Slide 10 for a brief update of supply. During the first quarter of 2019, a total of 8.9 million deadweight was delivered and 2.5 million deadweight was sent to demolition for a $6.4 million (ph) net inflow. Demolition activity has now reached 4.8 million deadweight and already stands above the full 2018 scrubbing figure. A total of 9.1 million deadweight has been reported by Clarksons as firm orders this year and up to an additional 3 million deadweight have been identified as LOIs or options.

The order book currently stands between 11.4% and 12.6% of the fleet depending on how many LOI and options will be exercised and is approximately 1% below last year's levels. The geared order book stands at just 6.8% of the fleet. The average steaming speed of the dry bulk fleet is at 11.4 knots, down 0.3 knots to last year, due to combination of relatively low freight rates and the HFO price environment. During 2019 and 2020, the fleet is projected to expand at a pace of approximately 2.4%. However, due to off-hires related to scrubber installations and tanks cleaning during 2019, as well as slow steaming during 2020, effective supply is unlikely to expand by more than 1.5% per annum.

Let's now turn to Slide 11 for a brief update of demand. During Q1, 2019, the dry bulk market was negatively affected by a series of disruptions in iron ore exports owing to Vale's iron ore mine accident and cyclone Veronica in Australia, which came on top of additionally weak seasonality during this period. China's coal import restrictions from Australia created further uncertainty in February and although overall Q1 saw Australian coal exports, up by 2.6% year-on-year. Shorter distance coal exports from Indonesia increased by 10.6% year-on-year, mostly due to the benefit of smaller sizes and to the detriment of ton-miles.

During Q1, iron ore exports from Brazil came almost flat compared to last year with March volumes, however, contracting heavily by 26% year-on-year. Brazil exports continue to underperform during April down 29.1% and recorded the lowest monthly export figures since January 2012. Australian iron ore exports during Q1 declined by 5.6% year-on-year, with March volumes also contracting by 17% year-on-year. Nevertheless, steel industry fundamentals stand healthy confirming that the declines experienced are not demand driven. More specifically, China's crude steel production increased by 9.1% year-on-year during Q1 and accelerated in April to 11% year-on-year, which combined with a slowdown in imports has led to a sharp destocking of iron ore at ports.

With steel consumption standing at healthy levels as indicated by the pace of declines of steel inventories, further iron ore destocking at Chinese ports might push port stockpiles at much lower levels over the next months. Overall, iron ore trade in 2019 is expected to decline with Clarksons projecting minus 1% and minus 2.3% in tons and ton-miles respectively.

Coal imports into China during Q1, 2019 decreased by 1% year-on-year. February and March under performed the most, after China imposed coal import restrictions. Australia thermal coal prices received strong downward pressures as a result, which made them competitive to other destinations. China's total electricity generation during Q1 increased by 6% year-on-year. Thermal coal increased by 4% and hydropower accelerated by 11%. Nevertheless, China's domestic coal output has remained largely flat during the first four months of the year, on a series of mines safety inspections, which we view as a positive.

At the same time, Indian coal imports are estimated to have increased by approximately 20% during Q1 and are projected to remain strong during this fiscal year. Clarksons projects coal trade growth of 1.7% and 1.8% in tons and ton-miles respectively.

The US China trade dispute and the imposition of 25% tariffs on US imports by China is taking its toll on soybean trade since Q4, 2018. Brazil has partly picked up the slack with its exports increasing by 30.8% year-on-year during Q1, and while some pressures from the US have been observed. US cargoes under performed compared to last year, as indicated by weakly export volumes.

Chinese soybean imports declined by 14.4% year-on-year in Q1 with demand having also been affected by the African swine flu outbreak. Total grain trade including soybeans is projected to increase by 1.7% and 2.7% in tons and ton-miles terms in 2019 after contracting in 2018.

According to Clarksons, total dry bulk trade is projected to expand by approximately 1.2% during full year 2019 and to rebound above 3% during 2020. Finally, as a general comment, potential inflationary pressures related to IMO 2020 in our opinion will stimulate early restocking across all dry bulk cargoes during the second half of 2019. As a result, we remain optimistic for the end of the year and expect that the combination of lower supply and recovering demand is likely the surprises to the upside.

Without taking any more of your time, I will now pass the floor over to the operator to answer any questions, you may have.

Questions and Answers:

Operator

(Operator Instructions) Your first question is from Ben Nolan from Stifel. Your line is open.

Benjamin Nolan -- Stifel -- Analyst

Yeah, great. Thanks, guys. My first question relates to -- well, I have a few questions and I'll start these events (ph). So as it relates to the buyback program, obviously, you guys were pretty active in the quarter and clearly with the shares below now, I would suspect that's probably certainly a better use of capital than buying ships. But how do you weigh in sort of preservation of balance sheet and making sure that in case the market is slower to recover that you're not overextended? At what point are you -- do you slowdown that buyback program or even close to that?

Hamish Norton -- President

Well, Ben, it's Hamish Norton. We do not want to debt finance buyback program, and frankly, we don't want to finance the buyback program with cash in the (ph) balance sheet as it exists today. The buybacks earlier this year were largely financed with the effective proceeds from not buying the Rickmers ships, where we had a put call arrangement, where we were assuming that Rickmers would either put the ships to us or would be commercially compelling to exercise the call option, which would have reduced our cash balances. And in the event, Rickmers chose not to exercise the put option, and we chose not to exercise the call option and that left us with more cash than we had forecast. And it was essentially equivalent to selling those ships at the put price.

Benjamin Nolan -- Stifel -- Analyst

Okay. So reading through into where we are now given kind of the state of the market, we shouldn't expect you at least in the immediate term to be aggressively buying back shares based on current...

Hamish Norton -- President

Not unless, we finance it with the sale of ships.

Benjamin Nolan -- Stifel -- Analyst

Got you. Okay. That's very, very clear. I appreciate that Hamish. And then my next question, I'll turn it over relates to the logistics business. I was just counting the operating days in the quarter relative to the last quarter. It seemed like they -- well they were up almost 17% quarter-on-quarter. Is that something that was opportunistic or is that logistics side of the business something that you are purposefully growing and expect to continue to grow?

Petros Pappas -- Chief Executive Officer

Ben, this business basically is expanding, that's why you saw a higher -- a higher movement around -- we fixed more vessels and that was -- that's all. That's it.

Benjamin Nolan -- Stifel -- Analyst

Okay. So and that -- and that sort of leads me to the next part of the question I guess. When thinking through that business, are you -- do you ever take net long or short positions or maybe another way to think about that is -- does this logistics part of the business, does it tend to -- for you guys and the way you envision it. Did it -- should it smooth the results or amplify the results?

Petros Pappas -- Chief Executive Officer

Well, the reason we started this is because we want to get into the voyage business. So basically up to now, now I think, we are already a year -- more than a year and a half doing this business. So up to now, we tried to keep a balance -- a balance sheet, so that we're not too long or too short. We're basically practicing. And the only time, we were not balanced basically are -- was the first quarter of this year, where we went short on FFAs because that was partly a hedging tool for us. As I have said in the past between August and December of every year, we tried to hedge the first three months to six months of the next year because, as we all know these are the lower activity quarters.

So through Star Bulk itself, through Star logistics and by fixing -- by fixing physical -- physically our vessels on short term periods, we actually went short. So at that time Star Logistics was short. And the result actually you can see from the fact that on average, the spot market was something like 7,300 (ph) on the three types of vessels that we operate, but our time charter equivalent was 11,200. So that is partly due to the hedging that we did including Star Logistics. And it was also partly due to the fact that I mean, we over performed also because the market fell obviously.

Benjamin Nolan -- Stifel -- Analyst

Right. Okay. And going forward, obviously, you hoped that this would be additive to earnings. But do you think it will smooth that curve, as it sort of did in the first quarter, that's part of the objective, I suppose?

Petros Pappas -- Chief Executive Officer

Well, it depends. I mean, as I said, before 2020, we are basically going to be balanced. So it won't have a major effect on the curve. After 2020, we want to do voyage business. So (technical difficulty)

Benjamin Nolan -- Stifel -- Analyst

Hello, I think -- I think I might have cut out. Okay, well, if you can still hear me, thanks, guys.

Operator

Okay. And your next question is from Noah Parquette from JPMorgan. Your line is now open.

Noah Parquette -- JPMorgan -- Analyst

Thanks. I would ask, the IMO meeting came and went and it doesn't look like there'll be much development, but I would love to hear your thoughts on like the proposal for regulation of speed or speed limits or average speed or what have you, whether you think that has a prospect like any potential of actually happening, at what point of time, what timeframe? Just love to hear your thoughts on that proposal?

Operator

(technical difficulty) Ladies and gentlemen, I think we have lost the speaker line of Petros. Please stand by while I reconnect him. Thank you.

Petros Pappas -- Chief Executive Officer

(technical difficulty) Sorry Ben. Hello. Operator, can you hear?

Operator

You're now back in the room, Petros. Thank you.

Petros Pappas -- Chief Executive Officer

Thank you. Ben...

Simos Spyrou -- Co-Chief Financial Officer

(foreign language)

Petros Pappas -- Chief Executive Officer

Yeah. Okay. So...

Noah Parquette -- JPMorgan -- Analyst

Yeah. Hey, it's Noah. I think Ben, we lost you so. But yeah, I don't know if you heard my question. I was asking about the IMO proposal for the speed regulations and speed limits. What you thought about that? Whether that has any chance of happening?

Petros Pappas -- Chief Executive Officer

Well. I'm in favor -- our Company is in favor of that proposal. And actually, if you guys remember, we were vocal about it even on the investor calls about two years ago. We're talking about the situation where, if vessels, for example, reduce their speed by 15% emissions would be reduced by about 30%. And the IMO regulation is talking about a 40% reduction in emissions by 2030. Now, if we could have 30% within a day, why wouldn't we do it. This is would be good of course, for the environment, and it would be good for shipping as well, and it is very easy to implement. I understand though that there were differences of opinion, as to how to attain this goal and every country came in with their own view. So I do not think this is something that will happen immediately. But I think that at some point, reason will prevail and it will pass in one form or in another.

Noah Parquette -- JPMorgan -- Analyst

Okay. And then, I want to ask about the soybean trade. Obviously, you went to detail on that and the tariffs have affected it. We've seen a bit of a bounce back from the US cargoes. I mean, I guess, what I want to know is what chance is there that -- that normalizes without the tariffs going away. I mean, can China continue this for a good period of time, in terms of -- they kind of front loading from Brazil or whatever, but or is it -- is it going to -- we have to wait till the tariffs are reversed?

Petros Pappas -- Chief Executive Officer

Well, last year they did. Of course, this year, we also have the swine flu problem, which puts less pressure on China because I think that like between 10% and 20% of the swine population was (inaudible) and therefore, there's going to be less, less need for imports. The soybean -- China's soybean exports -- imports are about 1.7% of world trade. So if that was reduced by 10% would be like 0.17% of world trade, which would be like 7 million ton or 8 million tons. Every ton counts, today. I think that if the trade war continues, China will continue to try to get to import soybeans from other countries like Brazil and Argentina. The difference there is somewhat longer than it is from the US. But I think it will have a slight negative effect overall.

Noah Parquette -- JPMorgan -- Analyst

Okay. And then, I just want to ask, I guess, modeling question. In terms of increasing dry docking expenses, I know, you guys expense it, not amortize dry docking expenses and I don't think this is the case, but just remind me the scrubber expenses will not show up on this line item, right. And -- and I guess, what caused the increases there? Is there going to be an increase this year as normal dry docking is incurred along with the scrubbers or just want to get an understanding of that? Thanks.

Petros Pappas -- Chief Executive Officer

Noah, the scrubber expenses basically are capitalized and will be amortized as of January 1st, 2020, we will start amortizing them. The dry dock expenses are expensed as we are doing up to now anyhow. So basically, we will have as an indication about 52 dry docks this year spread primarily -- mainly during the second and the third quarter of the year.

Simos Spyrou -- Co-Chief Financial Officer

Noah, as far as installations of scrubbers are concerned, we have 52 installations during dry docks, and we have 50 installations -- this year I'm talking about, alongside in combination with doing it at sea. So the ones that we do during dry dock basically they're finished during the dry dock -- the normal dry dock time. The ones we do alongside, they are half of the time is alongside and half of the time is at sea, so we actually operate, while we're installing them. So -- so we are trying that way to minimize the loss of time that we have.

One thing that we've done is that we pushed all -- we brought forward all our dry docks for 2020 and we're doing them in 2019 that way we don't have to stop our vessels twice for once for dry dock and once for scrubber installation, that's one thing, and we really don't lose anything because on dry dock, they're five year cycles. So whatever is due in 2020 would have been done the dry dock on the third year. We can do the dry dock instead on the second year of the cycle, and we still -- the next dry dock will be after three years.

So we remain within the cycle. We do them earlier, which means of course, more expenses this year and more off-hires. But next year, we have zero dry docks and hopefully zero scrubber installations if we stick to our program, which we're doing right now, and we will be able to trade unobstructed for the whole year -- during the year that we expect to make much better profits.

Noah Parquette -- JPMorgan -- Analyst

Okay. That's helpful. That's all I had. Thanks.

Petros Pappas -- Chief Executive Officer

Thank you.

Operator

Your next question is from Amit Mehrotra from Deutsche Bank. Your line is open.

Chris Snyder -- Deutsche Bank -- Analyst

Hey, this is Chris on for Amit. So just following up on the IMO meeting. The language was not super clear, but it seems like they're going to evaluate the use of open loop scrubbers over the next two years and make a decision in 2020. So I guess one, am I interpreting this correctly? And two, what do you guys think is the real risk of seeing a potential open loop scrubber ban in international waters? And then if decision is made in 2021, I'm assuming there would be a grace period before any potential ban would even go into effect?

Hamish Norton -- President

Okay. First of all, we think that the likelihood of an open loop scrubber ban is very small in international waters. A large majority of the countries that express their opinion on the subject agreed that more research was needed, but wanted to make sure that the conclusion of the IMO was based on science and not politics. And the science here is coming out pretty strongly that open loop scrubbers are not in fact a source of pollution of any significant at all. In fact, there was a recent sea ballast (ph) study that just came out that concluded that, even if you run an open loop scrubber in port and they did an accumulation study that after a year, the level of pollutants would be between 0 and 15,000 (ph) of the European Union limit. So it doesn't appear to be something that is likely to end up being concerning.

But regardless of what happens two things, we think are going to be very helpful. One is, the IMO is very slow to move, and it is going to be quite difficult for the IMO to change any substantial regulations around open loop scrubbers before 2022. And the second thing is that there does seem to be a very substantial support for grandfathering of scrubbers that we're putting in good faith before any change in regulation. So we're pretty optimistic that this is not going to be a serious problem for us.

Chris Snyder -- Deutsche Bank -- Analyst

Okay. Thanks for the color. Really, helpful. And then just kind of staying on the topic of scrubbers. It seems like scrubber penetration for the Cape fleet is expected to wind up in the 25% to 30% range, still the minority of the fleet, but definitely a meaningful amount. At what level of penetration would you start to worry about maybe, other like ship owners competing away some of the fuel savings?

Hamish Norton -- President

Well, I mean, the more scrubbers that are installed, the more the savings is in effect competed away. But while you may have 25% to 30% scrubber penetration eventually in the Capesize fleet, we don't think that -- that is going to exist in January of 2020. And I don't know if Nicos Rescos is there, but I think he has some views -- our Chief Operating Officer has some views on the percentage of the Cape fleet, it's likely to be scrubber equipped, as of January.

Nicos Rescos -- Chief Operating Officer

Well, we are monitoring carefully what is happening with installations in the Far East mainly. Our count is about 800 retrofits on the dry bulk sector. With the way things are going, we believe less than half would be ready by January 1st, 2020 and with the remainder coming in throughout the year. So that's our view, and we're trying to update it regularly. But we see significant bottlenecks both on the equipment side and on the shipyard side.

Petros Pappas -- Chief Executive Officer

Yeah. But also one -- one other thing is that even if 50% of the Capes had scrubbers, the other 50 would not. So when the charters are looking for a vessel that can do the job as cheaply as possible, I suppose that they would go first for the 50% of the scrubbers, the Capes and then for the rest. And therefore, we think there's going be a two tiered market. Well, having said that we don't expect there's going to be more than 10% or 15% of the Capes with scrubbers on the 1st of January and perhaps that's even a high number.

Chris Snyder -- Deutsche Bank -- Analyst

Yeah. Thank you for that. And then, I guess, just lastly a modeling question. I think you guys said there's 52 dry locks in 2019 mainly in Q2 and Q3. So just for modeling, is it safe to assume that the dry dock expense in these quarters was going to come in above the Q1 level?

Hamish Norton -- President

Chris, yes. As we said before, we are expecting to have 52 dry docks throughout the year. The cost that we are budgeting overall is about $50 million for the entire year. We have covered about 9 to 10 (ph) in the first quarter, and we have the vast majority of the remaining during Q2 and Q3.

Chris Snyder -- Deutsche Bank -- Analyst

Okay. Thank you. That's it for me. I appreciate the time guys.

Petros Pappas -- Chief Executive Officer

Thank you.

Operator

Your next question is from Erik Hovi from Clarksons. Your line is open.

Erik Hovi -- Clarksons -- Analyst

Hi, guys. So from what we can see guiding on the second quarter rates to-date, it looks fairly good the market considered. So on the $10,150 per day average trade for the larger vessels. What kind of rates do you guys see on the Newcastlemaxes compared to the Capes?

Petros Pappas -- Chief Executive Officer

Well, today's example is that we have an offer on one Newcastlemax of ours. It's still Q2 (ph) today. So at $17,500 (ph) net on Newcastlemax. (technical difficulty) Hello? Do we have Erik on line?

Hamish Norton -- President

It sounds like Erik may have dropped off.

Operator

No further questions at this time.

Petros Pappas -- Chief Executive Officer

Okay. And with that the operator...

Operator

Okay. Your next question is from Randy Giveans from Jefferies. Your line is now open.

Randy Giveans -- Jefferies -- Analyst

Hey, how do you do gentlemen? How's it going?

Petros Pappas -- Chief Executive Officer

Good. How are you doing?

Randy Giveans -- Jefferies -- Analyst

Great guys. All right. So a few quick questions following up on the scrubber strategy. You had the 40 vessels that are going to have scrubbers like you said by May, I guess this month. What are you going to kind of do with those in the next few months. Are you going to test the technology? Are you going to be running the scrubbers, so that you maybe don't have to. Are you going to test like different high sulfur fuel oils in the coming months. What are your plans for those 40?

And then for the remainder, you have 52 dry docks, 50 SC installations what have you. What's the difference in terms of time and cost savings between those two kind of retrofit options?

Petros Pappas -- Chief Executive Officer

The vessels that have already scrubbers installed, we are basically run continuously. And this is good because that way we see whether there are any small problems that need to be rectified, and therefore, they are being run. Actually, we had installed a scrubber in April 2018 that was our first scrubber, and I think it's been running since then.

Simos Spyrou -- Co-Chief Financial Officer

Yes.

Petros Pappas -- Chief Executive Officer

Yeah. It's been running since then. What was the second question?

Randy Giveans -- Jefferies -- Analyst

Before I get to the second question, you're running since then and working good or you're scrubbing it below the 0.5%. No problems there?

Petros Pappas -- Chief Executive Officer

Yes. No problems whatsoever.

Randy Giveans -- Jefferies -- Analyst

Cool. Follow-up is the dry docks versus SC installations. What's the difference in terms of time and cost savings between those two retrofit options?

Petros Pappas -- Chief Executive Officer

Okay. So the dry docks actually up to now have on average taken us 23 days. And within those 23 days, we're able to install the scrubbers as well, and we've done it every time. On the alternative, where we install -- where we do preparations and we do it two ways, either we install the scrubber and then we sail and we do all the other works at sea or we do the works first, the auxiliary works and then we go to port and we install the scrubber. On average, this takes us up to now 16 days. So it's not that -- it is not a matter of economics that much, it is a matter of availability of yards. We have booked yards from a year and a half ago to do that. So we have accessibility, but the yards are so pressured right now by everybody that you may go there and have to wait for a few days. So in a way by doing that we secure the 16 days, which 16 days off-hire and not more than that, and -- and we make the life of shipyards easier. Cost wise, it is about the same whether we install at the shipyard or we install -- we do part of the installation at sea. The cost is about the same.

Randy Giveans -- Jefferies -- Analyst

Okay. And then for the remaining Newcastlemaxes, are those coming out of the shipyard with scrubbers? And then what's the timing for those last two deliveries?

Christos Begleris -- Co-Chief Financial Officer

The last two -- hi, this is Christos. Basically the last two Newcastlemaxes, one is coming end of June and the other is coming by July. So the one that is coming out end of June is going directly to a shipyard to have their scrubber installed next door. The one that's coming out in July will have the scrubber installed.

Randy Giveans -- Jefferies -- Analyst

Perfect. All right. And then kind of lastly, obviously news regarding Vale, it's been pretty much all over the place with mines restarting and shutting and other dams possibly on the brink of failure what have you. So all that being said just trying to get your in-house view on how many million tons of I guess, decreased Vale production or export, is Star Bulk, the guys in that room expecting this year relative to 2018? I know, you've quoted Clarksons and their estimates, but trying to get your in-house view on that?

Petros Pappas -- Chief Executive Officer

Okay. Well, last year's Brazil -- last year Brazil exported 390 million tons of iron ore or so. Out of that 365 was Vale, and 25 were other companies. If you remember the Anglo American, who was producing between 17 million tons and 20 million tons of iron ore, at some point had some problems with some pipeline. So they stopped exports at the time. Now, Anglo American is back. So let's say -- let's say that 80 million tons of Vale's 365 have been affected. We expect to see the Broker 2 (ph) back, the 30 million of Broker 2 back in the next very few months. And therefore, we expect that there is probably going to be about 45 million tons to 50 million tons of loss of exports from Vale. However, we'll have to add the 20 million of Anglo American, the 10 million of Trafigura that came into the market this year.

And if you look at SD11, they are going to be increasing -- Vale's SD11 mine, they will be increasing by about 15 million tons to 20 million tons. So overall, we expect that the loss is not going to be more than 15 million tons to 20 million tons for the whole year. But we think that exports will accelerate in the second half of the year because the demand is there, you can see that from where the price is today $102 (ph) per ton.

And one other thing which is interesting is that, I read that SD11, which will be producing -- which is presently producing about 75 million tons per annum is going to double their export capacity in 2020. So if that happens, I think we're back on the road with Brazil. At the same time of course, Australia is -- which was affected by the cyclone is now exporting as normal. And one good thing that happened with the Vale problems for the market is that there are about 50 VLOCs stuck in Brazil waiting for Vale to load them and therefore this -- this assist the market.

Randy Giveans -- Jefferies -- Analyst

Okay. Well, I kind of summing it all up, it seems like supply is slowing, a lot of vessels coming on for scrapping and retrofit for scrubbers, demand in your estimate should strengthen pretty strong in the back half of the year especially 2020. Obviously, spot rates still pretty depressed, Capesizes at I don't know 12,000 a day, although the forward freight agreements in 4Q are closer to 18 (ph)? And then, the time charter rates are still in the mid to high teens. So all that being said you're going to have fully equipped scrubbers by the end of this year for 2020 or maybe even starting in 4Q, '19, do you expect almost full spot exposure or if you want to kind of hedge your bets and lock away some long term charters on some of those scrubber equipped vessels?

Petros Pappas -- Chief Executive Officer

There are two things, we have to think about. First, we have to think what the rates are going to be on a scrubber less vessel; and second, we have to think of what the differential between heavy fuel oil and gas oil is going to be. So before we start talking about hedging because we could hedge one thing like we could hedge the FFAs for example, and we could leave the bunker differential open or we could do the other -- or we could hedge the bunkers and leave the charter, the FFAs -- the chartering of the vessels open or do a little bit of both. That will depend. I mean, it's still too early to take this decision. Our view is that we're going into a strong market in the second half of the year and next year, and depending on what rates we'll see, we will take our decision. As things are today, I would not hedge for 2020 yet.

Randy Giveans -- Jefferies -- Analyst

Got it. All right. Well, thanks -- thank you for the time and that's it from me.

Petros Pappas -- Chief Executive Officer

Thank you.

Operator

No further questions at this time. Speaker, please continue.

Petros Pappas -- Chief Executive Officer

No further comments on our side either. Thank you, operator.

Operator

Thank you. That does conclude the conference for today. Thank you all for participating, and you may now disconnect.

Duration: 51 minutes

Call participants:

Simos Spyrou -- Co-Chief Financial Officer

Petros Pappas -- Chief Executive Officer

Hamish Norton -- President

Nicos Rescos -- Chief Operating Officer

Christos Begleris -- Co-Chief Financial Officer

Benjamin Nolan -- Stifel -- Analyst

Noah Parquette -- JPMorgan -- Analyst

Chris Snyder -- Deutsche Bank -- Analyst

Erik Hovi -- Clarksons -- Analyst

Randy Giveans -- Jefferies -- Analyst

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