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Scorpio Bulkers Inc (NYSE: SALT)
Q3Â 2019 Earnings Call
Oct 23, 2019, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Hello, and welcome to the Scorpio Bulkers Incorporated Third Quarter 2019 Conference Call. I would now like to turn the call over to Hugh Baker, Chief Financial Officer. Please go ahead, sir.
Hugh Baker -- Chief Financial Officer
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; Cameron Mackey, our Chief Operating Officer and James Doyle, our Senior Financial Analyst.
Earlier today we issued our third quarter earnings press release, which is available on our website. The information discussed on this call is based on information as of today, October 23rd, 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 and www.sec.gov.
Call participants are advised that the audio of this conference call is being broadcast live on the Internet 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. As well as the call there will be -- we have a issued and uploaded a supplemental presentation, which is complementary to this earnings press release.
With that I'd like to pass you on to Emanuele Lauro.
Emanuele A. Lauro -- Chairman and Chief Executive Officer
Thank you, Hugh. Welcome to all and thanks for being with us today. The quarter has continued to show good progress within the company. And we've continued our active balance sheet management, recurring debt and making opportunistic sales of tonnage, where we saw opportunities. We believe this to be value enhancing to shareholders given the current share price.
Despite a challenging start to the year in dry bulk the weakness in rates experienced in the first half of the year was reversed in the third quarter. This was due mainly to increased online, due to Chinese buyers being forced to source agricultural commodities from Brazil and Argentina, rather than the United States. In addition, Brazilian miner Vale resumed its export program after a prolonged disruption from dam failures. These fronthaul voyages, and the significant number of larger dry cargo vessels fitting scrubbers in Asia constrain the supply side and push rates to recent highs.
We continue to execute on our significant scrubber retrofit programs ourselves, while optimizing our balance sheet and liquidity. Importantly, and in our considered view, this is also the appropriate moment to share a significant part of the value creation from our opportunistic investment in STNG. We have taught carefully about how to do this. We hope that many SALT shareholders will see the same upside in STNG that we continue to proceed. But we felt it was right to start returning a significant portion of the value creation to our shareholders.
I am confident that Scorpio Bulkers will continue to be relevant in the dry cargo space, due to its strong market position, modern fleets and best-in-class operations. Furthermore, as today's move demonstrates, we will continue to look for ways to share these return with our investors going forward. Both the freight environments and regulatory changes have tested asset times in the past few years. But given our position in the markets, I look forward with cautious confidence cognizant that there is more to come.
With this I'd like to turn the call back to Hugh Baker.
Hugh Baker -- Chief Financial Officer
Thank you, Emanuele. I would like to refer you all to the supplemental presentation again, which has been uploaded with the earnings press release.
In the third quarter, the company made a net loss of $1.9 million a loss per share of $0.03. This includes a gain and dividends totaling $1.6 million or $0.02 a share, primarily related to the STNG investment; a $200 reversal of writedown of assets related to the sale of SBI Cougar and SBI Puma and the write-off of deferred financing costs of $0.5 million relating to the refinancing of existing debt. Third quarter EBITDA was $26.1 million and cash flow from operations was $9.1 million.
During the quarter our Ultramax vessels had time charter equivalent earnings of $11,824 per day and our Kamsarmax vessels had time charter equivalent of $13,149 per day. Earnings in Q4 are improved from these levels with our Ultramax vessels earning $13,351 per day for 34% of the days to-date and our Kamsarmax vessels have earned $13,715 a day for 36% of days to-date.
During the quarter, we completed the sale of SBI Puma and SBI Cougar for approximately $37.9 million in aggregates, generating $16 million of additional liquidity. During the quarter, we also closed all of our remaining scrubber financings and our scrubber finance program is now completed and our scrubber program is fully funded. Details of our scrubber program can be found in our earnings press release.
Furthermore, during the quarter, we are pleased to have redeemed all of our $73.6 million of outstanding 7.5% Senior Notes. As of October 18th 2019, the Company had $89.6 million in cash. We have no restricted cash and all the cash is freely available. The company's Board of Directors declared a dividend of $0.02 a share on October 22nd 2019.
Finally, in addition, as mentioned by Emanuele, the company is paying a special dividend of 1 million shares, it owns in Scorpio Tankers, which will be payable on December 13th to all shareholders of record on November 15th. After the dividend, the company will have own approximately 4.4 million shares in Scorpio Tankers.
With that I'd like to open the call up to questions.
Questions and Answers:
Operator
[Operator Instructions] And our first question comes from the line of Omar Nokta with Clarksons Platou Securities. Your line is now open.
Omar Nokta -- Clarksons Platou Securities -- Analyst
Thank you. Hey guys, good morning and good afternoon.
Hugh Baker -- Chief Financial Officer
Good afternoon Omar, welcome back.
Hi, Omar.
Omar Nokta -- Clarksons Platou Securities -- Analyst
Thank you, happy to be back and nice to kick it off with Scorpio as my first earnings call.
Emanuele A. Lauro -- Chairman and Chief Executive Officer
Yes, must do the bull market in shipping.
Omar Nokta -- Clarksons Platou Securities -- Analyst
Indeed. Well, the STNG special dividend is what I would say as a clearly a surprise to put it lightly and coming into the call. I was planning on asking, how you viewed the position versus three months ago? Clearly the dividend said something and obviously we've heard Emanuele's comments, but curious to hear you speak about it a bit more, STNG shares are up 20% since the 2Q earnings call when you really last discussed this publicly?
Robert Bugbee -- President and Director
Sure. Well, as we described on the 2Q conference call was a good pace to start. We've said that and we were very confident to the fundamentals of the product market. And that we were -- we look forward to that playing out as we approach 2020. Now, since that cool that conference and the product market is only increased and not only is the fundamentals improved, but the present earnings in that product market have really improved and setting up for a very strong early recovery this winter. So in many ways if we were disappointed at all the moment would be the STNG is only up 20% in the last three months.
So the way we'd be viewing it going forward is that even if you maintain the same momentum related to the stock price is that there's no reason to think that the STNG's stock comp be up 50% by the time the self-reports next. So that's why we're maintaining the lion's share, the great majority of the stock that we own in STNG. Now, at the same time as Emanuele said, we think it's right thing to do is especially when we've been trading under NAV to share, you know, to share in that game that -- with our shareholders and with our shareholders who place their trust in that original decision that the company made and they deserve a reward for that. So that's what the dividend is therefore.
Omar Nokta -- Clarksons Platou Securities -- Analyst
Alright, cool. Thanks, Robert. Yes, clearly, it's worked out very well, since the time of investment. You mentioned NAV and as we think about it today regarding the fleet as it stands. You've sold a couple of Ultramax's recently; you did a few -- a couple kinds of Kamsarmax's a couple of months ago, as well. Just kind of thinking about it with a discount to NAV, should we be thinking more that we'll be seeing more vessel sales? How do you think about the fleet today?
Robert Bugbee -- President and Director
I think that you -- we've got all the options there. I mean, we've -- so far, we started off the beginning last year, this time last year and through the winter is the dry cargo market if you remember, wasn't that strong in the first part of this year lots of fears related to the World Trade, etc, etc. And the market was weak and we sold vessels in order to ensure that we could keep the STNG trade on. Then everyone was terrified that we would have to sell the STNG shares in order to fund our balance sheet and we sold vessels and continued to sell vessel through that period to -- we got to fund that.
In the last quarter, we sold vessels to freight that flexibility that you are now seeing played out and paying back the dividend. We intend to maintain that flexibility. So it's a fairly -- is not a difficult decision to sell vessels at NAV when you're trading below NAV in order to maintain liquidity in other trades that's going very much your way. We could easily repeat -- if we wanted to, we could repeat next quarter what we've done this quarter.
Omar Nokta -- Clarksons Platou Securities -- Analyst
Yes, that makes sense. Good. Well, I'll leave it there. Thanks, guys.
Operator
Thank you. And our next question comes from the line of Amit Mehrotra with Deutsche Bank. Your line is now open.
Chris Snyder -- Deutsche Bank -- Analyst
Good morning, this is Chris on for Amit. So the first question is just following up on the STNG stock dividend. In the release you characterize this is a one-time special dividend. However, you still have more than 80% of the STNG position remaining. So I guess what's the plan for the remaining 80%? Is the expectation that this position will be wound down and distributed to SALT shareholders over the coming quarters?
Robert Bugbee -- President and Director
So the expectation is what we said, the expectation is we expect to see significant gains in the STNG stock. And if you look what's happened, last quarter the market -- lots of different ways of looking at this and we're obviously not going to completely reveal that position. That's the beauty of a special dividend. So one way of looking at this is in the last three months is the first question, I said the STNG stock has gone up about 20% and we've dividend it out just under 20% of the STNG stock.
Now, we will watch what happens, maybe the STNG stock goes up 50%, maybe it goes up 10%, maybe it goes up 20, maybe it goes up 30. We have a lot of different positions we can take on this, but I think you've seen the clear evidence the clear change that we've moved that balance sheet from holding position into now wanting to share with the shareholders the -- of which we're a substantial shareholder, the gain of that position. And I think the beauty of it is, is that most of the Scorpio Bulkers shareholders love STNG stock too. And I think people are absolutely thrilled to receive STNG stocks dividend, to some of them is better than cash.
Chris Snyder -- Deutsche Bank -- Analyst
Okay, fair enough. So it sounds like the timing and the magnitude of the dividend, the future maybe stock dividends are highly flexible and very dependent on the STNG share price?
Robert Bugbee -- President and Director
Yes, we've to keep everybody guessing.
Chris Snyder -- Deutsche Bank -- Analyst
Yes. Okay, fair enough. And then next, turning over to scrubbers, so the spread for 2020 is looking to be around $250 per ton based on what we're looking at, at least. Can you maybe talk about I guess one, is this kind of the same spread you guys are seeing and what kind of payback this equates to on the mid-sized bulker fleet. And then this -- what is your willingness in -- and ability to lock in these economics in the derivative market?
Cameron Mackey -- Chief Operating Officer
So this is Cam speaking. The first part of your question is it the same spread we're seeing? Well, the spread, I think you're talking about the differential between VLSFO and 3.5-HFO. Is that correct?
Chris Snyder -- Deutsche Bank -- Analyst
Yes.
Cameron Mackey -- Chief Operating Officer
Right, so it really does depend whether one wants to use that differential or the differential between HFO and MGO, which obviously is somewhat higher. And the reason one would use that is: A, the availability and specification of VLSFO is still very much in question. But B, that as it may, it's another $50 to $100. So we would argue the spread is somewhere depending on what method you want to use between $250 and $350. As we've said in the past, we don't think enough attention is being given to the overhang of excess HFO going forward, while the global slate of crude will lighten for the world's refiners, there still will be much excess HFO and we think the clearing price for that 3.5% HFO will be lower for longer than the market is currently pricing.
Irrespective, to the second part of your question, the returns from medium sized bulkers for $250 spread. Your IRR is somewhere between 30% and 70% or 80% depending on other assumptions you use about consumption per day, time at sea versus time at port, speed these sorts of things. So that type of IRR, I think, still justifies on amount any basis the marginal capital that is being put in, I mean half of our time that's being put into scrubbers on the vessel.
Chris Snyder -- Deutsche Bank -- Analyst
And then maybe just real quick on, is there any willingness or ability to lock in some of these economics of the derivative market? Or is it just that hey, you guys think that the high sulfur price is going considerably lower, so you kind of want to wait that out?
Cameron Mackey -- Chief Operating Officer
There is certainly ability, there's active derivatives market that would allow us to lock it in. As a separate matter, what we are doing is making sure that physical availability is there. So we do have contracts in place to secure our fuel on a floating price basis. So the actual physical availability is not in question. The price we have decided for the time being not to lock in.
Chris Snyder -- Deutsche Bank -- Analyst
All right, that does it for me. I appreciate the time. Thank you.
Cameron Mackey -- Chief Operating Officer
Thank you.
Operator
Thank you. And our next question comes from the line of Jon Chappell with Evercore. Your line is now open.
Jon Chappell -- Evercore -- Analyst
Thank you. A quick follow-up on the dividend just off the top of my head and using the shareholder registry. It looks like three of the SALT shareholders are pretty significant shareholders of STNG as well. Do you have any numbers as to what the overlap is in the shareholder base as we think about desire willingness to hold the STNG shares that you've given us a dividend?
Robert Bugbee -- President and Director
Sure, if you put insiders?
Jon Chappell -- Evercore -- Analyst
Yes, it was kind of insiders.
Robert Bugbee -- President and Director
The insiders and then the next top two, you're already close to 60.
Jon Chappell -- Evercore -- Analyst
Great, great.
Robert Bugbee -- President and Director
And then there are others that are smaller, but you can see -- all you need to do is take Bloomberg and just cross reference that the file has there been some people, who've overlapped and bought STNG. SALT recently did own STNG, I don't think we would have yet be showing up as a derivative to STNG too, but I would estimate and I'm certain that the overlap is at least 55, but I would estimate that it's as high as 70.
Jon Chappell -- Evercore -- Analyst
Perfect, alright. The other theme I wanted to talk about a little bit, it was a bit noticeable that the off higher day schedule that you've been pretty transparent with since discover initiative was announced, was not provided in this earnings release. And we've heard a lot kind of anecdotally about delays and whatnot. Where do you stand right now with off higher time associated with the scrubber retrofitting number of days per ship? And has the schedule changed at all, any push back's into 2020 from what you'd expected to have been done by the start of next year?
Cameron Mackey -- Chief Operating Officer
Thanks, Jon. So our vessels are taking somewhere between 35 and 45 days to fit scrubbers, which is somewhere between five and 15 days longer than what we are targeting. The good news is that we feel these delays are -- in our case these delays are going to come down. Because we're using the same yards and the same manufacturer, the scrubbers and the same design engineers and the same process to outfit ship after ship. So is purely on the basis of repetition and familiarity, we feel the time to fit the scrubbers should reduce. As a completely separate matter delays that are being reported in China can come from myriad causes. Many of the delays are happening on the larger vessels, because that's where you get the most critical constraint of shipbuilding or ship repair capacity. So think about the 20,000 TEU container ships, the Valemax's, the VLCC's all competing for rather limited space. That's one bottleneck.
Another bottleneck is purely the supply chain of the equipment and the parts coming from the scrubber manufacturers. And another bottleneck is the pre-retrofitting design and engineering work that has to be done. So there are many different reasons why people are experiencing delays, we can only speak to our experience. And again, because we're sort of targeting smaller repair facilities with our vessels, we don't see the type of extensive a prolonged delay that some of the larger ships are seeing.
Jon Chappell -- Evercore -- Analyst
That makes sense Cam. So the number of ships we just assume that based on the last schedule, we've seen, the number of ships per quarter hasn't changed, we should just maybe raise the number of days per ship by somewhere between five and 15?
Cameron Mackey -- Chief Operating Officer
Yes, I think that -- that's conservative. One other point I'd make is that on the margin, you'll see a vessel or to slip from one quarter into the next, but simply not on the basis of delays, but that's on their trading patterns, time in port or extra options that we give a charter. So that just is a delay not because of the outfitting, but rather prolonged trading of the vessel before they go to dry dock, so that's the basis you might see a -- some of the schedule slip up a few weeks or take one ship from this quarter into the next.
Jon Chappell -- Evercore -- Analyst
Yes, that makes sense. The one last thing I want to ask Cam is the ability to kind of adapt these scrubber contracts and once again, anecdotally in the tanker market, market takes off, people maybe want to just reap trading their ship as opposed to meeting their scrubber retrofit date. I don't necessarily think that's going to happen in the dry bulk market, but if that were to be the case, what's your flexibility on pushing back your slot as it were to take advantage of maybe an opportunity to trade the ship and make more in the very near-term?
Cameron Mackey -- Chief Operating Officer
So the answer is it depends. So in our case, the entire Scorpio Group is booked out a lot of slots at very few shipyards. Shipyards, we've done due diligence with over the last two, three years. As a reminder we have a number of these ships that were going in for a special survey anyway. So your greatest luxury is having a long lead time to develop relationships and secure contracts with the yards where you are a large "strategic customer with repeat business". So in our case, we have a lot of built in flexibility to move around the schedule if we want. In fact, we're doing it now on some of the tanker vessels, because the market has gotten so constructive. Now, with others if you're a single ship owner with one Aframax or one VLCC, well, if you miss your slot, the yard has better things to do. So it's different decisions, depending on what type of owner and what type of scale benefit you're presenting to the shipyard.
Jon Chappell -- Evercore -- Analyst
Yes, totally makes sense. Thanks a lot for that, Cam. Thanks, Robert.
Cameron Mackey -- Chief Operating Officer
Sure.
Robert Bugbee -- President and Director
Thank you.
Operator
Thank you. And our next question comes from the line of Randy Giveans with Jefferies. Your line is now open.
Randy Giveans -- Jefferies -- Analyst
Howdy, gentlemen, how's it going?
Robert Bugbee -- President and Director
Great, thank you Randy.
Randy Giveans -- Jefferies -- Analyst
So just looking kind of at general market strength, clearly increasing iron ore fixtures from Brazil to China, certainly boosting the cape size market throughout 3Q and now even into the fourth quarter. That said, can you point to any specific commodities or regions that are providing most of the strength for your Kamsarmax's and Ultramax's?
James Doyle -- Senior Financial Analyst
Hey, Randy it's James. Some particular interesting developments have been increased and exports from Latin America. It's partially offsetting US exports, but this is an increasing ton-mile that has to do with price. Another interesting development or I guess surprise is that China is actually, up 8% on coal imports this year, so that's been strong.
And then we've been seeing some developments on some of the minor bulks. [Technical Issues] I said, catch the headlines. You've seen increased cement production in Vietnam, that's going to China as China tries to reduce its pollution, we might see areas in which they start to import certain commodities that they don't want to have a negative impact on pollution. And then obviously, as you mentioned, we have seen the positive resumption of iron ore exports from Brazil and we've seen some larger vessels and these type vessels are off-hired for drydock and scrubber I'm sorry.
Randy Giveans -- Jefferies -- Analyst
Okay. Perfect and then switching gears to share repurchases. On the last call, you mentioned the sale of Ultramax's for -- I guess quoting opportunistic in one way to close the gap between NAV and the stock price. That said there were no share repurchases in the third quarter. So what is the strategy for share repurchases going forward?
Robert Bugbee -- President and Director
At the moment we'd chosen to -- while the actual position has been stable in terms of earnings in the first half, because as you can see was to deal with that balance sheet and get it pretty strong for what we're doing at the moment. So you also saw that we repaid down a base bond in the last quarter two. And we'll see whether or not this dislocation is persistent now that we're starting to let's say return some of the gains that we've created in the STNG position itself. So we'll watch and see whether or not the -- to say that balancing now is pretty flexible to do a lot of different things. And we'll watch and see what happens related to the gap between NAV and stock price.
Randy Giveans -- Jefferies -- Analyst
Okay, and then Cam, second question, how many scrubbers have been installed as of today?
Cameron Mackey -- Chief Operating Officer
Randy, four vessels have had the scrubbers installed, three Kamsarmax's and one Ultramax.
Randy Giveans -- Jefferies -- Analyst
Excellent. Well, thanks again.
Cameron Mackey -- Chief Operating Officer
You have a similar number right now.
Randy Giveans -- Jefferies -- Analyst
Perfect, thank you so much.
Operator
Thank you. And our next question comes from the line of Greg Lewis with BTIG. Your line is now open.
Greg Lewis -- BTIG -- Anlayst
Yes, thank you and good afternoon and good morning.
Cameron Mackey -- Chief Operating Officer
Thanks, Greg. Good afternoon to you.
Greg Lewis -- BTIG -- Anlayst
I guess, I want a little bit -- talk a little bit about the balance sheet. So in the last couple of years challenging to say the least, you guys spent a lot of -- increased liquidity, you've relied heavily on the sale leaseback market. Now, it looks like the cycle is kind of entered a kind of cyclical upswing as we think about that. I'm curious that your thoughts around taking vessels that have been put on sale leaseback over the last couple of years, and shifting those back maybe to cheap -- some cheaper financing. And then just thinking about that its look out over the next 12 months are there opportunities to do that? If you kind of put some color around that, that would be super helpful. Thanks.
Cameron Mackey -- Chief Operating Officer
Greg, I mean, I think the first thing to say is that we obviously manage our balance sheet very actively and one of the things we've done in the third quarter, which I think is very significant is to repay $73 million of baby bonds. Now, that was a very flexible and finance at the time. But it was 7.5% coupon and it was up by far our most expensive piece of debt. The sale leasebacks we announced earlier this year were surprisingly competitive on price. One was priced at LIBOR plus 290. The other is priced I think LIBOR plus 340. And so what we're seeing as sale leasebacks for the right borrowers are actually much more similar to bank debt than they used to be and they've become much more flexible. So we're not looking at sale leasebacks in the way that we used to. We see them as much better and more attractive instrument.
Now, that said, you're absolutely correct that plain vanilla bank debt is cheaper and as the company develops through 2020 and into 2021, we do expect to look at our more expensive debt and our more expensive debt is our highest advanced rate debt. And we look at it as part of the de leveraging, we could easily -- it could easily become attractive to address some of the sale and leasebacks.
Greg Lewis -- BTIG -- Anlayst
Okay, perfect. Thanks for the time.
Operator
Thank you. And our next question comes from the line of Ben Nolan with Stifel. Your line is now open.
Ben Nolan -- Stifel -- Analyst
Hey, guys. Yes, I had a question about sort of how to think about the scrubbers in the context to the pools. Obviously, the pools probably contain -- especially initially ships that both have scrubbers and those that don't. How do you come up with a math of deciding here's -- given sort of an unknown spread in fuel prices? How much extra scrubber ship should be contributing to the pool or how much of the owner of that scrubber ship should be able to take out relative to one that wouldn't have a scrubber?
Cameron Mackey -- Chief Operating Officer
Thank you for the question, Ben. It's based on actual's. So there's an estimate that looks forward and then there's a true up at the end of every say relevant period to reflect actual's.
Ben Nolan -- Stifel -- Analyst
I see, so it's not just some sort of a pool point allocation. This is real math, I guess, right and so...
Cameron Mackey -- Chief Operating Officer
It is -- it's essentially real math. Pool points work much the same way. A pool point is basically an approximation or system of approximation something like a golfer's handicap right? And then the actual score determines the relevant payouts to each owner or each participating vessel.
Ben Nolan -- Stifel -- Analyst
Okay, yes, now that that's helpful. I appreciate that Cam. And then the other thing is just looking at the rates that you booked in the fourth quarter, at least relative to maybe some of the indexes that we see a little bit lower, particularly on the Kamsarmax's and then at least what I was looking for. Is there something around that relative to -- I don't know positioning or scrubbers or something that, that you would call out?
Cameron Mackey -- Chief Operating Officer
No, thank you, Ben, it's actually both. So there were a couple of vessels that were positioning east to west with longer than say expected balancing legs. And what was pronounced during the quarter was a quite a large differential between rates that you could achieve in the western hemisphere and those you could achieve in the east. So as our vessels start to position to drydock, in Asia, if they're a little early and they're trading around Asia, of course they're experiencing that discount right in rate.
Ben Nolan -- Stifel -- Analyst
Right, right.
Cameron Mackey -- Chief Operating Officer
So that's largely explains the sort of the broad TCE numbers that you see there.
Ben Nolan -- Stifel -- Analyst
Okay perfect, I appreciate it. Thanks, Cam.
Cameron Mackey -- Chief Operating Officer
Sure.
Operator
Thank you. And our last question comes from the line of Liam Burke with B. Riley FBR. Your line is now open.
Liam Burke -- B. Riley FBR -- Analyst
Thank you. You've discussed based on your NAV a strategy of managing through your fleet. Is there any particular bias either on the buyer or the ad or the subtract side on which type of vessel that you would manage to?
Cameron Mackey -- Chief Operating Officer
I tend to think it's just about values. The S&P market, sale and purchase market is active. But I wouldn't call it liquid. It's a variety of different participants with a variety of different biases. And so it's whatever presents the best value at the time.
Liam Burke -- B. Riley FBR -- Analyst
Okay and on the commodity front, if you're looking at the potential trade truce between China and the US, how does that change your outlook for the -- going forward for the next 12 months or so?
Cameron Mackey -- Chief Operating Officer
Well, obviously, it's positive. You'd expect a couple of things. One is disruption in supply chains. And rerouting of vessels generally is good for the supply demand balance right? So as vessels were rerouted from the US to South America, for example, for agricultural commodities, you see a corresponding expansion of ton-miles and freight is therefore supportive or constructive. When you unwind that you're going to see two things, a short-term increase, because everything again has to be rerouted and rearranged. And then you're going to get -- even though the net result will be somewhat reduced ton-miles, as you're going to get corresponding increase in volumes. So again, longer term of course, more trade is better and better trade relationships are better. In the short-term, you'd expect to see some disruption, positive, negative, sort of netting off to where we are now, which is generally a pretty OK market.
Liam Burke -- B. Riley FBR -- Analyst
Okay.
James Doyle -- Senior Financial Analyst
And just -- I mean, the simply as Cam is saying, generally anything that promotes world trade growth is good.
Liam Burke -- B. Riley FBR -- Analyst
Right, so I mean, effectively, I mean, the market has been pretty stable, pretty good. I guess the question was you're looking past the current market a trade truce over the long-term would be a positive for you and make things even better?
Cameron Mackey -- Chief Operating Officer
Yes, but I think as you've seen we're managing the company on the basis that we're not relying on that where we haven't -- where we've created a strategy where Scorpio Bulkers is the best performing drydock stock over the last 12 months, where we're not dependent upon the trade position or default position until further notice is that there is no trade truce. Because if we know we can create value and make cash flow in whatever way during that period, then if there is a trade truce as opposed to the status quo at the moment and that'll be great.
Liam Burke -- B. Riley FBR -- Analyst
Great, thank you.
Operator
Thank you. And this concludes today's question-and-answer session. I would now like to turn the call back to Hugh Baker, Chief Financial Officer for any further remarks.
Hugh Baker -- Chief Financial Officer
Thank you, operator. We have no further remarks. Thank you all for participating in the call.
Operator
[Operator Closing Remarks]
Duration: 38 minutes
Call participants:
Hugh Baker -- Chief Financial Officer
Emanuele A. Lauro -- Chairman and Chief Executive Officer
Robert Bugbee -- President and Director
Cameron Mackey -- Chief Operating Officer
James Doyle -- Senior Financial Analyst
Omar Nokta -- Clarksons Platou Securities -- Analyst
Chris Snyder -- Deutsche Bank -- Analyst
Jon Chappell -- Evercore -- Analyst
Randy Giveans -- Jefferies -- Analyst
Greg Lewis -- BTIG -- Anlayst
Ben Nolan -- Stifel -- Analyst
Liam Burke -- B. Riley FBR -- Analyst
