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Eagle Bulk Shipping Inc (NASDAQ:EGLE)
Q4 2019 Earnings Call
Mar 5, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Eagle Bulk Shipping Fourth Quarter 2019 Results Conference Call. [Operator Instructions].

I would now like to turn the call over to Gary Vogel, Chief Executive Officer; and Frank De Costanzo, Chief Financial Officer of Eagle Bulk Shipping. Mr. Vogel, you may begin.

Gary Vogel -- Chief Executive Officer and Director

Thank you, and good morning. I'd like to welcome everyone to Eagle Bulk's fourth quarter 2019 earnings call. To supplement our remarks today, I would encourage participants to access the slide presentation that is available on our website at eagleships.com. Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition. Our discussion today also includes certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and TCE. Please refer to the appendix in the presentation and our earnings release filed with the Securities and Exchange Commission for more information concerning non-GAAP financial measures and a reconciliation to the most comparable GAAP financial measures. Also note that the Baltic Supramax Index or BSI that we will reference in this presentation is basis to BSI-58 Index.

Please now turn to slide 5. The fourth quarter was a dynamic period for the shipping markets and one of transition for the Company. Having reached a six-year quarterly high in Q3, the BSI traded off in the fourth quarter to average approximately $10,500. As we indicated in our earnings call in November, market weakness in Q4 was due to a number of factors including Indonesia's ban on nickel ore exports coming into effect, import quotas on Chinese coal imports being met, and a lack of U.S. soybean shipments. In addition, we believe the year-end market was negatively impacted due to some factors related to IMO2020 coming into effect on January 1st.

Eagle achieved a net TCE for the fourth quarter of $11,292 per day, according to a market outperformance of $1,430 or 15%. Looking back, we've now outperformed in 11 out of the last 12 quarters. For the full year 2019, Eagle achieved a net TCE of 10,385 per day, according to a market outperformance of 15% or $1,319. This translates to an annualized value creation of $24 million basis our current own fleet of 50 ships, our highest year yet. It's also noteworthy that we achieved this while positioning 34 ships into and out of yards in the Pacific for scrubber retrofits.

Moving into Q1, market weakness intensified on the back of traditional seasonal weakness relating to increased new building deliveries and Chinese New Year and was further exacerbated by higher fuel costs due to IMO2020 fuel switchover, and now more recently, the significant impacts of trade demand as a result of the coronavirus. We'll address this in more detail later. But, our first and foremost concern is for the wellbeing of those who've been affected, and as a company for the safety and wellness of our employees, including the crews onboard our vessels. In this regard, we're taking precautions in line with guidance from relevant organizations and authorities and stand ready to adjust our actions as the environment dictates.

Quarter-to-date, the BSI has averaged approximately $6,000 per day, representing a drop of 44% as compared with Q4. As of today, we've fixed about 85% of our available days for the first quarter with a net TCE of $10,300 per day, representing our current total outperformance of around $4,000 per day when compared to the index. This figure is inclusive of approximately $28,000 TCE benefit generated on our scrubber fitted fleet from fuel spread savings.

Please turn to slide 6. Fuel costs for the majority of the industry, which is operating non-scrubber fitted ships, increased dramatically with the inception of IMO2020, while at the same time, fuel costs for those operating scrubber fitted ships by Eagle are benefiting from lower fuel pricing. Fuel spreads between HSFO and VLSFO have been quite volatile since January, with the actual fuel spread year-to-date close to 200 and the balance of the year now averaging around $150 per ton. This has come in since the outbreak of the coronavirus, but forwards have been widening over the past few days, and we believe spreads will continue to move up as and when oil demand normalizes.

In order to start crystallizing part of our scrubber investment returns, we've entered into hedges for approximately 25% of our scrubber-related fuel spread exposure for 2020 and 2021.These are at average prices of $240 and $150 respectively. And as of today, those hedges have a mark to market positive value of around $5 million.

Please turn to slide 7. EBITDA adjusted for certain non-cash items totaled $9.8 million for the fourth quarter, down around 25% as compared to Q3. While our TCE performance increased in Q4, EBITDA was negatively impacted by significant offhire days as we work to complete our scrubber retro program ahead of IMO2020. We incurred a total of 740 days offhire during Q4, the largest in our history as 18 ships or more than 35% of our fleet were in a Chinese shipyard at some point during the quarter. This had a material impact to our earnings, which Frank will discuss in more detail.

In order to be able to maximize the potential fuel spread benefit, our objective from the beginning had been to complete the scrubber retrofit program by January 2020. And we achieved just that. As of the end of January, we had 38 scrubbers fitted with just three units which we ordered last summer remaining to be installed during Q1. This scrubber retrofit program has been a monumental task for our Company, and its successful and timely execution is a result of great teamwork and dedication across the Eagle organization. Once our program is fully complete, we'll have a total of 41 vessels or 82% of our own fleet fitted with exhaust gas cleaning systems. This makes Eagle the largest owner of scrubber-fitted Supramax/Ultramax vessels. And we believe this provides us with competitive advantage as only about 7% of the midsized drybulk fleet has been fitted.

Although it's early days, our IMO2020 compliance strategy is delivering value. Since implementation on January 1st, we estimate our scrubber investment has yielded roughly $9.5 million in incremental revenue for the Company. And based on our expectations for continued positive forward fuel spread environment between HSFO and VLSFO, we believe the contribution from our investment in scribers will continue to be meaningful.

With that, I'd like to turn the call over to Frank who'll review our financial performance.

Frank De Costanzo -- Chief Financial Officer

Thank you, Gary. Please turn to slide nine for a summary of our fourth quarter 2019 financial results. Revenue, net of both, voyage and charter hire expenses, totaled $41.9 million for the fourth quarter, 3% lower than the prior quarter. The Company reported a net loss of $11.2 million for the fourth quarter, or a loss per share of $0.16. Adjusted EBITDA came in at $9.8 million. Operating performance for Q4 was negatively impacted by several factors, including lower available days due to scrubber installation offhire; higher vessel expenses due to onetime start-up costs relating to our ship acquisitions; higher operating expenses, driven by the previously disclosed OFAC settlement and onetime legal charges. It is noteworthy that taking into account scrubber offhire along with the onetime events mentioned above, our earnings were impacted by approximately $12.1 million or $0.17 per share in the quarter.

Let's now turn to slide 10 for an overview of our balance sheet and liquidity. Total cash, inclusive of $5.5 million of restricted cash was $59.1 million at December 31, 2019, which represents a decrease of roughly $42 million from prior quarter end. The decrease in cash was primarily driven by drydocking expenditures, the installation of scrubber and ballast water treatment systems, and the purchase of the last three Ultramaxes we acquired in part offset by the draw from our new Ultraco debt facility. The company's total liquidity as of December 31, 2019 was $129.1 million, comprised of total cash of $59.1 million and $70 million of undrawn revolving credit facilities. In the fourth quarter, net cash provided by operating activities came in at $2.7 million.

For the full year, net cash provided by operating activities was $21.7 million. Total gross debt excluding debt issuance costs as of December 31, 2019 was $474.7 million, an increase of $25.3 million from the prior quarter. The increase in debt is primarily due to incremental borrowings related to vessel acquisitions under the new Ultraco debt facility, in part offset by debt principal repayments.

Please turn to slide 11 for a cash walk for Q4 and full year 2019. The chart at the top of the slide lays out the changes in the Company's cash balance in Q4 2019. The two large bars in the left, revenue and operating expenses are simple look at the operations. The net of the two bars is positive $9 million, which comes in very close to our Q4 adjusted EBITDA number. To the right, you will find a bar covering the $6 million of drydocking costs, capex of $8 million for scrubbers and ballast water treatment systems along with a vessel S&P bar totaling $62 million, covering the purchase of three Ultramax vessels. The $33 million bar represents the net proceeds from the new Ultraco debt facility accordion draw. And finally, the bar totaling $18 million for debt principal and interests we paid in Q4 2019.

Let's now discuss the chart at the bottom half of the slide, which displays the changes in the Company's full year cash balance. The net of revenue and operating expenses bars, is positive $49 million, which is very close to our full year adjusted EBITDA number. To the right, you will find a bar covering the $12 million for drydocking, a bar totaling $58 million for capex on scrubbers and ballast water treatment systems, a bar totaling $114 million, with the seven Ultramax vessels we purchased during the year, in part offset by the four Supramax vessels we sold. A bar totaling $152 million, representing the cash proceeds we received from the convertible bond debt offering, new Ultraco debt facility accordion draw and the debt refinancing in January 2019. The final bar on the right totaling $46 million covers the debt principal and interest paid for the full year 2019 on our existing debt facilities.

Let's now review slide 12 for our cash breakeven per ship per day. For the full year 2019, cash breakeven per ship per day came in at $10,080, $1,722 higher than the prior year. The year-on-year increase is primarily a result of the increase in debt principal payments related to the new Ultraco debt facility, along with an increase in our operating expenses. Full year 2019 vessel expenses or opex came in at $4,859 per ship per day, $134 higher than prior year. As I previously indicated, opex was impacted by onetime vessel acquisition costs.

In 2019, drydocking came in at $702 per ship per day, $218 higher than 2018. Please note that drydocking costs are a function of the age of the vessels drydocked, as well as the additional upgrades performed to improve the long-term fleet performance. That being said, the average age of ships drydocked in 2019 was older than the age of those performed in the prior year.

Cash G&A in 2019, excluding certain non-recurring items came in at $1,681 per ship per day, up $115 from prior year. It is worth noting that our G&A per ship calculation is based only on our owned vessels. In this regard, if we were to include the chartered-in days in our calculation, 2019 G&A a per ship per day would be $1,388. Cash interest expense for the full year 2019 came in at $1,471 per share per day, which is $120 higher than full year 2018. The increase is primarily due to increased debt relating to our vessel acquisitions and less ownership days, which will normalize in 2020 as the 50 vessels in our fleet will be fully counted for the year. Cash debt principal payments in 2019 came in at $1,366 per ship per day, which is $1,134 higher than prior year. The increase is attributable to our principal repayments on the new Ultraco debt facility.

Looking forward to Q1 2020 breakevens, we see opex and debt principal repayments around the 2019 levels, G&A to move down to circa $1,550 per ship per day, interest expense to increase slightly due to the full year impact of the additional debt and drydocks, which will come in as per the capex slide in the appendix of our presentation.

This concludes my comments. I will now turn the call back to Gary.

Gary Vogel -- Chief Executive Officer and Director

Thank you, Frank. Please turn to slide 14. As indicated earlier on the call, apart from the seasonal factors, which traditionally affect the first quarter, the drydock market's been negatively impacted in Q1 by both IMO2020 coming into effect, particularly for owners that do not have scrubber fitted fleets, and the coronavirus. In terms of IMO2020, unfortunately given weak demand dynamics in early Jan, owners of non-scrubber fitted ships were essentially unable to pass on extra fuel costs to charterers, and this in turn has pushed time charter equivalent rates down significantly. While we had expected this to moderate post Chinese New Year, the coronavirus has led to major trade impacts, particularly for cargo into China. This is clearly evident in the number of Chinese port calls, which actually decrease post Chinese New Year by about 30% from pre-holiday levels, when normally we would have seen an increase.

Positively, we've seen a rebound in this metric over recent weeks, and we're now back around pre Chinese New Year volumes. Notwithstanding the weak market, the BSI bottomed at $51, $52 per day on February 13, and is now trading back over 7,000 with the forward curve indicating rates for Q3, Q4 in the mid $10,000 range. Given the erratic supply demand dynamics, I also think it's noteworthy to look at the extreme differential, which currently exists between the Atlantic and Pacific markets. Please turn to slide 15 for look at this graphically.

Here, we depict the Atlantic versus the Pacific BSI premium. We added this slide to the deck due to the extreme disparity. While the overall market is averaging 7,000, the Atlantic BSI is close to $10,000 while the Pacific is hovering around 4,000. Although this differential ebbs and flows around seasonal factors, it's been exacerbated this year due to the significant fall off in demand into China.

As we have mentioned in prior calls, the Atlantic market tends to trade at a historical premium, averaging around 30% due to structural supply demand dynamics. As you can see, the Atlantic premium skyrocketed to a 15-year monthly high in January, reaching 180%. This volatility presents challenges, but opportunities as well given that we operate our ships between the Atlantic and Pacific basin in part to capture arbitrage opportunities. Looking forward, we expect the mean reversion will occur with Pacific rates rebounding and narrowing the gap as and when trade normalizes.

Please turn to slide 16. Vessel supply growth remained elevated in Q4, despite a drop in new building deliveries, a total of 108 vessels amounting to 11.8 million deadweight tons delivered during the quarter. For the full year, a total of 432 new ships hit the water in 2019. It's noteworthy that there was very little slippage in 2019, whereas most ships in the order book delivered at schedule.

Demolition of older tonnage totaled 26 vessels during the fourth quarter, amounting to 2.5 million deadweight tons. For the full year of 2019, scrapping increased year-over-year to total 7.8 million deadweight tons or 82 vessels. It's worth noting that only 18 ships or just 0.5% of the Handymax fleet was scrapped in 2019. This figure pretends that there's a growing backlog of potential scrap candidates in the mid-sized segment. And given current fuel pricing and market dynamics, we believe scrapping is likely to increase. Given the above, net fleet growth came in at 3.9% in 2019 for the total drybulk fleet, about a point higher than was widely expected earlier in the year. In terms of forward supply growth, things look more positive, whereas the drydock order book currently stands at 9% and for the Supramax, Ultramax segment just 6.5%, the lowest level in over 20 years.

In 2020, drydock net fleet growth is forecasted to be around 3.4% but within Supramax/Ultramax segment 1 percentage point lower at 2.4. Although we believe it's likely that number will be even lower due to the potential for increased scrapping due to weak market conditions, as well as productivity issues at Chinese shipyards due to the coronavirus. A total of 256 drybulk ships were ordered in 2019. To put this in context, there's only been one other time in the past 15 years when so few vessels were ordered. Within the midsized segment, 77 ships were ordered in 2019 or 2% of the fleet. As we indicated on our last earnings call, due to a number of factors including the price advantage of secondhand ships versus newbuildings, as well as the uncertainty surrounding future propulsion technology, we remain optimistic we will not see a material pickup in ordering for the foreseeable future without a very significant pickup in rates.

Please turn to slide 17. Global growth expectations for 2020, as forecasted by the IMF were revised down in January to 3.3%. This was on the back of weaker prospects for some of the emerging markets including India, which is experiencing weakness in domestic demand. With the onset of the coronavirus, there has been a severe shock to economic activity in China. The Chinese Purchasing Managers index for manufacturing, which came out a few days ago, tumbled in February to 35.7 from 50 the month prior. To put this in perspective, this has been the sharpest drop in manufacturing activity since the 2008 financial crisis, and I think underscores the massive impact the virus has had on this country.

In terms of the rest of the world, it's impossible to know how the coronavirus will ultimately impact activity, either directly or via supply chain disruptions. However, given the correlation between global GDP growth and drybulk demand, our industry has clearly been impacted. While, we don't know exactly when, we're confident that return to normalization will be supported by both the restocking of inventories as well as stimulus from central banks and governments, as we saw earlier this week when the Fed cut its benchmark interest rate. Additionally, China typically relies on infrastructure spend to stimulate economic growth. And drybulk is a direct beneficiary of such policies, given the importance of the commodities we carry. Notwithstanding the current uncertainty with the macroeconomic environment, we believe Eagle is uniquely positioned to navigate through this period, and then capitalize on the expected recovery, given our strong balance sheet, our active owner-operator model, as well as our industry leading position with scrubbers.

With that, I'd like to turn the call over to the operator and answer any questions you may have. Operator?

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Jon Chappell from Evercore ISI. Your line is open.

Jonathan Chappell -- Evercore -- Analyst

Thank you. Good morning, Gary. Good morning, Frank. Gary, just three hopefully quick ones for you. First one is more of a clarification. As you read through the earnings release in the revenue section, it says that the decrease in revenue was due to a decrease in charter hire rates year-over-year. If you read the charter hire expense, it says there was partially offset by higher charter rates year-over-year. So, can you just help us kind of clarify why were the rates of maybe the core fleet lower year-over-year in 4Q but then the charter-in fleet higher year-over-year? Was it just a great for 4Q '18 results in a tough comp, or how did that kind of play out?

Gary Vogel -- Chief Executive Officer and Director

Sorry, John. I think, the charter-in rates were higher of the vessels that we chartered in. Although year-over-year, the market was lower, the overall market was lower, the overall BSI market was sub-10 last year, down about $1,000 year-over-year, but potentially chartering in the Ultramax, I don't have the specific figures. We definitely can get back to you on that. What was the second one?

Jonathan Chappell -- Evercore -- Analyst

Well, I mean, that was the first question. Maybe to segue into the second one then, you spoke on slide 15 about the massive premium of the Atlantic TCE versus the Pacific. So, you said you expect mean reversion. Have you positioned your fleet, maybe aggressively is the wrong word, but maybe with a bias toward the mean reversion that you've spoken about, or are you still trying to maybe balance between the two basins, especially now that the majority of the scrubbers have been fitted and you're not kind of tied to the Pacific as you may have been in the recent past?

Gary Vogel -- Chief Executive Officer and Director

Yes, it's a great question. I mean, we're actually now a majority back in the Atlantic and we worked hard to do that, which clearly impacts rates. The backhaul market today for a Supramax is just above zero and Ultra is probably around 1,500, given the -- obviously the earning capacity. So, that's been costly on our performance in order to get it back to a premium there. I mean, at the moment, as you would imagine with the weak Pacific market, ships are paid significantly more to go out to an area, but we're definitely looking at the potential with that mean reversion to take some of that Atlantic position and more balance it into Pacific, taking that over the next, say, number of months. And then, of course, it's a contrarian type position. But we don't do things in the extreme. You'll never see us put our entire or even a vast majority of our fleet in one basin or the other. But, I think it's worth showing because, there is a huge discrepancy, obviously, if you have a ship sitting in a Pacific right now versus the Atlantic.

Jonathan Chappell -- Evercore -- Analyst

And the final one, you mentioned on slide 17, the IMF taking their forecast down and obviously incredibly fluid situation. But, you guys are on the ground, so to speak, by all the different commodities that you move in the Far East. Have you seen any kind of verification of an uptick in industrial production or demand in China It feels like the cases there maybe peaked and people are returning back to work after the extended holiday?

Gary Vogel -- Chief Executive Officer and Director

Yes. I mean, there's no questions. We're seeing much more in Korea and cargos. And it's showing in the market. I mean, while I was just handed the index, which came out while we were doing our call here, and it's up -- BSI is up 277 today, and part of that is $300 in Southeast Asia. We're definitely seeing more cargo, we have ships that are doing the last three -- we're doing the last three scrubber retrofits this quarter and labors there and working. And it feels quite good. But, as you said, it's a fluid situation, right. And so, we don't want to get ahead of ourselves here that this has passed, but it definitely feels much more positive and much more activity, whereas four weeks ago, there were ships that were sitting. Fortunately, not scrubber fitted ships but there were definitely older Supramaxes that we're sitting not being able to get any business at all. And I think that's completely mitigated at this point.

Operator

And our next question comes from Randy Giveans from Jefferies.

Randy Giveans -- Jefferies -- Analyst

I was just looking on the 1Q guidance, you said there is about a 4,000 Premium compared to the benchmark. I think, you said 2,800 was scrubber-related. So, I guess, just Atlantic over Pacific or are there other things there ascribing to that kind of premium?

Gary Vogel -- Chief Executive Officer and Director

Yes. I mean -- first of all, and I appreciate the question in order to clarify. So, 2,800 is what scrubber fitted ships have been able to generate as a premium. Having said that, with -- we now have 38 ships, but overall for the quarter, slightly less than 38, about 75% of our fleet. So if you take the 2,800 on those ships and net it out over the entire fleet, you get down to about a $2,100 benefit spread out amortized over the whole fleet. So, about half of the 4,000 comes from that, and the other half from -- outperformance comes from various aspects. Of course, where you position your ships is important, but it's also arbitrage. It's chartering other vessels. That is what we call creating asymmetric optionality between chartering ships, optional periods, using derivatives dynamically hedging and things like that.

So, it's absolutely not just being in the -- in one basin versus the other. But it's a multi-strategy approach. And that I think speaks to the fact that why we've been able to outperform 11 of the last 12 quarters and Q1 looks quite strong. So, I think, pretty confident that you can make that 12 out of 13.

Randy Giveans -- Jefferies -- Analyst

Okay. And then, kind of following up on that. The 2,000 a day premium, likely falling here as the spread has been tightening, how has your kind of forward hedge position changed to you in the last few weeks. I know you gave an update on your IMO call I guess a month or so ago. I was just trying to get an update currently with that stance?

Gary Vogel -- Chief Executive Officer and Director

Yes. I believe we've mentioned we're about 25% covered on our hedge position for both 2020 and 2021. And those hedges average $240 fuel spread for 2020 and $150 for 2021. So, if you take that with a blended, you're -- right now based on the spot, you're probably looking at about $175 for 2020 on a blended basis. And actually the hedge position for 2021 is very much in line with the forward market, which has moved up from sub-140 just a week ago to about 150 now.

Randy Giveans -- Jefferies -- Analyst

Sure, excellent. That's it for me. Thanks again.

Gary Vogel -- Chief Executive Officer and Director

Great. Thank you, Randy.

Operator

[Operator Instructions] Our next question comes from Amit Mehrotra from Deutsche Bank. Your line is open.

Christopher Snyder -- Deutsche Bank -- Analyst

Hey. Good morning, guys. This is Chris Snyder on for Amit. So, you guys -- it sounds like you continue to outperform the broader benchmark in the Q1 bookings guidance. But, you also had a significant number of vessels coming out of the yard in Q4, following scrubber installations. And as you guys have talked about already, the rates in the Atlantic are coming in at a pretty significant premium to the Pacific. So, could we -- I'm assuming the kind of the fleet positioning there was a bit of a headwind to the outperformance, or could we have seen an even more significant performance, if we kind of adjusted for that?

Gary Vogel -- Chief Executive Officer and Director

There's is no question that our performance was impacted significantly by the need to position 37 ships in and out of yards of which -- 35 of them were into China, especially given the fact that the majority of our fleet, more than 50% typically is in the Atlantic in any given time. And anytime you don't have a freehand to trade, it's going to impact that. So, there's no question in our minds. And in Q4, those ships coming out put us in a position to move other ships out of Asia, knowing that these ships would be coming out of the yard.

So, yes, we feel confident that we would have done better in 2019 in terms of outperformance. It was still our best one. And as mentioned on the call, about $24 million of value creation. But, no question about it, if you were to speak to our commercial team, I think they -- say, they had one hand tied behind their back for significant number of positions.

Christopher Snyder -- Deutsche Bank -- Analyst

Yes. Because it just kind of feels like the headwind was almost a double whammy in sometimes because not only was it impacting the flexibility of trading, but you're also having to put them all into the base that is significantly weaker. So this -- but fortunately, it feels like a onetime kind of event, or is it a onetime event?

Gary Vogel -- Chief Executive Officer and Director

Yes. I mean, that's a good point also, yes, onetime event in that. We could have spread out our scrubber installs over a greater period. We made a concerted effort, as things backed up to push hard to get this done by January 1st, because, if we had 10 of the ships ready on July 1st, instead of January 1st, we would forego about 5 -- what we calculated to be about $5 million on a half a year on 10 ships of scrubber premium. And it doesn't come back, right? I mean, that is just effectively money against the project. So, yes, Q4 was tough in that regard. We had 18 ships in a yard at one given at least part of the quarter. Never had it before, don't expect we ever will. But, as you said, onetime event -- that's behind us. We have three ships that we're working to get done within this quarter, and then we'll be completely -- have this completely behind us, and just working on the revenue side.

Christopher Snyder -- Deutsche Bank -- Analyst

Yes, for sure. Then this next -- so China stimulus is becoming a pretty major narrative in the entire equity market. Dry bulk, of course is a big beneficiary of that. Iron ore gets a lot of attention. But, can you maybe talk about which mineable cargos will benefit here? I would also just assume China ramping up, has to carry positive implications for scrubber spreads as well?

Gary Vogel -- Chief Executive Officer and Director

Yes. I mean, first of all, you're right. Iron ore does. But of course you also have -- I mean, coal is a huge commodity as well that that we move. And as you have stimulus and steel production and infrastructure spend, there's energy consumption around that. And the other thing is we expect steel, it's expected that steel movements this year will be higher than in the past two years where it was negative in the last few years. So, it'll be the first year and that's one of the largest or is the largest minor bulk in terms of volume, so on a weighted basis, that's really important. But you also have various cargoes -- other cargoes ores, limestone, gypsum things like that that are all part of construction and building, and we move a considerable amount of those cargos as well. And then in metals, we move things like a manganese ore from West Africa into China. That's a significant trade for us, as well as bauxite. So, it really is a kitchen sink. And that's one of the benefits of minor bulks is it's a very diverse in both in terms of commodity as well as sourcing in terms of geography.

Christopher Snyder -- Deutsche Bank -- Analyst

And then, just one more if I could. Grain activity out of Brazil seems to be ramping up. Could you just kind of remind us of the grain seasonality here? First, South America and then kind of how that leads into the North American grain season? And any kind of outlooks or anything you guys are hearing about how the grain season is shaping up? I guess particularly South America just because it's more near?

Gary Vogel -- Chief Executive Officer and Director

Sure. So, -- and you're absolutely right. I mean, grain is the seasonal driver overall. And if you think about its Southern Hemisphere is spring into summer, and then Northern Hemisphere is fall into winter. So, it's starting to ramp up now, March, but it really typically -- it seems to take a while to get going usually, and it really hits normally in May. And it's been longer, over -- 10 years ago, it used to be maybe a 6 to 8-week season. It's definitely become longer for a number of reasons, storage capacity, hedging capabilities of farmers, things like that. But now, it typically goes into September. And what we've seen in the last few years with the absence of U.S. soybeans moving, it's gone even longer. And then typically, the North American grain season gets ramped up kind of end October, November and carries on into January. I mean, we haven't seen -- and the data shows that said we haven't seen buying Chinese buying of soybeans in any meaningful way. And unfortunately, there was a lot of optimism on the back of the phase 1 trade deal but now we have the coronavirus. So, it's going to be interesting. Brazil crop is going to be strong this year. But, we expect they'll be competition from the U.S. market given the trade deal I just mentioned.

Christopher Snyder -- Deutsche Bank -- Analyst

I appreciate all the color. That does it for me. Thanks for the time, guys.

Gary Vogel -- Chief Executive Officer and Director

Great. Thank you, Chris.

Operator

Thank you. And I am showing no further questions from our phone line. And I'd like to turn the conference back over to Gary Vogel for any closing remarks.

Gary Vogel -- Chief Executive Officer and Director

Thank you, operator. We have no further remarks. I'd like to thank everyone for joining us today on our quarterly earnings call and wish everyone a great day.

Operator

[Operator Closing Remarks].

Duration: 37 minutes

Call participants:

Gary Vogel -- Chief Executive Officer and Director

Frank De Costanzo -- Chief Financial Officer

Jonathan Chappell -- Evercore -- Analyst

Randy Giveans -- Jefferies -- Analyst

Christopher Snyder -- Deutsche Bank -- Analyst

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