SOURCE: Excel Maritime

December 15, 2005 08:30 ET

Excel Maritime Positive on DryBulk Sector Fundamentals

NEW YORK, NY -- (MARKET WIRE) -- December 15, 2005 -- Excel Maritime Carriers Ltd. (NYSE: EXM) President, CEO & Director Mr. Christopher Georgakis was recently interviewed by Barry Parker of Below please find the interview.

Barry Parker:

Dry bulk stocks have been under significant pressure and decline lately. In your opinion, what are the reasons behind this?

Christopher Georgakis:

Shipping is a very important industry in global trade, if you take into consideration that 2/3 of the world's goods are transported by sea. However, it is also a cyclical business, with freight rates impacted by the balance between the supply of vessels and the demand for transportation.

We, as providers of seaborne transportation services, are fully aware of the risks and opportunities which the cyclicality of our business presents. Investors should also take this into consideration when investing in shipping and ensure they take a longer term view.

Shipping is a relative newcomer to the U.S. capital markets and certain investors may not be fully versed on the industry's structure and dynamics. As a result we have observed that some investors become concerned about the short term decline in freight rates and fail to focus on the medium or longer term potential of the drybulk sector, which we anticipate to be quite positive.

A considerable number of IPOs took place during the first nine months of 2005 in a climate of optimism and robust freight levels. Since then, freight rates -- and as a result stock prices -- have declined and we believe that at this particular moment much of the trading activity is driven by tax, technical or speculative factors and not by sector or company fundamentals.

We expect that as of January 2006, trading will again start responding to fundamentals, with investors focusing on the sector's outlook for 2006 and 2007. The current low valuation levels, coupled with positive sector outlook for the second half of 2006 and beyond, should enhance interest in dry bulk stocks.

There are numerous publicly listed companies in the dry bulk sector which follow distinctly different strategies in terms of fleet composition, fleet deployment, capital structure and dividend payout, thereby potentially appealing to different types of investors. Consequently, investors can have a wide choice amongst them.

We expect that current market trends will result in a reshuffling of shareholder constituency in most shipping stocks. "Hot money" from speculative investors and short term trading oriented hedge funds will tend to exit shipping stocks, and, a new "value-oriented" investor base is likely to acquire positions. As a result, notwithstanding the volatility of current market conditions, shipping stocks should attain a more stable and long term oriented shareholder base.

Barry Parker:

What happened to the market in 2005? Why are we experiencing lower rates? Why was the rate recovery that started in the third quarter 2005 not sustainable?

Christopher Georgakis:

Following one of the strongest freight markets of all time early in 2005, freight rates began deteriorating in the second quarter 2005 in the face of the developing supply side, and continued sharply downwards in the third quarter 2005, before bottoming in early August 2005. The reasons for such decline are simple and can be attributed to an inventory correction in China, as well as seasonal weakness lasting longer than anticipated. Though rates staged a recovery in September 2005, they failed -- so far -- to live up to the anticipated levels suggested by many market participants. I maintain that recent high freight levels witnessed in the dry bulk markets are primarily "Cape-led" and attributable to an excess in Capesize demand over supply. In my view however, recent rapid fleet expansion in the Panamax class is beginning to compete for cargo usually shipped by the Capesize class and consequently, erode demand for Capesize vessels resulting in freight deterioration in all vessel classes.

Notwithstanding the above, we believe that the fundamentals in the dry bulk sector remain strong. The rapid industrialization that is taking place in China results in increased steel production and imports of raw materials which act as the principal drivers for strong freight rates. The first half of '05 GDP growth in China was 9.5% and industrial production growth was 16.5%. China's rapid growth rate, together with growth in the emerging economies of South East Asia, is behind the increase of seaborne trade of approximately 4% on an annual basis for the next three years. This increase in seaborne trade is expected to result in firm freight levels.

What is important to understand is that this demand is not consumer driven. It is demand related to core commodities necessary for infrastructure development and industrial activity. These imports go into electricity generation and steel making. Even if there is softening in Chinese GDP growth this does not necessarily translate into less electricity or less steel making, especially given China's preparation for the Olympics of 2008 and the 2010 World Expo in Shanghai. There are also other projects which will require large quantities of steel for the next several years such as a national electricity grid, a national highway system, and the Yangtse-Huangpu canal.

Barry Parker:

How does Excel Maritime differ from its peers?

Christopher Georgakis:

Excel Maritime is the first pure dry bulk company to have listed on a U.S. Exchange. We have been public since 1998 and have delivered 6 consecutive years of profitability.

One of the key elements that differentiates us from our peers is our fleet deployment strategy. In November 2004, we had a fleet of five vessels with an average age of 25 years and a total deadweight tonnage (dwt) of 358,000. Within a period of three quarters we sold 4 older vessels and acquired 16 new ones, increasing the total number of the fleet to 17 vessels (one Capesize, ten Panamax and seven Handymax vessels) with a total dwt capacity of 1.0 million and an average age of 12.8 years, well below the industry average of 16 years. This transformation was made possible through two secondary offerings in December 2004 and March 2005 which grossed about $ 179 million.

In principle, we are period minded, however, our present mix of period and spot charters enables us to take better advantage of prevailing market conditions. For the fourth quarter of 2005, 50% of our fleet operating days are booked under period charters and 50% by spot charters. For 2006, 36% of our fleet operating days are under period charters and 64% under spot charters. We believe that this strategy enables us to take full advantage of market opportunities as they arise, while at the same time enjoy cash flow stability and greater visibility of earnings.

We also enjoy several major competitive advantages. Firstly, a strong management team with considerable experience in the operations of dry bulk vessels, Secondly, strong customer relationships, as a result of the quality of our fleet and Excel's reputation for dependability. Thirdly, cost effective operations with low operating costs and low break even levels. It is also worth noting that Excel Maritime is the first listed dry-bulk company to have fully integrated in-house commercial and technical management. As of March 2005, the technical and commercial management of the fleet is conducted by Maryville Maritime Inc., our wholly owned subsidiary, which also provides management services to third parties. Finally, we have considerable experience in dealing effectively with all regulatory aspects of being public, having been a listed corporation since 1998.

In conclusion, Excel Maritime has successfully delivered on its promises to the investment community by rapidly expanding the size of its fleet, reducing the average fleet age, implementing a deployment strategy of "period" charters, maintaining a Net Debt to total cap ratio of about 40% and addressing the trading liquidity of the stock by transferring to the NYSE. We look forward to the continuation of our expansion strategy in 2006 and to delivering shareholder value.

About Excel Maritime Carriers Ltd

The Company is an owner and operator of dry bulk carriers and a provider of worldwide seaborne transportation services for dry bulk cargoes, such as iron ore, coal and grains, as well as bauxite, fertilizers and steel products. The company’s current fleet consists of 17 vessels (ten Panamax and seven Handymax vessels) with a total carrying capacity of 1,004,930 dwt. The Company was incorporated in 1988 and its common stock had been listed on the American Stock Exchange (AMEX) since 1998. As of September 15, 2005 Excel Maritime is listed on the New York Stock Exchange (NYSE), trading under the symbol EXM. For more information about the company, please go to our corporate website

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