BANGALORE – Greek dry-bulk carrier DryShips Inc is betting heavily on the spot market, risking revenue volatility, to take advantage of strong daily freight rates. «We feel quite confident that supply is going to be so tight, it justifies the risk taken,» Chief Executive Giorgos Economou told Reuters in a telephone interview on Friday. About 85 percent of the company’s vessel-operating days are open for spot hiring in 2008. Spot rates, which move daily based on supply and demand, can be lucrative, but may lead to revenue volatility. On the other hand, a fixed, or charter, contract locks in a steady revenue stream. Other major bulk carriers like Diana Shipping Inc, Excel Maritime Carriers Ltd and Eagle Bulk Shipping Inc have already fixed on average more than 50 percent of their vessel-operating days for the 2007 fourth quarter and the year after. Economou said the company will charter some ships on a long-term basis to counter volatility in the spot rates but will resist freight derivatives to cover its spot exposure. «You get days when the paper market has moved up or down $25,000 or $30,000, (while) the physical has not moved by more than two, three or four thousand dollars,» Economou said. The «paper market» – also known as forward fr—-nts (FFA) – is a derivative contract that allows shipowners and charterers to buy and sell the price of freight for future dates to cover spot-market exposures. Expanding fleet Rising freight rates have led to increased demand for vessels, and DryShips has been buying second-hand vessels to immediately rent them out in the spot market. DryShips has a fleet of 44 dry-bulk carriers comprising five Capesize, 29 old and eight new Panamax vessels, and two Handymax vessels, with a combined deadweight tonnage of about 4 million. Economou said second-hand ships can be turned around much quicker compared to a new ship, which would take about three years to build. DryShips has also sold a few old vessels to modernize and reduce the average age of its fleet. Rising fuel costs are not a concern as they are passed on to the charterers, and have no effect on the margins, Economou said. «It is not an expense of ours, it’s paid by somebody else.» Betting on spot Economou expects the dry-bulk market to remain strong in 2008, as demand from China and other emerging markets like India continues to grow. Port congestion in key export centers like Australia and Brazil is expected to further bolster the freight rates. «Everybody is going to benefit from the rise in freight rates and, depending on strategy, some people will benefit more,» he said. «Those that stay spot will benefit lot more than those who want to hedge. And those that hedge everything will benefit even less,» Economou said.