Dry-bulk carrier owner Navios Maritime Partners LP (NYSE: NMM) reported a first-quarter operating surplus of $29.6 million, up 11.7 percent from a year ago. Operating surplus is a measure that’s equivalent to distributable cash flow and is calculated by adding back noncash accounting charges to earnings as a measure of distribution power. On this basis, Navios Maritime Partners covered its first-quarter distribution of $0.44 per unit by a healthy 1.19 times.

Dry-bulk ships haul commodities such as coal, iron ore and grain. Although demand for commodity transportation has held firm (especially in emerging markets), the industry has been afflicted with an oversupply of vessels.

In 2007-08, strong demand for commodities and a shortage of dry-bulk ships pushed the daily rates charged to lease these ships to record highs. In their haste to take advantage of the tight market, operators inadvertently ordered too many vessels.

Day rates collapsed during the financial crisis, and the flood of newly built vessels began to enter the market just as global trade began to recover. The Baltic Dry Index, which tracks the rates charged to lease dry-bulk ships, has declined to a low of 647 in February 2012 from a high of almost 12,000 in May 2008.

But 77 percent of Navios Maritime Partners’ 18 dry-bulk vessels are booked under fixed-rate time charters with more than three years remaining. In 2012, 97 percent of the MLP’s available charter days are already fixed under long-term deals. Based on existing contract terms, Navios Maritime Partners LP should be able to maintain its current distribution through at least the end of 2014.

When more of the MLP’s vessels come off contract in 2015, the market for dry-bulk tankers should be on firmer footing as deliveries of newly built ships will shrink dramatically. In addition, the 17 percent of the global fleet that’s more than 20 years old will likely be scrapped in coming years.

Drop-down transactions from the MLP’s general partner, Navios Holdings, could also offer upside. Navios Maritime Partners currently charters the Navios Prosperity from its parent and then leases the ship to customers at a higher rate. The MLP has the option to purchase the Prosperity when its contract expires in July 2012, which would likely occur at a price that would make the deal immediately accretive to cash flow.

A similar opportunity will crop up in 2013, when Navios Maritime Partners will have the option to purchase the Navios Aldebaran. If the MLP still has easy access to the capital markets, we expect management to take advantage of this opportunity.

We also wouldn’t be surprised if the MLP were to take advantage of fire-sale prices on dry-bulk tankers to build its fleet. Yielding almost 11 percent, units of Navios Maritime Partners LP rate a buy up to 20.