Maritime CEO Issue Two 2018

ISSUE TWO 2018

BY

Posi d Spec onia ial Gre ek

fina

o nce w ners, and trav el

John Michael Radziwill Riding the good shipping cycle

MANIFEST

Economy

31 Asia Bulk Logistics 33 China Merchants 35 Dorian LPG

4 US 5 EU 7 China 8 India 9 Brazil

Maritime CEO Forum 36 Digitalisation 39 Dry Bulk 40 Tankers 41 Peter Sand

Markets 11 Dry Bulk 13 Containers 14 Tankers 16 Offshore 17 Finance

Greece

Executive Debate 18 Cape spot market

22 Cover Story GoodBulk 25 China Navigation 26 Essar 27 Nakilat 29 Norvic 30 Globus Maritime Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Jason Jiang jason@asiashippingmedia.com Correspondents: Correspondents are based in Athens, London, Melbourne, San Francisco, Shanghai, Singapore and Tokyo Contributors: Nick Berriff, Andrew Craig-Bennett, Paul French, Chris Garman, Lars Jensen, Jeffrey Landsberg, Dagfinn Lunde, Mike Meade, Peter Sand, Neville Smith, Eytan Uliel Editorial material should be sent to sam@asiashippingmedia.com or mailed to 24 Route de Fuilla, Sahorre, 66360, France

Recreation 46 Wine 47 Gadgets 48 Books 49 Travel

Profiles

An ASM publication

42 Posidonia 43 Owners 44 Shipping Cycles

Opinion 50 Kris Kosmala 51 Neville Smith 52 MarPoll Commercial Director: Grant Rowles grant@asiashippingmedia.com Maritime ceo advertising agents are also based in Japan, Korea, Scandinavia and Greece — to contact a local agent email grant@asiashippingmedia.com for details MEDIA KITS ARE AVAILABLE TO DOWNLOAD AT: www.asiashippingmedia.com All commercial material should be sent to grant@asiashippingmedia.com or mailed to 30 Cecil Street, #19-08 Prudential Tower Singapore 049712 Design: Mixa Liu Printers: Allion Printing, Hong Kong Subscriptions: A $120 subscription is charged

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Copyright © Asia Shipping Media (ASM) 2018 www.asiashippingmedia.com Although every effort has been made to ensure that the information contained in this review is correct, the publishers accept no liability for any inaccuracies or omissions that may occur. All rights reserved. No part of the publication may be reproduced, stored in retrieval systems or transmitted in any form or by any means without prior written permission of the copyright owner. For reprints of specific articles contact grant@asiashippingmedia.com Twitter: @Splash_247 LinkedIn: Maritime CEO Forum Facebook: Splash Maritime & Offshore News

AT THE PROW

Scrubbed out

W

ho’d be a maritime inventor? A combination of the glacial pace of legislation and the notoriously last minute approach to technology take-up by shipowners makes even the best laid plans difficult to market to maritime customers. Take scrubbers. They’re set to be a hot topic at this year’s Posidonia where this magazine will be distributed. However, despite being marketed for many years – and at many Posidonias of yore – their adoption by owners has still been slow, and time is running out fast to IMO’s 2020 sulphur cap date. With the number of scrubbers installed on the global commercial fleet still yet to hit four figures, there’s now not enough time and ship repair capacity for mass adoption with 18 months until the sulphur cap kicks in. Owners, it would seem, have shunned scrubbers for now and adopted a wait and see approach with an eye on what refiners will be offering them come January 1, 2020.

Scrubbers have come in for a fair bit of bad press lately. Consultancy Drewry dismissed them in a recent report as a “messy answer” in shipping’s ongoing search to reduce its emissions. Drewry said scrubbers cost approximately $4m to install, and users will still be faced with the problem of waste disposal.

“Owners will also feel vulnerable to later changes in regulations that might make their scrubbers non-compliant,” Drewry warned.

Unlike LNG and low-sulphur marine gasoil, the report pointed out scrubbers will not reduce emissions of greenhouse gases, and this is an area that is likely to come under increasing regulatory scrutiny. A survey of owners by Drewry suggests that they see scrubbers as only a short-term solution.

Khalid Hashim, boss of Thai bulker owner Precious Shipping, writing for us earlier this year, maintained that scrubbers are not the

ISSUE TWO 2018

solution, just yet another “mechanical add-on”.

Ishaan Hemnani from bunkering platform BunkerEx suggested in an article for us in April that owners should not be drawn into buying a scrubber just yet.

Scrubbers are not the answer, he wrote, a point of view shared by giants such as Maersk, Hapag-Lloyd and Pacific Basin who have all publicly expressed their doubts.

“Due to the large gulf between HSFO and MGO prices (currently about $230/mt), there is a strong economic incentive for refiners and blenders to produce a stable <0.5% sulphur fuel oil. This increases as the difference in the forward curves gets wider after 2020,” Hemnani wrote.

Besides the likely increased availability of a <0.5% sulphur fuel, there is also the probability of decreased availability of HSFO as it becomes uneconomical for refiners to produce it, and this is perhaps the key in the chicken and egg scrubber big picture debate.

The folk over at Bureau Veritasbacked VeriFuel tell me that in the context that the take-up of scrubbers has been lower than hoped, vessels with scrubbers installed will need to prepare for a future where HSFO could become a niche fuel with reduced availability.

You’ve opted for a scrubber?

Then you’re going to need to ensure you’ve got suitable HSFO availability, HSFO storage capacity and HSFO barging (this latter one could be the real wild card) going forward. As a consequence long-term contracts will likely be necessary to ensure supply and pricing. The spot market for HSFO will inevitably dwindle.

While normally I do applaud first movers in shipping I have come to believe that owners’ wait and see approach regarding scrubbers and fuel prices come 2020 is actually a smart play.

I threw the scrubber debate out on LinkedIn in May and within days more than 3,000 people had checked out the ensuing discussion. Bjørn Højgaard, CEO at Anglo-Eastern Univan, commented that if the current retrofit pace is anything to go by, less than 2% of the world fleet will have scrubbers come 2020.

“That, in turn,” wrote Højgaard, “just may mean that demand for HSFO will be potentially down 98%, and if that’s the case will the supply chain – between refineries and ship-side – be able to accommodate such a shallow demand, especially given that the same supply chain infrastructure must now contain a multitude of MGO/MDO and hybrid/ blend oils that may not be able to mix? What if – just what if – scrubbers turn out to be a red herring, solving a problem that eventually does not exist?”

Dan Weil, CEO at New Navigator Capital, agreed, asking what refineries would be incentivised to produce HSFO in a market they know by definition is declining.

“That’s like arguing for the survival of the finest buggy whip company after the Model T started rolling off the lines,” Weil quipped.

Arguments for and against scrubbers will, I am sure, be heard across the many events at Posidonia this June. ●

3

ECONOMY US

America first casts a shadow America’s current economic expansion is now the second longest in history. Trade wars and spiralling debts are still a worry

F

irst quarter data from the Federal Reserve (the Fed) shows that the ongoing US economic expansion is now the nation’s second longest on record. Borrowing costs are historically low, interest rates on hold, government spending has held steady while tax cuts have been enacted. This may be easily the most polarising and internationally unpopular president in recent times but the economy seems to be immune to his decisions. It isn’t the case that ‘Trumponomics’ (and no two analysts can agree on what that school of economics is exactly!) is boosting the economy though it is far from clear that anything the president has done has weakened the economy either.

Politically many of his decisions may be disliked and unpopular by various sections of US society but the economy remains in pretty healthy shape.

However, there are some political decisions being taken now that could affect the continuance of strong growth in the US economy.

Primary among these is obviously the USA oil exports by destination 2017 Destination

% of total exports

Canada

29

China

20

UK

9

Netherlands

8

South Korea

5

Italy

4

France

3

Singapore

3

Japan

2

India Rest of world Source: US government data

4

2 15

“

Trade spats could lead to a more isolated and less globalised economy for America burgeoning US-China trade dispute that could escalate over the course of the year. Add to this trade spats with other countries, notably the European Union, and that could lead to a more isolated and less globalised economy for America. The general consensus among analysts and US corporates is that this is would not be good news, whatever President Trump thinks it would achieve in bolstering his domestic political base.

The president has stated that he wants to achieve 3% GDP growth this year – that seems unlikely, though 2% is seriously possible. The White House thinks that its tax cuts will spur productivity, profits and job creation – we’ll know if they’re right by the end of the year. Certainly the jobless rate is low, and at less than 4%, really equals full employment (though obviously with pockets of deprivation and long term joblessness) with people changing jobs, between contracts, etc.

US manufacturing also appears relatively healthy and is being aided in

”

its continued recovery by oil prices, an improving global economy and steady spending by US households on property and retail sales. Tariffs on steel and aluminium are causing materials prices to spike, and that will weigh on factory activity in the medium to long term. The tax cuts and the higher central government spending are adding to national debt though, but nobody will talk about this until the end of the decade when the US gets back into a renewed election cycle.

And so a trade war with China remains the biggest potential derailing policy of the government. A study by the Consumer Technology Association (CTA) and the US National Retail Federation (NRF) found conclusively that proposed tariffs on Chinese imports from Washington, combined with the retaliation promised by Beijing, would hurt the economy and cause US job losses. The next few months will see if that scenario is one the president is willing to risk. ● maritime ceo

ECONOMY EUROPE

Troublesome budget times Beancounters in Brussels are trying to work out how to do more with less funds with the UK’s contributions set to end soon

I

t’s budget time at the European Union and this year there’s a lot at stake but a lot less to play with.

The budgets being set now will see the EU through to 2021 but they must take into account that they won’t include the contribution from the EU’s second-ranked economy, the Brexiting UK. This will leave a hole of at least EUR10bn a year in the accounts.

Wealthier small states such as the Netherlands and Sweden have insisted that they do not want to pay another penny and are demanding that the EU’s budget shrink. These smaller, more Eurosceptic countries (who generally pay in more than they take out) are now having to step up and make the demands of the commission that were previously largely made by Britain. These countries are also all rather envious of the famous rebate that the UK negotiated – though it’s unlikely Brussels would ever agree to that sort of deal again with a small economy. At the same time less wealthy countries, which are net recipients of EU money, such as Poland and other eastern European countries, have

ISSUE TWO 2018

EU foodstuffs exports, by major destination (outside the EU), 2017 Country

m tons

Germany

39.7

Italy

20.5

France

14.0

Spain

13.9

UK

10.2

Belgium/Luxembourg

8.6

Poland

8.5

Source: Eurostat

warned that they will not accept less from Brussels. Quite the conundrum given that Brussels maintains it will not cut spending but doesn’t have an answer for where the money will come from to make up the shortfall after the UK stops paying in next March.

Less investment around Europe could ultimately hit growth.

Consider Poland, with a population of around 38m, and the largest recipient of EU funds. Its economy has boomed for years, partly thanks to this infusion of billions of euros from Brussels that have helped upgrade

Polish infrastructure and develop its poorest regions. With less cash to go round it may become increasingly apparent that pump priming from Brussels – effectively cash transfers from west to east Europe – were responsible for any economic miracles in eastern Europe rather than economic and fiscal policies by local governments.

In the UK the economy is showing signs of sluggishness. The pound fell sharply to its lowest level since mid-January, as fresh signs of economic weakness undermine the case for raising UK interest rates. However, of course, that low pound could, after Brexit, see the UK emerge as a stronger (and cheaper) exporter, which would impact on its main rivals still in the EU, France and Germany.

The EU may also encounter difficulties with US trade wars.

France and Germany are concerned about Washington’s steel tariffs but a common EU response is not immediately apparent. The tariffs now being imposed on steel and aluminium that concern Paris and Berlin may well soon be extended to cars. It is likely that both countries will ultimately stand up to Washington and, Brexit aside, be joined in the opposition to the Trump tariffs by London too. Consumption in America and Europe has, for decades now, been financed by massive outflows of capital, a factor not necessarily good for Europe’s own economic development. Tariff wars in commodities and manufactured goods between Europe and the US are now ongoing and inevitable. The next question is could this escalate into a war over services and finance that would do neither side any good? ●

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ECONOMY CHINA

Strong fundamentals insulate the PRC from Trump Strong incomes, retail sales and services growth, moderate inflation, and less dependence on exports mean China can withstand a trade war

I

t’s easy to fixate at the moment on the American president’s decision to enter a trade war with China. Certainly that is not likely to help either side much and may ultimately polarise them for the rest of this presidential term. Better perhaps to look at the Chinese economy itself, which is a generally good story.

China’s economy at present is characterised by strong income growth, which translates into exceptional and prolonged retail sales and services growth, moderate inflation, healthy corporate earnings and a lower than historical dependence on exports. It is these factors that will insulate China’s economy from any potential trade conflict with the United States and ensure the country remains a desirable investment destination. Looking at these numbers President Trump’s decision to instigate a trade war (which he admittedly began as a primarily political rather economic policy decision) with China was not overly wise.

The rebalancing of the Chinese economy continued in the first quarter, with consumption accounting for 77.8% of GDP growth. China’s vast Chinese total exports to the US 2013-2017 Year

$bn

2013

426

2014

440

2015

468

2016

483

2017

423

Source: US Census Bureau

ISSUE TWO 2018

size and now continental economy (all those tier 4, 5, 6 cities becoming wealthier) have meant that the great retail sales story in the PRC is exceptionally long-lived. Real retail sales were up a still very impressive 8.1% in the first quarter of this year, down from 8.6% during the same period last year, and 9.7% and 10.8% two and three years ago, respectively.

This is a decline from previous highs, but by international standards, it’s a very slow decline and the overall pace of retail sales growth remains super healthy.

This is of course because employment is remaining high and wage growth strong, which in turn means property purchasing and spending on everything from furniture to food to overseas holidays.

But the Trump trade wars are a factor that cannot be totally ignored. Things could escalate and certainly the Trump administration

may want that to please his political base. But Xi Jinping does not want an escalation, even if he stands strong rhetorically. Xi can open up financial services and other services sectors easily enough and build that into the ‘new phase’ of reform he has talked so much about in general. If these opportunities are made available it may be that any support in the US for a trade war will ebb away from the president as too risky and pointless.

China remains a major market for so many American companies from McDonald’s to Boeing, Michael Kors to Disney that an all out vicious trade war is in few corporates’ interests. However, this White House is a difficult beast to read and decisions do not always make sense or follow logical patterns (as the swings on tariffs with Europe as well the nation’s Korea policy of late have shown) and so we’re all still being kept guessing. ●

7

ECONOMY INDIA

On track Less government, more investment and good weather are proving a winning combination

P

erhaps it’s time to accentuate the positive regarding the Indian economy. Things had been rocky for a while – uncertainty about the forcefulness of the Modi government’s desire to truly try and reform the infamously over-bureaucratic economy; the fallout (that lingered for some time in an economy as cash-dependent as the sub-continent’s) from the 2016 banknote demonetisation plan and; some disastrous weather that aversely affected the important agricultural sector. But now it seems we are back in a growth spurt.

India can claim the fastest growth rate of any large economy – developed or undeveloped – and is looking at 7+% GDP growth this year. Agriculture is rebounding and looks likely to continue to do so if the meteorologists have got it right and India: Foreign direct investment October 2017–February 2018 Month/year

$m

October 2017

1,571

November 2017

-1,336

December 2017

4,323

January 2018

1,921

February 2018

4,007

Source: Reserve Bank of India

8

the monsoon season is kind this year.

Most importantly, manufacturing is surging ahead right now in a way not seen for almost a decade – the latest data (in April) pointed to an improvement in industrial production for the fourth month in a row.

Inflation appears to be under check and, analysts believe, there will be no near-term rate hikes by the Reserve Bank of India (RBI) in the immediate to near future. Less government, more investment and good weather – a winning combination for India.

If there’s a cloud on the Indian horizon then it is inflation rates. The decline in inflation has not been the doing of the New Delhi government (whatever they may claim) but rather the downturn in global prices for commodities – oil, gas and coal. This has been coupled with a fall in gold prices – important for India and boosting trade in the expectation of a later surge. However, prices are now rising – oil prices are up on war jitters in the Middle East (Syria and Iran) while gold prices are rising on the back of the uncertainty trade wars prompt. These are all factors India cannot control and so may see rising, and potentially damaging, inflation rates through no particular fault of its own. So goes enhanced global integration.

India also has a growing trade imbalance and imports are currently surging, pushing the balance even further out of whack. Last economic quarter the trade imbalance in the form of the deficit rose to a 56-month high. Analysts believe that this imbalance is being exacerbated by the imposition of the goods and services tax (GST), which has meant delays in refunds of input tax credits, which have consequently hurt export activity. The rupee is not a strong currency traditionally and is, at the moment, relatively weak. Any more declines could have serious consequences.

“

Inflation rates are the cloud on the horizon

”

These are real concerns as enhanced inflation, a weaker rupee and a trade imbalance all deter investment and what India needs right now (and has done much to encourage by removing barriers in sectors such as autos and retail) is inward investment. For now India is the standout BRIC economy in terms of growth, yet it also remains one of the most erratic of those emerging markets too. ● maritime ceo

ECONOMY BRAZIL

Stalled in first gear GDP is contracting once again. Looming presidential elections are likely to put any major policy changes on hold

T

he Brazilian economy has effectively stagnated – economic data for February this year could barely detect any uptick at all from the previous month (when it contracted from a year before).

It seems the Brazilian economic recovery has stalled before it ever really got going. The first quarter of 2018 looks likely to see a contraction in GDP of approximately 1% with slowdowns recorded in both retail sales and services. “Sluggish” is the term analysts are using most often to describe the country’s economy right now.

This sluggishness is tough on ordinary people – retail sales are low, unemployment remains double digit and for those lucky enough to be in work wage stagnation or (given inflation) reversals are the norm. No wonder home sales and general retail sales/services are contracting.

The government has revised its GDP growth targets – they now expect that GDP growth has peaked and were unable to pass legislation that would reduce their social security payment obligations that will mean high inflation persisting and a large government surplus. President Michel Temer’s administration, which has very low approval ratings, wants to implement unpopular belt-tightening measures to curb mounting government debt but unless the government’s economic strategy can put more people into work and more money into their pockets this is impossible without serious opposition and greater impoverishment.

Now, rather than implement welfare cuts, the Temer government is looking to privatisations and asset sales. However, Brazil will have

ISSUE TWO 2018

“

Rather than implement welfare cuts, the Temer government is looking to privatisations and asset sales

”

presidential elections later this year.

It is unclear who will emerge victorious and whether or not any new winner would honour any commitments to cuts, sales or privatisations the current government makes before the votes are counted.

Brazil has watched US President Trump’s mounting trade war with China extremely closely. With additional tariffs placed on Chinese goods by Washington the question was which Brazilian sectors were well placed to benefit? Brazilian soybean exporters are expected to prioritise the shipping of goods from South America to China, while Brazilian cotton producers also stand to gain from additional shipments to China. In neither sector can Brazil totally replace the US but it can up its share considerably if the trade wars escalate. In other sectors Brazil can strengthen its dominance in shipments to China – for instance,

orange juice, ethanol and sugar cane. It is also possible that Chinese demand for non-US imported pork could benefit Brazilian pig farmers.

But it is domestically that factors are dragging the Brazilian economy back into stagnation so soon after a slight upturn. Retail sales in Brazil fell 0.1% in February against expectations of a small, but crucial, 0.5% gain. A boost to retail sales requires some of the gains in exports to be turned into new jobs and better wages to kick start consumer spending again. That may happen but that spending won’t seep through to the economic numbers until late 2018 at the earliest and, if it happens, more likely 2019. ● Brazil: Retail sales growth/ decline by month – October 2017-February 2018 Month/year

growth/decline (% y-o-y)

October 2017

2.6

November 2017

6.0

December 2017

4.0

January 2018

3.1

February 2018

1.0

Source: Brazilian Government Statistical Institute

9

MARKETS DRY BULK

All eyes on Vale The Brazilian miner has laid out some very robust iron ore production targets, writes Jeffrey Landsberg from Commodore Research

A

s was widely reported in April, Anglo American’s Minas Rio iron ore mine in Brazil will not be producing or selling any additional iron ore cargoes in 2018. Iron ore mining at Minas Rio will remain offline through the end of this year in order to allow for a problematic pipeline to be fully inspected.

Of note is that Minas Rio produced 12.5m tons of iron ore during Q2 - Q4 2017, but this time around the capesize market will not be able to enjoy these vital Atlantic basin cargoes.

However, in its most recent quarterly sales report, Vale again confirmed that it plans on making good on its robust 2018 production target. Vale is continuing to forecast that it will produce a total of 390m tons of iron ore this year. Vale officials have also publicly stated that H1’s iron ore output is expected to come in at approximately the same level that was produced in H1 2017.

ISSUE TWO 2018

178m tons of iron ore was produced in H1 2017, which points to Vale expecting that its production in Q2 this year will total around 96m tons (82m tons was produced in Q1 this year).

Also extremely significant is that Vale officials have publicly stated that iron ore production is likely to total “distinctly over” 100m tonnes per quarter during Q3 and Q4. Vale produced only 82m tons of iron ore in Q1 this year - but 96m tons is expected to be mined this quarter, and over 100m tons is expected to be produced in Q3 and Q4. Based on these recent statements and 2018’s production target, Vale is specifically expecting that its iron ore production will average approximately 106m tons in Q3 and Q4. Such robust production is set to benefit the capesize market greatly.

Overall, the outlook for the capesize market still remains

“

2019 is now shaping up to experience a huge shift and epic capesize market

”

encouraging (and we remain very bullish for Chinese iron ore import demand prospects as we have examined often in our reports). Even loftier heights would be in store for the 2018 capesize market, however, if Anglo American’s Minas Rio mine was still producing iron ore. At the same time, though, 2019 is now shaping up to experience a huge shift and epic capesize market if Minas Rio and also Samarco do end up coming back online as currently expected.

2018’s story has still not come close to being fully written however.

Vale’s iron ore production target is still just that – a target – and there is never a guarantee that any miner will make good on annual production targets. Fortunately, though, there remains no sign that Vale will pull back on its ambitious production plans. For now, all eyes remain on Vale. ●

11

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MARKETS TANKERS

Even though I walk through the valley of the shadow of death

ISSUE TWO 2018

Billion tonne miles

generated by US crude US seaborne exports of crude oil and oil products in tonne miles 2007 - March 2018 oil exports amounted 95 95 90 90 to 18% of the signif85 85 80 80 icant tonne miles 75 75 70 70 65 65 that US oil products 60 60 55 55 exports generated. In 50 50 45 45 40 40 2017, the importance 35 35 30 30 increased to 70% for 25 25 20 20 the full year. Seaborne 15 15 10 10 5 5 US crude oil exports 0 0 tonne miles demand exceeded that of oil Product Crude Source: BIMCO, Census Bureau products exports during September to reached or even fallen below the November of that year.

5-year average target”, suggesting This trend seems to be continthat OPEC might as well claim it’s uing in 2018, as the growth of US oil “mission accomplished”. Less than a product exports has diminished in week later, the OPEC and non-OPEC recent years. Still exported mostly joint technical committee concluded in terms of volumes, but second to alike. Hardly a surprise, but are they crude oil exports when considering right in stating this? the vital sailing distances too. In Please be aware that OECD February 2018, US crude oil exports stocks only account for an estimated accounted for 55% of total US tanker one half of the market, making it tonne miles demand, but only to 35% an incomplete proxy for the whole in volume terms. oil market. Moreover, it’s relevant The next big question is: (when) to mention that if you estimate the will oil become a part of the US trade global stock building as the difwar with China? ference between global oil supply China being the largest importer and global oil demand, you reach a of US crude oil in 2017, lifted its total different conclusion. That concluoil imports (including pipelines) to sion points to a stock building that 8.4m bpd last year, up from 7.6m bpd peaked in January 2017. Since then in 2016. Q1 2018 shows imports now stocks have been drawn upon, but at 9.1m bpd. only half the way towards a five-year Finally, there’s the IEA and average estimate.

OPEC loudspeakers. While South In the end, the return of an Korea has silenced the loudspeakers oil price in contango ends most of that blast cross-border propaganda (until further notice), someone else is this dispute. Currently it’s a market in backwardation indicating the picking up the megaphone. rebalancing process isn’t over yet.

In its Oil Market Report of April Nevertheless, the sooner the better 13, the IEA stated: “OECD stocks for the oil tanker market. ● in the next month or two will have Jan. 2007 Apr. 2007 Jul. 2007 Oct. 2007 Jan. 2008 Apr. 2008 Jul. 2008 Oct. 2008 Jan. 2009 Apr. 2009 Jul. 2009 Oct. 2009 Jan. 2010 Apr. 2010 Jul. 2010 Oct. 2010 Jan. 2011 Apr. 2011 Jul. 2011 Oct. 2011 Jan. 2012 Apr. 2012 Jul. 2012 Oct. 2012 Jan. 2013 Apr. 2013 Jul. 2013 Oct. 2013 Jan. 2014 Apr. 2014 Jul. 2014 Oct. 2014 Jan. 2015 Apr. 2015 Jul. 2015 Oct. 2015 Jan. 2016 Apr. 2016 Jul. 2016 Oct. 2016 Jan. 2017 Apr. 2017 Jul. 2017 Oct. 2017 Jan. 2018

S

hipping cycles are sometimes considered to be almost biblical.

They come around and they go around regardless of how owners/ investors act and which way the world turns. Sorry, if you did not get the memo – it doesn’t work like that.

While we patiently wait for the global oil stocks to come down, let’s focus on the positive drivers that certainly are found in the tanker market today. And rest assured that BIMCO market analysis believes in fundamental market conditions more than ‘biblical’ shipping cycles.

The total fleet growth is the one that matters. Some may focus on a single sub-sector, like VLCCs or MRs. But not even the performance of these ‘benchmark’ ships, can escape the fact forever, that they too are at the mercy of the overall market development.

Within the oil product tanker sector, we saw the fleet of LR2s expanding by a double digit figure during 2015-2017, now at 7.8% y-o-y growth in March 2018. Within the same time span, the MR/handy fleet growth went from 6% down to 1.5%.

The point I want to make is that freight rate movement is closely synchronized regardless of the differences in sub-sector fleet growth.

It’s the total fleet size that matters, as they are de facto substitutes for each other in most trades.

The total fleet growth in 2018 and 2019 seems to be manageable for both the crude and product tankers.

Also of vital importance to note is the shift in US exports and ever growing Chinese imports. In 2016, the tonne miles tanker demand

Based on harmonised system code 2709 and 2710

13

Billion tonne miles

I will fear no evil. The market will eventually recover, writes BIMCO’s chief shipping analyst, Peter Sand

MARKETS CONTAINERS

Strength is in the hands of the carriers Lars Jensen from SeaIntelligence Consulting points out the pitfalls to liner profitability

L

ast year saw the majority of containerlines revert to profitable territory thanks to a strengthening in freight rate levels.

This development was not unexpected and is part of the structural recovery in the industry. The exuberant overordering in the lead-up to the financial crisis, followed by the head-long rush to the new generation of 18,000 to 22,000 teu vessels set the stage for the cyclical downturn leading to the eventual collapse in 2016.

We are now in a phase where demand is growing faster than capacity injection – with a few caveats as mentioned further down.

This means that we will continue to see a strengthening in the global supply/demand balance in 2018, 2019 and 2020. The recent spate of orders of new vessels will primarily impact the industry in 2020 and 2021, and hence not materially jeopardise the current upturn. The relative speed of recovery in 2018 versus 2019 depends primarily on the amount of 2018 orders delayed to 2019, but in combination the market is on an upwards trajectory.

From this perspective, there is cause for optimism amongst containerlines and their investors.

However, there are also risks associated with the upturn which has to be taken into context.

Given the delivery times from the yards, additional bouts of capacity ordering will not impact the 2018-19 upturn and will – at worst – set the stage for the next cyclical downturn in 2021. The risk is therefore not in the medium term coming from overordering.

The strengthening is contingent

ISSUE TWO 2018

on continued strong scrapping as well as continued slow steaming.

Scrapping is necessary in order to partially absorb the new tonnage coming on stream and has been at prudent levels in both 2016 and 2017.

The key risk would be that the upturn leads to owners postponing scrapping, in turn blunting the recovery.

More to the point is the importance of slow steaming. A very sizeable potential pool of capacity could be unleashed by vessels speeding up.

Realistically this would only happen in a situation of undercapacity combined with high freight rates.

This in turn means that speeding up does not threaten the upturn as a whole but provides a ceiling for the strength of the upturn where excessive capacity tightening would simply be alleviated by going slightly faster. The fundamentals therefore primarily come with risks in terms of how strong the upturn will be, not whether it will happen.

But there is a different type of risk stemming from the competitive environment. Whilst the global capacity injection does not cause concern, the capacity growth is very unevenly distributed amongst the carriers. This can easily give rise to fights over market share, in turn creating negative pressure on freight rates despite a stronger global market balance.

Additionally, the new vessels are primarily ultra-large and hence will be injected into the Asia-Europe trade. The supply/demand balance at a tradelane level is therefore highly dependent on the cascading strategies from the individual carriers and alliances.

This leads to a situation where the structural factors point to continued strengthening, but tactical and competitive forces between the individual carriers and tradelanes may prevent the stronger market balance from fully manifesting itself into carrier profitability.

In conclusion, the 2018-2019 market upturn is not primarily under threat from over ordering of vessels. The key threat lies in how the carriers will adapt their competitive strategies in the newly consolidated environment dominated by a few super-carriers of which some are government supported.

Unfortunately, analysis based on the Chinese CCFI index over the past 20 years shows that increasing consolidation has not created more freight rate stability – contrary to what one might believe, some elements of freight rate volatility have actually tripled in the same period where the top 10 carriers have increased their global share from 12% to more than 80%. ●

“We do not expect to go toe to toe with the top four in terms of pure scale and global market share” — Jeremy Nixon, CEO of new Japanese mega boxline, ONE

15

MARKETS OFFSHORE

You’re not an idiot if you believe in deepwater drilling David Carter Shinn from Bassoe Offshore on the drillship sector

T

he drillship market has reached a point where it deserves more attention.

There are 114 delivered drillships and 20 under construction. We consider 13 ships to be non-competitive (older than 2000, cold stacked, or overdue on their latest special survey). Competitive utilisation stands at around 55%, with 56 rigs on contract and 45 stacked.

Market day rates have gone from around $600,000 in 2013 to $150,000ish today. With huge capital investments and the most dramatic fall in day rates of any rig type, the drillship market has been dealt a particularly crippling blow.

Up until around 2007, there were only around 20 drillships which could operate in water depths over 7,500 ft. In a ridiculous example of fleet expansion, over the next seven years, more than 110 orders for newbuild ultra deepwater rigs would be placed.

As with the rest of the offshore fleet, nobody really knows how many competitive drillships are in the market today. Unlike jackups and semisubs, the supply of old rigs in the drillship fleet is limited.

If we take out the rigs we consider non-competitive, we’re still left with 117 new rigs (121 drillships in total).

Keep in mind that no more than about 85 drillships have ever been on contract. So it seems there are too many 6th and 7th generation drillships – even if you think we’ll return to a 2013-type environment.

Sounds like a bad situation.

But it’s not that simple. As day rates for drillships remain low, more rigs will become non-competitive with respect to initial invested capital plus capital required for stacking

16

and reactivation.

If you’ve got a five-year old drillship which has been poorly stacked for two years or more, you could end up having to spend $100m and months of work to get it back into drilling condition. You can’t compete until all other ‘better’ rigs are contracted first.

Another point in favour of reduced competition in the drillship market comes from the newbuild semisub fleet. Although there are six newbuild deepwater semisubs, they’re also harsh environment rigs. With all the focus on demand growth in the North Sea (especially the Barents Sea), it’s unlikely these rigs – which could compete with drillships in some cases – will enter the deepwater market anytime soon.

While contracting activity for drillships is still low, most major drilling contractors note a strengthening flow of inquiries and tenders from oil companies. As demand grows for rigs which are ready to work, the pool of competition these rigs have to deal with will shrink.

Breakeven prices have come down by over 20% over the last year or so, with many large deepwater projects able to work at oil prices below $50 per barrel. Shell, for example, recently announced that the Vito development in the US Gulf has a breakeven price of less than $35. At the same time, the oil price is pushing $80 per barrel, and oil companies are turning back to deepwater as a sustainable supply source again.

Demand for deepwater drillships should push up toward 75 rigs

in the next two years, implying a required supply of around 90 rigs for 85% utilisation. Assuming supply reduces to around 100–110 rigs, day rates should increase toward a profitable $300,000.

The problem is that most newbuild drillships were ordered at prices of around $550m. After delivery deferrals, some owners are in the hole for over $700m for their newbuilds (if they ever take delivery of them.)

Based on that, there are three types of drillship owners who will be just fine in the new, if slightly less extravagant, era of deepwater drilling: Well capitalised, established owners with some rigs on high-dayrate legacy contracts; restructured owners with leaner capital structures (debt to asset value ratios at more reasonable levels); and new or established owners who acquire newbuild drillships at low values.

Over the past few weeks, we’ve seen five drillship cancellations.

There are now at least six distressed drillships in the market. Two of them have been for sale for years. So far, there’s been no market-clearing price discovery. Although we haven’t seen any transaction activity on the drillship side yet (apart from Ensco’s acquisition of Atwood in 2017), we think it’s coming – especially for the distressed newbuilds.

Nobody knows where we’ll end up on price yet, but we’re starting to feel a pulse in deepwater which we haven’t felt in a while. And it’s at these times when the interesting stuff starts to happen. ●

maritime ceo

MARKETS FINANCE

Money for the masses Dagfinn Lunde will be debuting a brand new financing platform at Posidonia this year

S

o here we are at Posidonia once again and my, oh my how the mood of owners descending on Athens has changed since the last edition two years ago.

I will be using the world’s most famous shipping show to launch my new project – eShipfinance.com – a platform designed to address the shortage in the availability of ship finance to the majority of shipowners around the world, not least in Greece.

To my mind, the market over the past year has become overblown by words like digital and blockchain.

It is interesting to see how shipping on the cargo and brokering side has developed all manner of potentially useful online tools, but in ship finance there’s been just the release of shipowner.io and some fund-based leaseback vehicles.

If you look at other industries there are already an unbelievable number of financing platforms that have been created to cater for just about everything – the Zooplas of this world – but no one has cracked it in ship finance… yet!

Number of ships per Greek shipping line

63.4% Five or less 17% Six to 10 6.3% 11 to 15 13.3% 16+ Source: VesselsValue

ISSUE TWO 2018

It remains a fact that for the majority of shipowners there is limited access to banks. With eShipfinance.com we are trying to connect borrowers with investors. There is a lot of cheap money in the market that has never touched or thought about shipping, a sector that finally is set fair in recovery/growth mode. We will bring well-structured projects to investors. Owners will get a fixed interest rate at let us say 7%. Our 0.5% commission is next to nothing when you remember banks tend to come in for a 4% or 5% margin plus LIBOR. The investors will then get 6.5% fixed return, quarterly paid over three to five years in dollars. We will charge the owner the normal upfront fee of 1.5 to 2%.

Greece will be our main market thanks to the huge numbers of smaller owners across the Mediterranean nation. I am indebted to the folk at VesselsValue for providing me with the following key data, which I find very interesting. As it stands today, there are 558 shipping companies in Greece, 354 of those have five or less vessels, 95 have six to 10 ships and 35 of them have 11 to 15 ships so 484 companies out of 558 (87%) are companies with less than 16 ships – that is our target market.

For a very long period owners in Greece have not had much access to ship finance. Greek banks are finally returning to the market, passing recent stress tests, but they will come back only in a small way. It is interesting to note the growth of Cypriot banks with an eye on the Greek ship finance sector, albeit from a small base. Meanwhile, the exposure of the big European banks is shrinking all the time. The Dutch are still stable but the Germans and the Brits have pulled out en masse.

“

The disconnect between banks and their shipping clients has never been wider in terms of understanding the business, its cycles and what owners need

”

Central bankers and regulatory authorities are panicking about ship finance because of the inherent volatility. The probability of default in shipping is enormous and has traditional bankers on edge. You can see it most vividly at the moment with suezmaxes, which have been trading at $1,000 a day for a long time.

Still, I’d argue that the disconnect between banks and their shipping clients has never been wider in terms of understanding the business, its cycles and what owners need. I’ve now been in ship finance since 1976, back when there was no LIBOR and no paper markets. This business, I do firmly believe, is now at a crossroads and is set for new ways of doing things. ●

17

EXECUTIVE IN PROFILE DEBATE

Have owners lost control of the cape spot market?

The recent decision by Louis Dreyfus Armateurs to quit the capesize spot market has prompted much debate about the future of the trade as chief correspondent Jason Jiang reports

F

rance’s largest dry bulk operator Louis Dreyfus Armateurs (LDA) hit the headlines this April with news it is exiting the cape spot market, conceding that the sector has now become too firmly controlled by the world’s top miners.

In an interview with French business daily, Les Echoes, Edouard Louis Dreyfus, said that as part of a swathe of changes coming to LDA:

18

“We will be derisking capsize operations, and will get out of the spot market, which is too volatile. It is a profession that shipowners no longer control, it is controlled by mining groups.”

Edouard Louis-Dreyfus assumed

“

the presidency at LDA in July 2015, becoming the fifth generation of Louis-Dreyfuses to take the helm of the dry bulk giant. He has since set about a large reorganisation of the company.

The LDA decision has sparked

90 VLOCs and 50 newcastlemax vessels are on order, totalling 40.48m dwt

”

maritime ceo

EXECUTIVE IN PROFILE DEBATE

“

Shipowners no longer control the cape spot market. It is controlled by mining groups

much debate about who is pulling the strings of the cape market these days.

Peter Sand, chief shipping analyst at BIMCO, reckons the capesize market is very much a spot market and it is the world’s top miners and commodity traders that control the iron ore and coal cargoes.

“As the balance between the very large charterers and the often smaller owners is off, freight rate negotiations tend to be dominated by the top miners,” Sand says.

“Capesize spot still has a significant impact on the rest of the market, but these days, you see more often than just a few years ago, capesize spot going in another direction as compared to the rest of the market,” Sand observes.

Ralph Leszczynski, head of research at Banchero Costa, agrees that the limited cargo types and trading routes (in particular Australia-China and Brazil-China) in the capesize spot market make large mining companies naturally

ISSUE TWO 2018

command a strong position.

“The regularity of the trade means that a lot of the flow of iron ore and coal goes on long term contracts and on owned or time-chartered ships, leaving a relatively marginal role to the spot market, which is very volatile as charterers tend to resort to the spot market more when something goes wrong – they need to replace a ship which missed a laycan date, or there is a sudden unexpected increase in demand, rather than for regular day to day business,” Leszczynski says.

George Nordahl, dry cargo analyst at Affinity Research, believes LDA has made a prudent medium to long term decision in exiting the cape spot market.

Nordahl points to the influx of newcastlemax and VLOC tonnage, often controlled by the big miners, which is now flooding the market, offering more cost efficient capacity on many of the traditional routes previously dominated by the standard 180,000 dwt capesize vessels.

He believes the capesize design is of lesser relevance in today’s Asiacentric market, where having the flexibility to trade in the Atlantic is less crucial.

“Currently 90 VLOCs and 50 newcastlemax vessels are on order, totalling 40.48m dwt. Considering a lot of these vessels, particularly the VLOCs which make up roughly 75% of that capacity, are backed by COAs to carry iron ore, it is hard to see a scenario where the existing capesize spot market benefits,” Nordahl maintains, adding that 72.2% of the existing capesize fleet is under 10 years old and the ability for a supply side compensation to offset the additional capacity from the larger vessels is also questionable.

“I would say that it is not the case that the big miners control the spot market as such, but their

”

strategic decision to enter into long term COAs using VLOCs ordered for the purpose will most likely have a negative impact on spot rates as the vessels are delivered,” Nordahl says.

Maritime consultancy firm Maritime Strategies International (MSI) reckons the capesize exit is a smart play by LDA, suggesting that with structural market changes over the next five years the global iron ore trade will peak in 2020 and subsequently fall, impacting the demand landscape for capesize ships operating in both basins, and market participants who buy into this view will need to rethink their strategy for operating in the capesize market before this happens.

“I would not say the dry bulk shipping market is controlled by anyone on the ship supply side,” argues Randy Giveans, vice president of equity research at Jefferies.

As an example, he says if Brazilian mining giant Vale decides to pull back production or hold back exports, that would be very negative for dry bulk shipowners, and if the miners decide to export incremental cargoes, that would be positive.

Giveans reckons there is not much “control” by the ship owners/ operators as they are price takers, but the same is true for pretty much any mover of a commodity.

Giveans point of view is supported by Panos Patsadas, chartering and operations manager at DS Multibulk, who neatly concludes this feature by saying: “My personal view is that the mining giants do reflect the changes in demand through their activity – or lack of, but they do not control the owners’ market, at least not in the context LDA claim they do. Of course, if you ask the guys at the trading houses, I am sure they will have a different opinion and that’s okay. That’s the beauty of shipping!”●

19

IN PROFILE

John Michael Radziwill p.22

John Hadjipateras

Athanasios Feidakis p.30

p.35

In profile this issue Maritime CEOâ&#x20AC;&#x2122;s 17 correspondents around the world have been in touch with many of the worldâ&#x20AC;&#x2122;s top shipowners. Highlights are carried over the next 13 pages

20

maritime ceo

IN PROFILE

Mudit Paliwal p.29

Xie Chunlin p.33

Ranjit Singh p.26

Abdullah Fadhalah Al-Sulaiti p.27

James Woodrow p.25

Pappu Sastry p.31

ISSUE TWO 2018

21

COVER STORY

Steeped in shipping cycles John Michael Radziwill grew up with shipping magnates all around him. This has helped him time his dry bulk foray to perfection 22

maritime ceo

IN PROFILE

P

lastered on the walls of John Michael Radziwill’s office in Monaco are many inspirational quotes from famous names such as Winston Churchill, Warren Buffet and Bill Gates. Two jump out as notable in terms of setting the scene for this interview with our Posidonia cover star.

“If I see something I like I buy it; then I try to sell it,” the British entertainment impresario Lord Grade once said. Another quotation printed out comes from one of shipping’s best known names, Euronav’s Paddy Rodgers, who said reassuringly of the suezmax markets back in 2012: “It will get better, we just don’t know when!”

For Radziwill, who is set for a high profile turn at Posidonia in Athens this June, the Rodgers maxim is especially pertinent. It was in 2016, at the absolute depths of the dry bulk market that Radziwill, who is a director at Euronav, launched GoodBulk. In the ensuing 24 months, he’s built up a fleet of 25 ships – a mix of capesizes, panamaxes and supramaxes – and even had the time for some clever asset plays along the way.

GoodBulk is Radziwill’s dry bulk investment vehicle, while C Transport Maritime (CTM), also headquartered in Monaco, serves as a ship operator with close to 100 vessels on its books.

The decision to launch GoodBulk at a time when rates were hitting historic lows was brave, but in hindsight it was beautifully timed.

“At the time we saw a modus

Spot on

GoodBulk Founded by John Radziwill two years ago in Monaco. Today owns 25 bulkers, a mix of capes, panamaxes and supramaxes.

ISSUE TWO 2018

operandi that could work,” Radziwill relates. “A low leverage platform, with an eye on opex and a long runway. We saw asset values were at record lows and that we could create assets very cheaply with no leverage.”

These newly acquired assets –

“

People are taught shipping from a young age and become very adept at understanding the cycles

”

mainly Japanese built – have since picked up in price a great deal. For instance, this February Radziwill was able to sell a cape he had bought nine months earlier for a tidy $5m profit.

“We are at the beginning of a bull run,” Radziwill predicts.

“Looking at the incoming fleet and projected cargo demand I’d say the next 18 to 24 months should see better than historic rates on the cards.”

Radziwill cautions the optimism quickly however with a number of “X factors” on the cargo side that could change fundamentals fast. As an example he points out how in 2013 most people missed the importance of the Chinese cutting coal imports.

Radziwill, 38, continues to hunt down secondhand tonnage, but is aware that the market is now being talked up by too many, something that tends to lead to a deluge of newbuild orders.

“Asset values are still attractive from a buying point of view,” he says. “The higher rate environment however will mean new orders. It always does historically. Higher rates and more supply always go together.

I hope I am wrong as there are plenty of ships out there on the water already.”

Radziwill, though still youthful in shipowning terms, is able to talk about shipping historically as the industry has been a part of his life from day one.

American-born Radziwill grew

up knowing he’d be in shipping from a very young age. All around him were titans of the Greek shipping scene such as his grandfather, John Carras, and George Livanos, his uncle.

“I aspire to achieve what my other family members have achieved,” Radziwill tells Maritime CEO humbly.

He has sailed on commercial ships, been involved in newbuild supervisions in Asia and bought his first vessel, a capesize, while still in his mid-20s.

On Greece’s shipowning culture, Radziwill says: “People are taught shipping from a young age and become very adept at understanding the cycles.”

Up next is a possible New York listing, but due to the structure of GoodBulk Radziwill will not be rushed into an IPO. “We’ll do it if the pricing is okay,” he says. “We have no capital commitments to need it. It’s a nice to have, not a must have.”

It would appear – as Posidonia hoves into view – that dry bulk is finally exiting its near decade long recession. Another quote pasted to the walls of Radziwill’s office serves this reader of shipping cycles well. Back in 1935, six years into the Great Depression, an ageing John D Rockefeller memorably quipped: “In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.” ●

“One of the major reasons why Cyprus has been successful as a maritime centre is the open communication between private and public sectors” — Natasa Pilides, Cyprus’s first ever deputy minister of shipping

23

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IN PROFILE

In growth mode China Navigation’s fleet is approaching the century mark

C

hina Navigation (CNCo), one of the most venerable names in Asian shipping, is very much in a phase of expansion, with the keen backing of its chairman, Barnaby Swire, the sixth generation at the helm of the famous family conglomerate.

Singapore-based CNCo is the oldest part of the Swire empire, a diverse group with interests in property, retail, bottling and airlines in the form of Cathay Pacific.

The shipping line installed James Woodrow as its managing director in 2015. He is presiding over a period of fleet expansion unparalleled in the company’s 146-year history, albeit a careful, niche-focused build-up.

“We are definitely in growth mode at the moment,” Woodrow tells Maritime CEO. As well as well established South Pacific focused liner trades, CNCo diversified into the handy bulk sphere five years ago and has since doubled the size of its fleet each year.

Today the fleet stands at 90 ships, of which 31 are owned. The company’s bulk focus has been on the larger handy sizes – 38,000 or 39,000 dwt.

“If there are opportunities to own more ships and take long term charters then we will. It just

Spot on

China Navigation The oldest part of the Swire Group with a fleet approaching 100 ships. A mix of handy bulkers and liners.

ISSUE TWO 2018

depends on where the markets are at,” Woodrow says, as the CNCo fleet approaches triple figures.

However, growth at CNCo is very targeted – and is never just for the sake of swelling a balance sheet.

Indeed, there is a sense Woodrow is relieved he is not beholden to keeping shareholders sweet.

“We’re not a public company so we do not have the pressure of reporting quarterlies that others do,” he says.

Perhaps it is this private, family-owned focus that has led CNCo to becoming a rare altruist among shipowners, a set of people better known – whether rightly or wrongly – for avarice. Famous across shipping for its commitment to the highest levels of training, CNCo has also recently been in the news for how it handles waste, both its own and others.

Woodrow is justifiably proud of how his company has recently recycled three ships in Alang in India to Hong Kong Convention compliant rules. The trio of ships took 95,000 working hours to dissemble and there were no injuries.

Just as commendable, in March CNCo signed a deal whereby its

vessels will carry containers of recyclable waste from eligible Pacific island ports, pro bono, to be sustainably treated and recycled in suitable ports in Asia Pacific.

CNCo’s bulker buildup has now coincided with a moment where the sector is finally moving upwards after a long recession, with Woodrow reckoning prospects for handies looking good this year and next, while looming environmental regulations could help keep a cap on the orderbook.

“With the 2020 IMO sulphur cap,” Woodrow says, “very few owners of smaller tonnage will invest in scrubbers so HFO prices will go up, which should mean fleet growth should slow down.”

On the liner side of the business the CNCo executive has no appetite to enter new tradelanes. “We’ll stick to our knitting,” he says, namely places such as Papua New Guinea and a host of islands in the South Pacific. “These are markets we know and where we can be competitive,” Woodrow says. “We have no dreams of entering the mainline trades, they are already overbooked.”

As with many of the past head honchos at CNCo, Woodrow has done his tour with Swire, working predominantly on the shipping side of the group’s business in Port Moresby, Hong Kong, Tokyo, Sydney and Auckland. Besides his shipping career, Woodrow also worked his way up to become cargo director at Cathay Pacific, an airline he spent eight years with. “Revenue management algorithms are so much more advanced,” he says of the airline business. Regardless, at the helm of CNCo, Woodrow is taking this Swire bastion to new heights. ●

25

IN PROFILE

Of cabotage and level playing fields The head of Essar Shipping uses the Maritime CEO platform to warn New Delhi he and many of his peers will reflag their vessels unless changes are made

I

ndia might have the world’s fastest growing big economy at the moment, but its shipping scene is lagging far behind, argues the CEO of one of the nation’s largest shipowners.

“The primary reason behind this discrepancy is the fact that cabotage is practiced elsewhere, while the concept of cabotage is conspicuous by its absence in India,” Ranjit Singh, the CEO of Essar Shipping, tells Maritime CEO. What India does have is the right of first refusal (RoFR) wherein Indian fleet owners have the option of matching the lowest bid for carrying cargo. Traditionally the lowest bids for carrying Indian cargo have always been quoted by foreign vessels.

“The rates they can offer are practically dumping rates since these vessels want to make whatever money they can instead of returning empty on their backhaul trip,” Singh claims, while also pointing out they also do not have to pay tax in India.

With New Delhi contemplating

Spot on

Essar Shipping Part of Essar Group, which has other interests in oil fields and logistics , the line can trace its origins back to 1945. Fleet today numbers 12 bulkers and a VLCC.

26

“

The concept of cabotage is conspicuous by its absence in India

”

relaxing RoFR norms Singh is threatening that he and his peers will reflag their ships elsewhere.

At present, not even 10% of domestic cargo is carried by local shipping lines.

Essar handled 13.06m tonnes of cargo in the previous financial year. The company is set to increase capacity from 15m tonnes to 25m tonnes by 2020.

Essar operates a fleet of 13 ships—mostly bulk carriers—comprising one capesize, six mini capes, one panamax, two supramaxes, and two handymaxes as well as one

VLCC. Further ships will be added, Singh says, as and when the right opportunities arise. Where these new ships will be registered however would appear to be in the hands of the Indian government. ●

maritime ceo

IN PROFILE

Growing in line with Qatari gas exports Nakilat is keen to foster more joint venture partners

E

stablished in 2004, Nakilat is a public listed Qatari-owned shipping and maritime company providing the critical transportation link in the state of Qatar’s LNG and LPG supply chains.

Nakilat’s LNG and LPG vessels are trading worldwide, either directly managed in-house through subsidiary Nakilat Shipping Qatar or in cooperation with Shell International Trading and Shipping Company (STASCO), or by joint venture partners such as MOL, NYK, K Line, Maran Gas, Teekay, Pronav and Shipping Corp of India.

Nakilat has a total of 69 vessels in its fleet, which is made up of 65 LNG and four very large LPG carriers. Out of the 65 LNG carriers, 25 of them are wholly-owned by Nakilat while the remaining 40 vessels are jointly-owned.

Nakilat also operates ship repair and construction facilities at Erhama Bin Jaber Al Jalahma Shipyard in Ras Laffan Industrial City via two strategic joint ventures: NakilatKeppel Offshore & Marine (N-KOM) and Nakilat Damen Shipyards Qatar (NDSQ). It also provides shipping agency services through Nakilat

Spot on

Nakilat Major Qatari gas carrier owner with 65 LNG and four very large LPG carriers in its fleet.

ISSUE TWO 2018

Agency Company (NAC) at all Qatari ports and terminals, as well as towage and other marine support services through its joint venture Nakilat SvitzerWijsmuller (NSW) for vessels at the Port of Ras Laffan and around Qatar’s Halul Island.

“We are actively looking at other opportunities to further increase our fleet in the near term and long term,” says the company’s CEO, Abdullah Fadhalah Al-Sulaiti. “Strategic alliances with renowned partners have been fundamental to our success, and we are always looking for opportunities to grow our international presence with first-class companies.”

Al-Sulaiti admits the immediate market prospects for the LNG shipping sector do not look great.

“There is lot of new shipping capacity scheduled for delivery in 2018 which we expect will soften the market in the short term so we don’t we don’t expect significant rebalancing in 2018,” Al-Sulaiti

says. Nevertheless, he has spotted shipowners placing orders for 2021 delivery, which he believes indicates that the expectation is for an undersupplied market from 2020 onwards.

“While in the last couple of years LNG producers were rather relaxed when it came to securing shipping capacity, we expect that the forthcoming shortening of the market will push for longer term commitments stabilising the market with healthy rates,” Al-Sulaiti says optimistically.

The supply of LNG from Qatar is expected to increase by close to 30% over the next decade and Nakilat plans to provide solutions to meet the associated demand for vessels, floating storage and regasification units (FSRUs) and maritime services.

As part of the company’s diversification strategy, Nakilat established a strategic alliance with Hoegh LNG to explore collaboration opportunities in the FSRU market.

“Qatar’s plans to increase LNG exports to 100m tonnes per annum will provide an excellent, large-scale opportunity for growth in Nakilat’s fleet size,” Al-Sulaiti concludes. ●

“Grand plans like China’s One Belt, One Road suggest there is the possibility of a sustainable recovery” — Sabrina Chao, chairman, Wah Kwong

27

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IN PROFILE

Norvic Shipping plots path towards 130 vessels Mudit Paliwal discusses his nimble approach to dry bulk

D

ry bulk operator Norvic Shipping is ramping up its organisation in line with the increasing fortunes finally seen in the sector.

Mudit Paliwal joined the company in November last year as president and COO, based in Copenhagen. Paliwal is a protégé of Harry Banga, the famous Hong Kongbased commodities tycoon and first ever cover star of this magazine five years ago. Paliwal’s career includes time at Noble Group and Caravel Group, both under the tutelage of Banga, as well as an interim stint at Panacore in Dubai.

Toronto-based Norvic was formed in 2006 and is active in the handysize, supramax, panamax, post-panamax and baby cape sectors. For the last 18 months it has been gearing up to make the most of the recovery seen in the dry bulk sector that has taken it well beyond its traditional sub-continent trading focus.

“Instead of going long and buying ships, we decided to remain asset light and invest in people and began to implement our strategy by hiring teams in Copenhagen, Houston,

Spot on

Norvic Shipping Toronto-based operator active in the handysize, supramax, panamax, post-panamax and baby cape sectors. Fleet about to pass 100 ships.

ISSUE TWO 2018

“

Instead of going long and buying ships, we decided to remain asset light

”

Dubai and Singapore,” Paliwal tells Maritime CEO, adding to the company’s existing presence in Toronto and India. A New York office is also about to open.

“If you have a product to sell the market has to support your cost structure, in order to cement our place in the industry, we have timed our expansion perfectly,” Paliwal says, adding: “Our expansion plans have immediately borne fruit. Having no legacy contracts to hold us back, the team has been quick in their execution.”

As of today Norvic has 97 ships on a variety of contracts from TCT, short period and even up to two years. It seldom works on voyage relets. It is on course to ship close to 40m tonnes this year, a very sizeable figure for a non-cape player.

“We are a very busy shop,” Paliwal says, outlining plans to grow the fleet to 130 ships soon.

On the markets, Paliwal concedes politics could throw a curveball dry bulk’s way.

“There is posturing going on between nations and that has added caution in how people expect dry bulk markets to look like in the near term,” he says, adding: “That is why our asset light approach and nimbleness with the ability to switch the book from long to short or vice versa in a matter of days yields results despite the massive volumes we are handling. We think the idiosyncrasies, a bit of opaqueness combined with the fragmented nature of the handy through to panamax gives us the ability to position ourselves to stay one step ahead.”●

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IN PROFILE

‘This is just the beginning of a long-term recovery’ Dry bulk fundamentals will lead to investments for Greece’s Globus Maritime

G

reek bulk carrier operator Globus Maritime is looking to further optimise its fleet and take the opportunities that come with a recovering market for a new round of growth.

Athanasios Feidakis, president and chief executive officer of Globus Maritime, has seen fundamentals in the dry bulk market picking up for the past year and he expects the trend will continue in the year ahead.

Feidakis is the son of Globus Maritime’s founder Georgios Feidakis. He took over the leadership of the company from Georgios Karageorgiou at the end of 2015.

“Rates are likely to keep trending higher and we do believe long term recovery is on its way,” says Feidakis.

Feidakis reckons the increase in coal, grains and iron ore ton-mile demand combined with a record low orderbook and decelerating fleet growth make a very positive argument for Globus to reinvest in the sector.

“We believe Globus is positioned to benefit from this upward shift entering into the second quarter and expect market fundamentals to strengthen and result in average

Spot on

Globus Maritime Greek listed dry bulk entity with four supramaxes and one panamax and eyes on kamsarmaxes.

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“

Companies with a track record find it a bit easier to access bank financing than newcomers do

”

higher freight rates and ship values.

We remain optimistic this is just the beginning of a long-term recovery,” Feidakis maintains.

According to Feidakis, Globus reported a 60% increase in voyage revenues during its first quarter earnings, mainly attributed to the increase in average time charter rates.

Talking about fleet development, Feidakis believes a mix of supramax, panamax and kamsarmax would be ideal for Globus.

“In our view a decent mix of supramax/panamax/kamsarmax would be optimal for a fleet that is looking to have moderate risk but also a healthy upside potential. We would avoid investing in capesizes at this point, they seem to be the

riskiest assets in the industry, the upside potential is great but in a bad market this segment suffers greatly.

Handies are believed to be the lowest risk but also do not face big volatility in rates that could potentially mean a good upswing in rates in a good market,” Feidakis explains, adding that Globus Maritime’s current approach is to renew and modernise the current fleet before expanding it further. “The focus will be to replace older tonnage with more modern ships and then if the market allows it, expand with a responsible and low risk approach,” says Feidakis.

Globus Maritime currently operates a fleet of four supramaxes and one panamax.

With the upside potential for a stronger market, Feidakis believes shipping will start becoming attractive for investors once again and the funding gap in shipping will gradually be filled.

“We do think there will be gradual participation from private equity and investors down the road.

Bank financing is still there for good and modern assets, companies with a track record find it a bit easier to access bank financing than newcomers do,” Feidakis says.

Earlier this year, Globus signed a share and warrant purchase agreement, providing gross proceeds of $5m in a private placement to a group of private investors. The company also reached amicable agreements with two of its lenders on certain amendments and waivers and was able to receive waivers and relaxations on its loan covenants as well as deferring instalment loan payments due in 2017. ● maritime ceo

IN PROFILE

Betting on Indonesian coal Jakarta-based Asian Bulk Logistics is building up a local bulker fleet fast

A

s Indonesian authorities continue to mull forcing exports of commodities such as coal and palm oil to be carried on local ships, one local transport firm is gearing up for massive expansion to help fill any potential gap.

Asian Bulk Logistics (ABL), a Jakarta-based integrated logistics and transportation service provider for the mining and commodities industry, has launched a program to expand its network of operations in the Indonesian dry bulk shipping sector.

The company is initially investing in cargo transfer ships and barges to increase its service offering in the Indonesian coal sector, and it has a larger plan to develop a global dry bulk shipping fleet.

According to Captain Pappu Sastry, deputy CEO of ABL and a veteran of the Indonesian mines and shipping scene, the plan is to take a combination of chartered and owned tonnage.

ABL is scheduled to handle 20m tonnes in 2018 with the assets it presently owns in Indonesia. Sastry estimates that the company will end the year with 50-60 ships on charter and five owned with the main ship sizes focusing on supramaxes and panamaxes.

Spot on

Asian Bulk Logistics Logistics and transportation service provider for the Indonesian mining and commodities industry with plans to double fleet size.

ISSUE TWO 2018

“The target is to build a strong foundation and then to scale up to grow 100% year-on-year,” Sastry says.

The Indonesian government’s plans to force coal and rice to be shipped on Indonesian vessels and to be insured locally too has created a storm of protest from shipowners overseas. While the authorities have postponed implementing the order, Sastry reckons it will eventually be promulgated.

“I believe the order will be implemented sooner or later. It is therefore easier to accept and work towards compliance than ignore the implications of non-compliance,” he tells Maritime CEO. Sastry was headhunted to spearhead ABL’s coal shipping drive. His knowledge of the sector is immense having provided a range of commercial shipping services to a conglomerate of 27 Indonesian coalmines for a number of years via a company he used to control in Hong Kong.

On the markets, the dry bulk expert is disparaging about many of shipping’s top analysts these days.

“Most weather predictions seem

“

Most weather predictions seem more accurate than the predictions by shipping gurus

”

more accurate than the predictions by shipping gurus,” Sastry quips.

He goes on to look at the disparity between the Atlantic and Pacific basins, saying: “In spite of India and China having the trade volumes that help Pacific markets, there is a constant disparity between Atlantic and Pacific rates – this disparity ensures no one earns close to index levels in the spot market; there are either big winners and big losers.”

As a charterer of tonnage the Pacific “curse” of sub-index earnings for ships will be an advantage for Sastry’s company. For the coming 18 months, Sastry, who started out as a cadet with Wilhelmsen in 1991, is predicting the Baltic Panamax Index should sustain levels of around 1,500, while the supramax index should hover at around 1,000 points. ●

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IN PROFILE

Assisting the PRC’s raw materials needs China Merchants Energy Shipping’s penchant for the largest bulk ships is pushing it up the deadweight ranks

C

hina Merchants Energy Shipping (CMES), China’s major state-run energy shipping giant, is looking to achieve significant growth this year despite the volatilities in both the tanker and bulker shipping markets.

Captain Xie Chunlin, managing director of CMES, admits the tanker market has been suffering from a decline in freight rates over the past two years, and the performance in the first quarter this year also was

Spot on

China Merchants Energy Shipping State-run shipping giant with a tanker fleet of 49 vessels including 44 VLCCs, a bulker fleet of 27 vessels including eight VLOCs as well as a fleet of 11 LNG carriers.

ISSUE TWO 2018

not promising.

“Tanker owners will face more pressure this year,” Xie says.

However, Xie has seen plenty of old tankers being sent to scrapyards in the first quarter, which could be a positive sign to the market, and he calls on fellow tanker owners to consider scrapping more older tonnage with the upcoming 2020 IMO regulations on ship emissions and ballast water management fast approaching.

Xie holds a cautiously optimistic view on the outlook of the tanker market from next year.

However, Xie reckons it is possible that the implementation of 2020 sulphut emission regulations could be postponed, as the industry is not ready.

“Some owners might have already made some preparations for it but in general the whole industry including upstream and downstream sectors are not ready to face this

challenge,” Xie maintains.

Talking about the bulker market, Xie is of the view that the markets of smaller bulkers will be further squeezed by VLOCs in the next few years with plenty of VLOCs set to be delivered, including to his own company.

“The rebound of the dry bulk shipping market has increased the confidence of owners and investors, which has resulted in more capacity being added since last year, and it could lead to more fluctuations for the market,” Xie says.

As for the LNG shipping market, Xie is very optimistic that the market will see brighter days ahead despite a slight drop in rates recently.

For the year ahead, CMES will continue to make efforts on capital operations including both making investments and securing financing for major projects, and develop opportunities for COA deals with major clients.

The company, rapidly becoming one of the largest shipowners in the world tonnage-wise, has made a target to achieve a 78% growth in operating revenue to RMB10.8bn ($1.7bn) this year. ●

33

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IN PROFILE

The case for LPG John Hadjipateras is pioneering an alternative solution for shipowners to handle the impending sulphur cap

F

uel choices are set to be a hot topic of debate at this year’s Posidonia. One shipping veteran attending believes the scrubbers versus distillates versus LNG debate is missing a trick.

John Hadjipateras, CEO of Dorian LPG, will be making the case for LPG as the fuel of the future for shipping at Posidonia this year. And he’s happy to put his money where his mouth is, splashing out on a series of pioneering initiatives to make LPG a real alternative marine fuel.

Dorian LPG recently started a program with Hyundai Global Service on the research of adopting LPG as a ship fuel, having earlier engaged class society ABS to help look into the matter. Engine upgrades to LPG on the Dorian fleet are likely to commence in 2020 upon MAN B&W finalising its engineering design and production of the ME-LGIP engine.

Dorian’s ships already burn an average of four to seven tons less fuel than older vessels, creating what Hadjipateras calls “an inherent competitive advantage”.

“We believe in the viability of LPG as a marine fuel. This project

Spot on

Dorian LPG New York-listed VLGC player with 22 ships. Based in Stamford.

ISSUE TWO 2018

“

Dorian expects LPG fuel to become a more mainstream alternative to MGO or compliant bunkers

”

will give us the option to burn the most economically advantageous source of fuel, thereby increasing Dorian’s competitive advantage,” Hadjipateras tells Maritime CEO. Hadjipateras, who has been in shipping since 1972, is better prepared than most of his peers for the impending 2020 sulphur cap. Two of New York-listed Dorian’s VLGCs are already equipped with scrubbers, and 17 additional VLGCs are scrubber ready.

“The Dorian LPG fleet was designed since new to allow for such flexibility,” Hadjipateras says, adding: “Dorian expects LPG fuel to become a more mainstream alternative to MGO or compliant bunkers that shipping companies will closely consider leading into and beyond the implementation of the new SOx emissions standard in 2020.”

Dorian LPG currently owns and operates 22 modern VLGCs. In

recent months it has concluded three sale and leaseback deals in Japan.

Greek national Hadjipateras is based in Stamford, Connecticut. His family can trace its shipping heritage back to a first steamship purchase 112 years ago. ●

“The biggest challenge for the Greek shipping industry is to keep the same character and flexibility while adapting to a global business environment with new requirements” — Theo Vokos, executive director, Posidonia Exhibitions

35

MARITIME CEO FORUM

‘Shipping nearer to Kodak than Uber’ Shipping’s most exclusive gathering returned to the Fullerton Hotel in Singapore in March for a series of high powered debates

S

hipping has been warned it’s nearer to Kodak than Uber in its slow adoption of technology. Delegates attending the digital session at the Maritime CEO Forum in Singapore this March were told

36

shipping is anywhere from 30 to 500 years behind the technology curve.

Venkatraman Sheshashayee, CEO of OSV operator Miclyn Express Offshore, said shipping and offshore were 20 to 30 years behind many other industries. Many developments maritime companies are working on today other sectors have had since the mid-1990s. The huge changes coming in the next five years would leave many lost, he predicted. “As an industry we are not prepared,” he said. “We need to change minds to cope with this huge revolution around us.”

Forget 30, the industry is 500

years out of touch, argued delegate Kenny Rogers, who heads up Aurora Tankers. He cited bills of lading as an example, something that have not changed much from the times of Columbus, apart from moving via DHL rather than on horse.

“Shipping does not need autonomous ships,” Rogers said, “It needs an interim solution just to take it out of the Middle Ages.”

Shubpreet Singh, managing director of OSM Ship Management, said the way ships operate has not changed much for decades.

“Our KPIs, the way we spend money has not changed since the maritime ceo

MARITIME CEO FORUM

“

Shipping does not need autonomous ships. It needs an interim solution just to take it out of the Middle Ages

CEO Central

”

late 1970s,” he argued, stressing the need to change the way people were trained in order to meet today’s tech challenges head on.

Mitul Dave, founder of ship finance blockchain platform Shipowner.io, agreed on the need to change mindsets, but also he said there were not too many executives willing to commit resources today to long term digital outlays.

“Why is shipping behind the curve?” he mused. “If you are making a decision where there is a cash outflow – a decision for the future – they tend to put that off.”

The novelty of blockchain meant that it was still something the conservative industry was sceptical about, Dave argued.

“Predictions don’t make sense, we need to get the probabilities on our side and we need to use to technology to help that,” he maintained.

John Hahn, CEO of digital freight platform Ocean Freight Exchange, said that going forward the shipping business will not solely be built around long term relationships.

“Those who are able to mine the markets and the data will be the winners. There will be a lot more done by fewer people,” he said.

Part of the problem, Hahn felt, was the individual nature of shipping. “Our industry has lacked a spirit of collaboration and that has really held us back,” he said.

Concluding the session, moderator Morten Lind-Olsen, CEO of Norwegian digital platform Dualog, warned those attending the exclusive, by-invite-only event: “ I think based on this discussion the shipping industry is nearer to Kodak and Nokia than Facebook and Uber.” ●

ISSUE TWO 2018

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Dry bulk stars in alignment a cause for concern A near universal sense of optimism has one speaker on edge

T

he sense of optimism among the majority of speakers at the high level Maritime CEO Forum dry bulk debate led one panellist to question this near universal sense of hope for a sector that has been in the doldrums for much of the last decade.

All speakers at the show were confident the next couple of years looked good for dry bulk.

However, Michael Nagler, head of chartering at Noble Group, cautioned: “The problem is when everyone thinks it is all perfectly aligned – it is very rare that this happens.” Nagler predicted freight rates would be good for the coming two years and then would “fall off a cliff” as owners take in another swathe of newbuilds. The only reason they might not, he said, is due to finding finance becoming more difficult.

Fiete Kallenberg, head of

ISSUE TWO 2018

“

Let two quarters of profit happen and you’ll see every shipowner and his dog looking to buy tonnage

”

capes in Asia Pacific for Cargill Ocean Transportation, predicted a sustained recovery with capes having reached a “very good base” of $30,000. A growth of less than 1% for 2018 and 2019 for capes was “next to nothing”, Kallenberg told delegates, while demand remains very robust citing long ton mile lanes from Brazil and West Africa to Asia.

“From a capacity utilisation point of view we have not seen anything like it for the last five years,” Kallenberg said, adding: “The next two years should average $20,000 to

$25,000 and if the stars are aligned it could hit $40,000.”

Handysizes too have hit a “fantastic” base of $8,000 a day, Rob Aarvold, the general manager of Swire Bulk, told delegates predicting the sector should kick on to hit $11,500 a day.

“With the right assets there is more liquidity. There’s more upside to come but I’m just waiting for that volatility,” Aarvold said.

Khalid Hashim, the veteran managing director of Thailand’s Precious Shipping, agreed demand is growing above supply and that this year and next should be good for those in dry bulk. Hashim said the sale and purchase market will be as volatile as the freight market.

“Let two quarters of profit happen and you’ll see every shipowner and his dog looking to buy tonnage,” Hashim warned. ●

39

MARITIME CEO REGULAR FORUM

Tanker market views split down the middle Do not prolong the pain and be tempted by the very low newbuild prices on offer from yards in Asia was a central message from the show’s tanker panel

M

arket views were split down the middle during a lively tanker session at the Maritime CEO Forum.

Moderator Tim Huxley from Mandarin Shipping kicked off proceedings noting of the mixed sentiment: “A time of contrasting opinions is always an opportunity for someone.”

The tanker market has plumbed new depths in 2018 so far with VLCCs earning just $6,000 a day during the first quarter. While few owners have been brave enough to predict when they see the sector bottoming out, there has been a near universal call for restraint when it comes to temptingly low prices on offer from desperate shipyards.

Moderator Huxley noted there was still a “significant overhang” of

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A time of contrasting opinions is always an opportunity for someone

”

tankers coming out from the yards in Asia.

Lars Malmbratt, general manager of Stena Bulk Singapore, was not too optimistic about immediate prospects telling the high calibre audience: “I’m afraid I have to take a negative view for the next one or two years. Don’t invest in tankers that is the answer for how to get our feet back on the ground,” Malbratt said, pleading fellow owners to give time to let the market balance and try to make cycles longer.

While Michael Elwert, CEO of Elektrans Group, was cautiously optimistic for the products sector in

a couple of years’ time, he was less so when it came to crude.

“As shipowners you have to be eternal optimists,” quipped Alan Hatton, managing director of Foreguard Shipping. He saw some hope for stainless steel chemical tankers, but like Malmbratt he stressed it was important owners held off ordering new ships. “Values going forward are certainly cheap,” he said, adding: “Secondhand opportunities look quite attractive.”

Frans van de Bospoort, managing director of ship finance in the eastern hemisphere for DVB Bank, warned that a stress test carried out across DVB’s entire portfolio showed tankers as the weakest sector. Crude tankers will take at least two years to recover, van de Bospoort reckoned. ● maritime ceo

MARITIME CEO FORUM

Sentimentality gets in the way of the blowtorch BIMCO’s chief shipping analyst made for a wry opening to the event

I

f owners can be rational for once then they can enjoy some good times in the coming couple of years. That was the message given to delegates attending the forum from one of the world’s most high profile shipping analysts. Peter Sand, chief shipping analyst at global shipowning organisation BIMCO, opened the show with an exclusive half hour question and answer session on the markets moderated by Maritime CEO editor Sam Chambers.

Sand (pictured left), one of the most vocal backers of greater scrapping volumes in recent years, hit out at shipowners’ sentimentality, which often holds them back from making cold, business decisions.

“Owners are often too attached to their vessels. I mean it’s hard to send a vessel with your mother’s name on it to the scrapyard,” he quipped.

Sand predicted that containers were set to enjoy the best market prospects this year, closely followed by dry bulk. Tankers, he predicted, would remain troubled for this year and next.

When quizzed which vessel type was best to buy now with a view to

“

It’s hard to send a vessel with your mother’s name on it to the scrapyard

”

an asset play, Sand went left field, picking out the much maligned classic panamax boxship, a ship type that has been hit hard by the opening of the expanded Panama Canal resulting in dropping values and

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many sent for scrap. Sand’s panamax pick looks to be well supported by recent charter developments where the volume of fixtures for this niche has picked up dramatically in recent weeks with 5,000 teu boxships recently being fixed for as high as $13,000 a day.

The next Maritime CEO Forum is scheduled to be held in Hong Kong at the Foreign Correspondents’ Club on October 2. ●

GREECE POSIDONIA

Talking points at the world’s most famous shipping show We’ll get to hear what’s uppermost in owners’ minds during the first week of June in Athens

P

osidonia beats all other major shipping events in the calendar in giving participants a real pulse for what shipowners are thinking. Whether it is on the exhibition floor or at the myriad parties and receptions across Athens and Piraeus in the first week of June, the biennial gathering serves as a great moment for owners to rub shoulders and let off steam in decidedly pleasant Mediterranean surroundings.

Likely talking points as Posidonia readies for its 50th birthday are the recovery in the markets, and looming environmental regulations.

“I suspect we’re all a bit bored with heavy topics like sulphur, carbon footprint and digital disruption,” says serial conference attendee and speaker, Dr Martin Stopford, the president of Clarkson Research. “But you still can’t beat a good argument about when the dry cargo market will really recover – i.e. serious money, and whether tankers will get there first. And of course what you would buy if you had a billion dollars spare cash!”

David Glass, the veteran Athens-based editor of Newsfront Shipping Publications, who has attended every Posidonia since 1976, reckons canny Greek owners will be discussing how the markets are moving.

“I think now people are starting to feel it is going to get better though not fly as high as people thought it

42

would a few months back,” Glass tells Maritime CEO. “The attitude will be very, very different from two years ago,” says our columnist and ship financier Dagfinn Lunde. “People are hopeful that without too many trade wars, demand will catch up with deliveries.”

“Shipping finance is and will be the hot topic,” reckons Basil Karatzas, who runs a shipping advisory firm out of New York. Only limited finance is available for most owners and Karatzas says there will be deep discussions and lots of head scratching about where the capital will come to the industry this June.

Harry Vafias, the boss of StealthGas, believes fuel decisions will be a hot topic this time around.

“Most people will be talking about emissions,” Vafias says.

“Scrubbers versus LNG versus distillates.”

Quite so, agrees Lunde, who points out that IMO’s 2020 sulphur cap is fast approaching.

“People do not have very long to decide. Shipowners tend to wait to the last moment,” he says.

Scott Bergeron, who heads up the Liberian flag, which boasts more Greek ships than any other, agrees with shipowner Vafias.

“With the necessary lead time essentially gone and a nominal amount of owners choosing to retrofit their ships with scrubbers,” Bergeron says, “the practical impact of the 2020 sulphur cap is likely to be a predominant topic during Posidonia. Who will win, who will lose? Don’t bet against the Greek shipowner.”

Panos Patsadas, chartering and operations manager at DS Multibulk, wonders in particular what tanker owners will do with all the environmental legislation coming their way.

“Crude carriers, with a grim half year behind them, will find many owners reluctant to make outlays for upgrades before they see light at the end of the tunnel or lucrative incentives which are far from present,” Patsadas says.

Concluding, Theo Vokos, the executive director of Posidonia Exhibitions, tells Maritime CEO: “It can’t be questioned that Posidonia remains the place to do business with Greek owners, keen to evaluate new technologies, source equipment and develop partnerships for their demanding fleet expansion and renewal programmes. So Posidonia exhibitors are positioned at the heart of this multi-billion market, face to face with buyers ready to do business.” ● maritime ceo

GREECE UGS

56% of owners consider relocating overseas There’s plenty of Greeks with itchy feet. Will the government listen to shipping’s demands?

E

xpect delegations from maritime clusters from around the world to be at Posidonia in ever greater numbers on news that Greek shipowners have increasingly itchy feet.

A study last year by Ernst & Young shows that 56% of Greek owners would consider relocating their administrative bases abroad.

The study titled ‘Repositioning Greece as a Global Maritime Capital’ warned, not for the first time, that unless regulations change Greek owners will relocate.

“If the local shipping sector’s legal framework becomes noncompetitive, or far more attractive offers are made by other countries, then a major exodus by Greek-owned shipping companies is possible,” warned one sector entrepreneur in the study.

For unrivalled coverage of Posidonia

ISSUE TWO 2018

Taxation and the regulatory framework were cited as the main reasons that would prompt shipowners to seek new bases, according to Ernst & Young. Singapore and London ranked as the most popular alternative destinations.

The Union of Greek Shipowners (UGS) has warned for a number of years that an owner exodus to other shipping hubs – both inside and outside the EU – could be on the cards.

The UGS finds itself at the moment in a regulatory squabble with the EU that has been rumbling for years.

UGS president Theodore Veniamis warned in a recent speech: “The prospect of relocation to hospitable shipping countries outside Europe, or even within Europe but outside the European Union, is no longer hypothetical.”

“

The prospect of relocation to hospitable shipping countries is no longer hypothetical

”

The UGS, by way of prompting the government into action, likes to highlight shipping’s contribution to the national economy. On its site, the shipowning body claims maritime transport services accounted for EUR136bn in the national economy over the years 2007 to 2016, a figure that is 16% higher than the next most important economic sector for Greece, tourism, something local owners may well be doing themselves as they search for new homes overseas. ●

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GREECE

‘Paralysis by analysis does not exist in Greek shipping’ Maritime CEO assesses the mindset of a Greek shipowner, and why this nation is so good at getting shipping cycles right

A

survey carried on the back page of this magazine shows readers overwhelmingly believe the Greeks are the best at reading shipping cycles. Among the top 10 shipowning nations, Greece garnered 64% of the votes.

“It’s obvious – they actually are shipping professionals and not finance professionals – they know how to weather the storm better than most,” one reader responded.

So what is it that sets the Greeks apart – and has let them continue to have the largest commercial fleet in the world for so long?

David Glass, the Athens-based editor of Newsfront Shipping Publications, says the ability to read cycles comes down to the fact that the Greeks tend to be family

44

businesses that are generations old.

“They don’t see shipping as a way to make a quick buck,” Glass says. “They don’t look at the bottom line all the time, the majority are not listed, they just have to keep their mothers-in-law and uncles happy. A lot of decisions are taken around the family lunch table on a Sunday.”

“

They just have to keep their mothers-in-law and uncles happy

”

Greeks owners tend to go with a gut feeling, not bound by government targets, and importantly as they are brought up in the business they have a strong operational understanding

of the business, Glass adds.

Esben Poulsson, the chairman of the International Chamber of Shipping, who also works for a Greek owner, Enesel, observes: “It is in their blood as the saying goes.”

He elaborates: “Greek shipowners focus on the fundamentals, and trust their instincts – more than they do research and statistics.”

Wily Greek owners have made the most of the changing cycle in the past 18 months with secondhand ship prices starting to climb, especially for bulkers. Greeks accounted for almost one in four secondhand ship purchases last year, pouring $4.5bn on used vessels in what was a record year for S&P. Many of these ships have since entered the Liberian Registry’s maritime ceo

SHIPPING CYCLES

books. Scott Bergeron, the CEO of the flag with the largest Greek fleet, tells Maritime CEO: “Judging by the S&P activity and consistent fleet growth, it can be fairly stated that the Greek shipping community has done well taking advantage of the prolonged downturn. As is widely recognised, the strength of the Greek shipowners’ acumen is to assess the opportunity and to strike promptly to realise the gain. Paralysis by analysis does not exist in Greek shipping.”

Greek owners’ notable fleet build-up from 2016 to the present is set to pay off handsomely, maintains Court Smith, an analyst at online pricing vehicle, VesselsValue.

“All shipping segments should see upwards pressure as recycling intensifies ahead of the 2020 bunker

ISSUE TWO 2018

fuel switchover, and the fleet under control of Hellenic owners should see asset value gains to the upside,” Smith says.

“Many private Greek shipowners have two things that many owners and investors would give their right arms for: time and yet more time,” says Dr Adam Kent from analysis firm Maritime Strategies International (MSI).

This, coupled with a commitment to the industry and deep pockets mean that they are often ideally positioned to ride the shipping market cycle without getting too distracted by short term volatility or external shareholder demands.

Of course, those Greek owners that have been behind lucrative asset plays tend to stick in the memory.

However, there are also a wealth of owners who have bought at the wrong time in terms of the market cycle, MSI’s Kent points out. The first half of 2014 saw bulker prices peak but nevertheless Greek owners dominated S&P activity buying at the market’s zenith, with many no doubt wishing, with hindsight, that they’d kept their powder dry.

Another advantage bestowed on the Greek shipowning community is its breadth and depth; in effect it becomes a numbers game, Kent argues.

“With a myriad of Greek owners prevalent across a range of sectors, someone at some point is going to hit the asset play jackpot, which again

becomes lodged in the industry’s collective psyche,” Kent says.

Dagfinn Lunde, a columnist for this magazine and a famous name in ship finance, agrees with Kent on the importance of the mixed fleet element, as well as Glass’s earlier comments on just how close Greek owners are to the actual business of running a fleet of ships.

“It’s down to a combination of the structure of the fleet and the people behind it,” Lunde says, adding: “There are very few places in the world where you can sit with an owner and he knows exactly where his ships are trading and what challenges they are facing. They have seen and been through so many cycles.”

“

Greek shipowners focus on the fundamentals, and trust their instincts – more than they do research and statistics

”

One thing is for certain: Greek owners will continue to shape the S&P markets for years to come, often dismissing other nations’ increasingly algorithmic approach to asset buying. There will naturally be winners and losers but with many sectors now climbing out of recent cyclical lows, expect to hear more about the Greek winners over the next couple of years. ●

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WINE

A little of what you fancy Neville Smith argues that drinking less and better is the way to go, especially with the drinks fest upon us that is Posidonia

W

hen you come to a fork in the road, the old saying goes, take it. It’s the kind of wonderful catchall truism that applies as much to wine as it does to navigation. And as the industry prepares for the marathon standing around with a drink in its hand known as Posidonia, we must once again try to do things differently.

As has been noted in these pages before the wines of Greece are under-appreciated, under-priced and almost impossible to pronounce, factors which taken together limit their appeal.

This advances the trend towards global wine because growers think, with some justification, that, if they plant Merlot, Cabernet or Sauvignon Blanc they can sell it more easily.

The result is a shrinking choice in

Two (more) to try OLIVIER LEFLAIVE’S WINES start with an even more reasonable Aligote and go all the way to Alaska in terms of style and status. The brilliant Bourgogne Blanc Les Setilles 2015 (£18.95, www.corneyandbarow.com) over-delivers in every conceivable way.

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general, and especially at the price point where most people buy their wine.

Let’s be clear; I’m not endorsed by any wine merchant (though technically I am open to offers) but the majority of people I know just don’t spend enough money on wine. This has much to do with living in the UK where successive governments have continued to tax the peasants in a way that a medieval monarch would approve of.

Even so, I have had to intervene on a number of occasions when friends on their way to the BYO restaurant attempt to buy two bottles for £10. In 2017, the head of a leading UK supermarket estimated that when buying a bottle of wine for £5 the value of the wine inside that bottle is just under 50p.

Loire reds are not particularly fashionable wines but 2016 Chinon Rouge, Domaine de la Semellerie (£17, www. bbr.com) would suit a new world Zinfandel lover, blending brambly fruit with chunky tannins in a refreshing, barbecue-friendly package. ●

It sounds like snobbery, but it’s simply a function of recognising that though cheap wine exists, the pleasure it gives – which is what it’s all about – is going to be limited at best. This is not meant to suggest that anyone should drink more or dangerously – drinking less and better is the way to go. Better and more should only be considered by the more experienced vivant.

On the basis of less and better there is plenty of choice beyond the varieties mentioned above but you do have to be selective. There is nothing objectively wrong with buying wine from large scale producers, but try and understand the deal from their side too. They are not selling cheap wine as a favour, but because the economics work and buyers too often confuse volume with value.

The power is in our hands as drinkers to demand better quality stuff to drink – made from the unusual, the native and produced with care and nurturing that demands we pay a proper price for it. It doesn’t have to be fashionable or high born, but it can be a thing of great beauty delivered in return for a little diligent study, some discretion and an understanding of where value lies; attributes of which the ancient Greeks would surely have approved. ● maritime ceo

GADGETS

A monitor that necessitates a larger desk

U

ltrawide monitors have been around a while. Samsung have taken the concept and added a lot more cowbell. Foolish amounts. Their CHG90 QLED Gaming Monitor is a curved screen 49” monitor with a 32:9 aspect ratio, 3840x1080 pixels, 144Hz refresh rate with HDR, Quantum dot technology and AMD’s Radeon Freesync 2 (sorry, Nvidia owners): essentially it’s two 1920x1080 monitors put side by side in one curvy splendour. It also comes with an extravagant price tag (not least because you’ll probably need to buy a bigger desk). But we want it anyway.

Samsung QLED Gaming Monitor www.samsung.com $1,100

A towel for all occasions

T

owel Day (May 25) is back. For those of you who haven’t yet read, seen or heard Douglas Adams’ Hitchhiker’s Guide to the Galaxy, all we can say is: “For shame! Go and do it now — We’ll wait”. One of the core concepts imparted in the five-part trilogy was that there is almost nothing more important to the interstellar hitchhiker than their towel. Another core concept is the soothing phrase “Don’t Panic” in big, friendly letters. SN Pro-Tips have melded these two into a splendid keychain, ensuring that you will always be the sort of hoopy frood who really knows where his towel is. No, it’s not very high tech, but look at us: do we look bothered? No. That’s because we’re not bothered.

Don’t Panic Keychain Towel https://snprotips.com/dont-panic/keychain-towel $15

SuperTV for your superyacht

O

wning a superyacht is always depicted in movies as a non-stop cocktail party, but the nerdy realist inside tells us that there are no doubt times when you want to kick back and watch some telly. C-SEED is banking on it, with its Supermarine Outdoor TV. This is a 201” LCD Screen (it also comes in a more modest 144”) that packs down into a tidy 78 cm recess in the deck, and unfolds itself out to its full glory in one minute using a hydraulic drive. Talk about ultrawide! With a contrast ratio of 4,500:1 and luminosity of 4,500 nits, it’s set to be none too shabby in the sun, either. There is also a matching retractable speaker system, for the full movie experience. Pricing and release details are not yet available, but if you have to ask, you probably can’t afford it.

C-SEED Supermarine Outdoor TV http://www.cseed.tv/index.php?id=68

ISSUE TWO 2018

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REGULAR BOOKS

Trade wars, threats and bluster Paul French shows there’s plenty of historical analysis already published to give readers some idea of what might happen if the spat between Washington and Beijing widens

I

t seems a trade war between the US and East Asia may break out just at the moment when a hot war seems less likely in the region. It’s been a while since we last had a major trade war and so perhaps it’s advisable to read a few books on the general subject.

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Trump must be thinking that the large size of the US domestic market gives him a lot of bargaining power in any trade dispute

”

A most useful book is Ka Zeng’s 2003 study Trade Threats, Trade Wars: Bargaining, Retaliation, and American Coercive Diplomacy. Though 2003 may

48

seem a long time ago the book is a useful reminder of how these wars get started. The author, an economics professor in the US, addresses two puzzles associated with the use of aggressive bargaining tactics to open foreign markets. First, as the country with greater power and resources, why hasn’t the US achieved more success in extracting concessions from some of its trading partners (such as Japan, Canada, and the EU) than other, arguably less powerful economies such as China and India (remembering this was written in 2003 when the economic balances of power were different)? Secondly, why haven’t trade disputes that match democratic and authoritarian states more frequently sparked retaliatory actions than those between democratic pairs? Trade Threats, Trade Wars draws on the ‘two-level game’ theory as a

key analytical device and supports its contentions both through quantitative analyses of dispute settlement under US trade law and through detailed comparisons of American trade negotiations with China, Japan, the EU, Canada, and Brazil.

Announcing his heightened tariffs on Chinese goods President Trump told the White House press corps recently, “Trade wars ain’t so bad”. Is this true?

John Conybeare, emeritus professor of political science at the University of Iowa, and the author of the book Trade Wars: The Theory and Practice of International Commercial Rivalry, argues that an enduring lesson from various trade conflicts in the 19th and early 20th centuries was that if there is a wide disparity in economic strength between two countries, the stronger country will probably prevail. Looking at today’s events Conybeare says, “Trump must be thinking that the large size of the US domestic market gives him a lot of bargaining power in any trade dispute.”

However, access to Chinese markets is a big deal to many American corporates so there is no clear cut bigger and smaller economy or stronger/weaker dichotomy in today’s trade war.

But then perhaps trade wars are inevitable between competing economies? Yash Tandon draws on decades of on-the-ground experience as a high level negotiator in bodies such as the World Trade Organization (WTO) in his book Trade is War: The West’s War Against the World to show that stronger countries (and in recent times that is the generalised ‘West’) always try to impose trade terms on smaller, poorer ones. However, this tendency to start trade wars is creating a global crisis that extends beyond the realm of the economic, creating hot wars for markets and resources, fought between proxies in Africa, Asia, Latin America, the Middle East and now even in Europe.

As a different path Tandon suggests an alternative vision to this devastation, one based on self-sustaining, non-violent communities engaging in trade based on the real value of goods and services and the introduction of alternative currencies. ●

maritime ceo

TRAVEL

Posidonia recuperation therapy Editor Sam Chambers lets readers in on his secret Greek hideaway

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’m fortunate enough to live in the utterly stunning surroundings of the central Pyrenees, a place beyond compare. Nevertheless, every second year I count down the months and days for our family trip to Greece, which we tack on to Posidonia.

To my mind there is no better place on Earth to recuperate from the frenzied Greek shipping week than spending a fortnight on the island of Amorgos in the southeastern stretches of the Cyclades.

Part of the greatness of this beautiful spot is down to the fact there is no airport so to get here requires an eight-hour ferry from Piraeus, meaning it is not 100% mobbed like other Greek hotspots.

With its dramatic mountain scenery and laidback atmosphere, exhausted Posidonia revellers will find sublime beaches and azure waters to unwind.

This was the island where Luc Besson filmed The Big Blue in 1988. The adventurous can head out to the west of Amorgos to Livoros to see the wreck of the Olympia which figures so prominently in the film.

ISSUE TWO 2018

The mountainous island is about 30 km long and we recommend staying at Aigali (pictured) in the north, which has plenty of easy to reach bays and beaches and is a great base for lots of lovely hikes and runs.

“

With its dramatic mountain scenery and laidback atmosphere, exhausted Posidonia revellers will find sublime beaches and azure waters to unwind

”

If you want to splurge, book in at the five-star Aegialis Hotel & Spa, although we think you can’t go wrong with the studios on offer at Gryspo’s Hotel.

Eat lunch at Remezzo on the main beach and for dinner enjoy the family atmosphere at Limani’s in town near to the ferry pier where the meal will likely end with a shot of rakomelo – a kind of fermented grappa, unique to Amorgos,

infused with honey, herbs and spices.

Hire a car to explore the rest of the island. Head south along a beautiful, herb scented coastal road, which then rises high up to the centre of Amorgos and the village of Hora with its 13th century Venetian fortifications and many churches.

From Hora strike a couple of kilometres east to the sea and the spectacular monastery of Hotzoviotissas, gleaming white at the base of a towering vertical orange cliff. Only a handful of monks occupy the 50 rooms now, but they are very welcoming and the views out to sea from this perched position are unforgettable.

To the southwest of Hora the road winds down to a deep inlet and the popular yachting town of Katapola where there are plenty of eateries and beaches.

Once you’ve seen these places retreat to the warm embrace that is Aigali and kick back.

Here’s my Chambers money-back guarantee, you’ll be hooked like me, and will be coming back come the next edition of Posidonia. ●

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OPINION

Blockchain switches digital trip onto autopilot Kris Kosmala assesses why we’re still not taking the bold steps necessary to harness the latest technologies

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t is telling when, following a recent conference session dedicated to container shipping, the moderator quipped how great it was that the whole session went through without even once mentioning the word ‘digitalisation’ or its sibling ‘digitisation’. Seems the caravan moved on. The industry is on the lookout for another ‘blue ocean’ idea with digitalisation already put to rest.

How did we end up here? Maybe blockchain is to blame. The last 12 months were chockfull of blockchain initiatives. The best-known brands in the industry jumped on the blockchain bandwagon starting with the joint announcement of collaboration between Maersk and IBM. Chief digital officers hired in a hurry by other carriers were called on to drop process re-engineering initiatives and develop blockchain nirvanas. What followed was a cascade of equally curious announcements of pilots undertaken by other carriers, closely shadowed by blockchain-related pilots initiated by freight forwarders and ports. There we are – blockchain proof of concept and pilot projects became proof of the digitalisation prowess sweeping the shipping industry.

If you are in the industry and you are apprehensive of digitalisation embodied by all things blockchain, you are right. We have not resolved the basics yet, therefore digitalisation projects risk getting stuck in perpetual ‘pilot’ or ‘proof of concept’ mode.

The first requirement of successful digitalisation is the availability of the complete digital data sets of each supply chain participant. The

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industry has not created a clear and convincing incentive for all players to update their operations to the digital age in all aspects related to cargo shipments. The second problem is a lack of standard for generation, usage and transmission of cargo and trip-related data between all external parties participating in each shipping contract. The third problem is the lack of a proper understanding of the concept of digitalisation within the shipping companies themselves.

The term ‘digitalisation’ always implied simplification of the core business processes, so that they can be resolved by machines, handled electronically, producing only limited number of exceptions requiring human intervention. All carriers have made decisions of maintaining their existing processes and automating them warts and all as they are. Those outdated processes throw out so many exceptions, that any use of machines to run the processes, plan the execution and decide using deep artificial intelligence is so limited that they do not produce any significant outcomes vis-a-vis the investment required to implement these technologies.

The chief digital officers hired along the way to question the ‘steady as she goes’ approaches have focused on low hanging fruit like blockchain and e-commerce portals. Without the CDOs championing radical business process change to take advantage of all that digital innovation and strong support for that change coming from the executive suite guarantees the digitalisation ideas that could make a real difference to the carriers’ business will

remain in the ‘proof of concept’ mode for longer than expected.

Looking over my notes taken during April’s Singapore Maritime Week events, I realised that technology vendors are not keen on questioning the business model assumptions of the industry. They are happy to let the industry define the need for a technology to address this or that silo-related problem and quickly jump into implementation mode. Outcomes, or the lack of them, from those projects are seen as the sole responsibility of the shipping companies.

Soren Skou, CEO of Maersk, proposed during the Singapore Maritime Lecture that digitalisation will change the industry’s culture. As any change management practitioner can attest, changing culture is not possible by simply deploying new technology. I cannot recall any success story of culture changing as a result of technological innovation.

In many cases, industry culture embraced digitalisation or automation, but it did not change as a result of technological innovations.

Only when the cultural change was internalised first, new technologies were called for to support it. That is something that CEOs of all shipping companies should understand. The dearth of real results from digitalisation projects undertaken might be directly related to the industry’s resistance to rapidly move from ‘piloting’ to ‘using’. While no one can stem the tide, the maritime shipping industry is simply plodding along and hoping that no one else will be able to eat its lunch. That’s a shame. ● maritime ceo

REGULAR OPINION

How I learned to stop worrying and love the IMO Neville Smith finally gives the UN’s shipping body the credit it is due

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ather than apologise to legendary filmmaker Stanley Kubrick, I should probably start by apologising to the International Maritime Organization (IMO).

As a reporter for Lloyd’s List some years ago, under former editor Michael Grey, I was not encouraged to be nasty to the IMO, but certainly my youthful exuberance was tolerated as I biffed and bashed the organisation and its member states for the glacial pace of its bureaucratic process.

Luckily that copy mostly resides behind a dusty paywall and these days troubles few readers, but I was lucky enough to witness the birth of Emission Control Areas, Common Structural Rules and other milestones, though only from the back of plenary where the NGOs sit.

It turns out this was the best place to be, as they would tell you what was actually happening rather than my having to plough through interminable docs or wait for the official reports. Useful too, as at one point my infractions were so many that the secretariat cut me off altogether and I had to use a mole.

These days, the job is made much easier by the intense media interest around the IMO’s environmental meetings – though it is rarely as strong for the just as critical safety ones. A blizzard of press releases before, during and after MEPC 72 has left us in no doubt of what was achieved in London in April.

And though my natural cynicism won’t quite allow me to join the chorus of industry approval, I think I have finally learned to stop worrying

ISSUE TWO 2018

and love the IMO. This has happened, not because of what the agency does – it remains a monolithic testament to law making at the lowest common denominator – but how many a vocal minority now see it.

Criticising the IMO for being slow, old-fashioned, riven by division or otherwise unfit for purpose is like criticising the rain for being wet.

The IMO was never designed to be a crucible of technology innovation for the maritime industry. It is, in reality more like a messenger boy, sent by governments to collect the bill for shipping’s indiscretions.

Its attempts to develop concepts such as eNavigation are textbook examples of why innovation cannot be left to regulators. There are maritime domain experts a plenty in the IMO, but that does not mean the body itself can develop new concepts in anything like the timescale that technology now moves.

But crucially the IMO is not a brake on innovation either, nor does it work to prevent any section of the maritime industry from innovating.

As I understand it, there is nothing to stop a shipowner employing any new technology they choose, providing flag state and class approve it in

accordance with their rules and applicable regulations.

Want to use an AI-based navigation system? Fill your boots. A drone to clean the barnacles off the hull? Go ahead.

Want to cut your fleet’s CO2 emissions to zero using nanotechnology? They’ll probably name a dolphin after you.

But accept too that there are minimum standards for safety, environmental protection, crewing and operational standards.

Because there need to be.

And rather than blame the IMO for what it is not, it should rather be praised for the very direct and positive effect it has on the markets.

In recent memory these effects range from the single hull tanker ban to emission control areas, ballast water management, the 2020 sulphur cap and now carbon emission reduction targets.

By raising the cost of doing business, the IMO is making it harder for poor quality operators to compete, especially where environmental groups and public opinion are strongest. This used to be almost solely the western hemisphere but is now spreading inexorably east.

IMO has saved the cycle before and now it’s possible it will do so again. With hundreds of ships likely to be scrapped rather than meet BWM and 2020, fleet capacity will fall. Once the carbon constraints start to bite (though when this might be is not terribly clear) it’s likely that a majority of ships will choose the path of least resistance and slow down to comply, lowering fleet utilisation and acting as a further prop – if not a driver – to earnings. ●

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MARPOLL REGULAR

Your verdict

Every issue we ask a series of topical questions. With more than 600 votes cast here are the latest results plus key comments Is ship finance too focused on the here and now rather than seeking counter cyclical opportunities?

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Has President Trump been good for international shipping to date?

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They have burnt their fingers so badly that they are now ultra cautious

Yes 83%

Economic polices and tariffs are not going to help shipping

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No 17%

Yes 12%

Are Vladimir Putin’s plans to increase traffic along the Northern Sea Route tenfold by 2025 realistic?

No 46%

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“ ” No 51%

With less crew onboard, more sophisticated equipment, a high level of isolation and increased use of remote monitoring, we are no longer training seafarers; we are training astronauts

Agree 79% Disagree 21%

Do you think there will be enough low sulphur fuel available for shipping by 2020?

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Is LNG as a ship fuel an interim or permanent solution to shipping’s green issues?

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Expect to price of MGO to double or triple in cost until the market can stabilise

Yes 43%

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No 57%

Which of the world’s largest shipowning nations is best at reading shipping cycles?

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It’s always Greece. Every other shipping centre has at least one lemming-type episode in its history

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No difference 42%

The ship of the future will require more sophisticated skillsets from seafarers than is the case today

Unfortunately, yes. Expect casualties

Yes 49%

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It’s too capex and too operationally heavy at the moment

Not a solution 25%

Permanent solution 29%

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Interim solution 46%

What’s the smartest ship investment in 2018 with a view to flipping vessels?

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Bulkers are easy to flip. You need to know what you are doing with the others and this makes the market for them less liquid

Greece 64%

Norway 12%

South Korea 1%

Japan 2%

Singapore 2%

Denmark 9%

Handysize bulkers 43%

Chemical tankers 16%

China 3%

Germany 2%

Hong Kong 2%

Sub-3,000 teu boxships 20%

LPG carriers 21%

US 1%

UK 2%

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maritime ceo

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LEADING THE FUTURE