Maritime CEO Issue Two 2022

ISSUE TWO 2022

BY

POS IDO S P ECI NI A Gre AL ek o wn

er trav el an s, finan c d wi ne e,

The life and times of Simeon Palios

MANIFEST

3 At The Prow

Profiles

Economy

22 Cover Story Simeon Palios 25 Constantin Baack 27 John Xylas 29 Philippos Phillis 31 Gary Vogel 33 Bob Burke

4 6 7 8 9

US EU China India Brazil

Markets

Recreation

11 13 15 17

34 35 36 37

Dry Bulk Tankers Containers Finance

Wine Gadgets Books Travel

Executive Debate

Opinion

18 Shipping & inflation

38 Claudia Paschkewitz 39 Carl Faannessen 40 Splashback

37

Global Connections, Local Network, Complete Control.

Global leaders in Port Agency and Marine Services, visit:

www.iss-shipping.com

AT THE PROW

An ASM publication Editorial Director: Sam Chambers sam@asiashippingmedia.com Associate Editor: Adis Adjin adis@asiashippingmedia.com Correspondents: Athens: Ionnis Nikolaou Bogota: Richard McColl Cairo: Camelia Ewiss Cape Town: Joe Cunliffe Dubai: Yousra Shaikh Genoa: Nicola Capuzzo Hong Kong: Alfred Romann London: Paul Collins New York: Suzanne Smith Oslo: Hans Thaulow San Francisco: Donal Scully Shanghai: Colin Quek Singapore: Grant Rowles Sydney: Ross White-Chinnery Taipei: David Green Tokyo: Masanori Kikuchi Contributors: Nick Berriff, Andrew CraigBennett, 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 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 for 2022’s four issues of Maritime ceo magazine.

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ISSUE TWO 2022

Reshoring: fact or fiction

F

or most of the 21st century, manufacturers have discussed China plus one strategies - a determination to not be 100% beholden to the People’s Republic for their supply chains. Latterly the term reshoring has also become common parlance too, a keenness to bring manufacturing nearer to home, to be less reliant on frayed supply chains, something that has become more paramount as the world seems to be splitting at the seams between democracies and autocracies.

Moreover, China’s dogged zerocovid strategy has infuriated and frustrated foreign manufacturers spectacularly.

Results from a flash survey carried by the EU Chamber of Commerce in China in early May when hundreds of millions of Chinese were in lockdown showed this frustration all too clearly. 23% of respondents said they are now considering shifting current or planned investments out of China to other markets—more than double the number that were considering doing so at the beginning of 2022, and the highest proportion in a decade. 78% of respondents said they feel that China is a less attractive investment destination as a result of its more stringent covid restrictions.

Likewise, a May survey carried by the German Chamber of Commerce in China carried similar sentiment. Nearly one-third (28%) of foreign employees of the surveyed companies plan to leave China due to covid-related measures, with 10%

“

We’ve left it way too late if we wanted to avoid being beholden to China

”

planning to do so even before their current employment contract ends.

Here’s the thing however for those that have reported on China for a long time. Once a decade or so the world debates this topic, and the media has a brief introspection about the future of globalisation.

Despite the threat of leaving en masse once all the maths are done global manufacturers will, I am sure, sit on their heels. The fact is all the chips are in China’s hands - whether it’s port infrastructure, factory set-ups, raw material availability or financing, there is no other place that can offer the cheap products we have all come to rely on in the 21st century. Then there’s the NIMBY factor, which people underplay - does the west want the pollution and scarred landscapes that a wholesale industrial shift would bring? We’ve left it way too late if we wanted to avoid being beholden to China. ●

Sam Chambers Editor Maritime ceo

3

ECONOMY US

Swings and roundabouts There’s plenty of plusses and minuses for analysts studying America’s economy today

M

any analysts, and the current political administration, were somewhat non-plussed at the news of -0.4% in the first quarter, or -1.4% on an annualised basis – America’s weakest quarter since the early days of the covid pandemic. So what’s going on, after a strong end to 2021 with rising employment numbers leading to heightened spending? The US Commerce Department has stated that it believes the slowdown was caused by a sharp rise in imports and a concomitant drop in a combination of stats including private inventory investment, exports, federal US: The Cost of Living Rise in Inflation Terms – October 2021-March 2022 Month Inflation rate

(%)

October 2021

6.1

November 2021

6.5

December 2021

6.9

January 2022

7.4

February 2022

7.8

March 2022

8.3

Source: US Government Data, Federal Reserve

4

government spending, and state and local government spending.

Consumer spending, the largest component of the US economy, grew 0.7% in the first quarter of 2022. This is not a stellar performance given positive employment numbers and life getting back to something like normal in key consumption areas such as California and the east coast. Employers have added an average of 600,000 new jobs a month over the last six months and America’s unemployment rate dropped to 3.6% in March, close to the pre-pandemic low.

This weak first quarter looks almost definitely to worsen through the second and third quarters of the year at least. The war in Ukraine has obviously triggered oil and gas price rises that are still working their way through the economy and China’s new coronavirus lockdowns will worsen already persistent supply chain problems. While demand for American fuels is rising, especially as European nations look to break their commodities relationship with Russia, this may not be enough to offset global price rises for American industry. It is also the

case that American business will find themselves stretched in terms of components and consumer goods due to the logjams at Chinese ports.

Additionally, this could also hit American corporate results – big China manufacturers like Apple, Tesla, etc are almost guaranteed to see slower sales for a while due to supply chain interruptions.

The other factor that may make a rebound harder to achieve is that the lower than expected numbers in the first quarter will mean that the Federal Reserve is likely to raise interest rates to tackle rising inflation.

Already Fed rate rises in March meant that inflation hit a 40-year high of 7.9%. Central bank analysts expect another rise of 0.5 percentage points in the pipeline, twice March’s rise.

Finally export figures. Exports fell 5.9% and imports rose 17.7%. This was clearly due to stockpiling in the final quarters of 2021 to avoid any domestic supply chain disruptions (lack of truck drivers, etc). China lockdowns and likely medium to long term knock-on effects of port disruptions will see this drop extend through 2022. ● maritime ceo

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ECONOMY EUROPE

The fallout from Ukraine Europe has acted fast in the days following Russia’s invasion. The effect on the continent’s economy is likely to blunt growth

T

he Russian invasion of Ukraine is having adverse effects on the European Union (EU), particularly Germany. Inflation, already jumping, will soar further as the continent pays higher energy bills, weaning itself off Russian energy.

Still, as the worst of the Covid-19 pandemic appears to be receding in western Europe the EU is cautiously optimistic about renewed economic growth as the continent emerges into a new normal status post-Covid-19.

The European Commission’s Winter 2022 Economic Forecast issued in early February projects that, following a notable expansion by 5.3% in EU: New job starts by top 5 sectors, 2021 Sector

% of over all employment

Accommodation & Food Service

12

Art, Entertainment, Recreation

7

Administrative & Support Services

6

Agriculture, forestry & fishing

6

Construction

6

Other

63

Total

100

Source: European Commission

6

2021, the EU economy will grow by 4% in 2022 and 2.8% in 2023. Growth in the Eurozone is also expected at 4% in 2022, moderating to 2.7% in 2023. The EU as a whole reached its pre-pandemic level of GDP in the third quarter of 2021 and all member states are projected to have passed this milestone by the end of 2022.

A major issue, which the commission accepts, will be inflation, particularly fuel inflation. Again, according to the commission’s projections, overall inflation in the Eurozone is forecast to increase from 2.6% in 2021 to 3.5% in 2022, before declining to 1.7% in 2023.

It is also worth noting that we are now seeing a clearer picture of the drastic effects on trade between the post-Brexit UK and the remaining EU bloc. UK exports of goods to the EU fell by £20bn ($23bn) over the first year of Brexit, according to the Office for National Statistics (ONS).

Also, according to the ONS, UK goods imported from the EU were down almost 17%, or about £45bn, compared with 2018. In comparison, imports from the rest of the world increased by almost 13%, or about £28bn.

The situation in Ukraine aside, how have the major EU economies been performing? It seems France

is actually recovering faster than Germany – France’s economy recovered by 0.7% at the end of 2021 while Germany stumbled by 0.7%./ Sweden and Spain also saw some recovery.

The International Monetary Fund (IMF), in its latest economic forecast, said France would expand by 3.5% by the end of 2022, with 3.8% growth in Germany and Italy.

Politically it should be noted that while Germany has now gone through its political transition from Angela Merkel of the Christian Democratic Party to Olaf Scholz of the Social Democratic Party, France is facing a presidential election this year with incumbent Emmanuel Macron aiming to win re-election in April. Macron’s finance minister, Bruno Le Maire, has talked of a “re-industrialisation” of France with an emphasis on renewed manufacturing and greater levels of investment – Renault e-vehicles, everyday technology brands, etc.

Certainly, France’s apparently strong post-Covid bounce back should play in Macron’s favour though French unemployment remains higher than US, German or UK levels while government debt is high. This spring the French people will decide what direction they wish to go in economically. ● maritime ceo

ECONOMY CHINA

Covid shutdown

Maritime CEO picks apart Beijing’s economic data in the wake of crippling lockdowns

A

fter nearly two years of seemingly holding covid at bay China appears to be slipping dramatically into a new wave that has seen globally unparalleled lockdowns that have been massively controlled and seen the government effectively taking over food supply logistics in major cities.

While attention has, for obvious economic reasons, focussed on the 25m strong megalopolis of Shanghai dozens of other mainland cities have also been in equally harsh lockdowns including many with sizeable industrial and manufacturing bases.

The staggering images of the number of vessels off the coast of Shanghai alone indicates the size of the problem and the knock-on effects that will be felt for some considerable time both in China and throughout the global supply chain.

Yet, inexplicably to just about every economist China’s central government is claiming China’s

gross domestic product growth accelerated to 4.8% in the first quarter of 2022, from 4% in the final three months of 2021. This despite disastrous property sales numbers and lockdowns imposed in dozens of cities including the economic powerhouse of port and manufacturing centre of Shanghai. This seems to be unbelievable given purchasing managers indices, chamber of commerce member polls, electricity usage stats and, of course, port data.

Real estate development is at a halt and, given that real estate development accounts for 20% of GDP, the remainder of China’s economy would have to growing at a remarkable 7% – retailing, e-commerce, tourism, hospitality, all growing at higher than previous levels for a decade, during lockdowns. Seemingly impossible.

Given this situation it is impossible to view these recent statistical announcements as anything but

China-India Trade 2021 – Moving in the Right Direction Year

Imports ($bn)

Exports ($bn)

Growth (%)

2020

26

43

67

2021

9

15

65

Source: China General Administration of Customs

ISSUE TWO 2022

politically motivated. As one analyst told Bloomberg, if the government is going to seriously stick to the 4.8% statistics then that starts to raise broader questions about the longterm credibility of the data.

So, what was first quarter growth? Most analysts come down somewhere around 2% GDP growth year-on-year. And there’s also the seemingly impossible official stat that disposable income rose 5.1% in real terms in the first quarter of the year. Credit Suisse in a household survey of 56 cities has calculated that genuine income growth averaged only 1% over the period.

The covid lockdowns also mean that imports have largely collapsed and while some factories have reportedly got back to work they will soon run low on inputs if the lockdowns continue at the currently severe level. Meanwhile, with the major ports mostly closed, exports are backing up to alarming levels.

It may yet still get worse.

Shanghai appears a long way from full openness again, and if the zerocovid policy is adhered to in the future other major cities could find themselves in similar quarantine situations to Shanghai. ●

7

ECONOMY INDIA

Lowered expectations India will be the world’s fastest growing large economy for the second time in a row this year, but growth will not be as strong as originally forecasted

T

he global situation – covid, the Russia-Ukraine War, rising commodity and fuel process – are all impacting India’s economy leading to downward revisions of previous growth forecasts for 2022-2023. Most estimates now argue that GDP growth for the year will be less than the previously forecast 7% (though some analysts, most linked to the government as well as the International Monetary Fund, estimated 8.2%). Yet, India is seemingly putting the pandemic behind India: Who Does What?

Employment Statistics, 2021 Year

GDP Growth/Fall (%)

Agriculture

53

Manufacturing

11

Construction

11

Trade

9

Transport

4

Hospitality & Real Estate

3

Education

2

Government

2

Others

5

Total Source: Indian Government

8

100

itself and, with China in seemingly never-ending and harsh lockdowns, India will be the world fastest growing large economy for the second time in a row this year and into next.

The biggest threats to growth are sharply rising fuel prices and high food inflation. Job recovery seems strong in most sectors except, perhaps surprisingly, IT. However, the most interesting story coming out of India is the boom in exports post the worst of covid restrictions.

India’s merchandise exports rose 24.22% year-on-year in April to $38.19bn, according to preliminary government data. Petroleum products, electronic goods and chemicals led the Indian exports charge, according to the commerce and industry ministry in New Delhi.

Still many Indian manufacturers cite rising logistics costs and increases in raw material prices as factors that will hold back both their expansion and investment. High freight costs are of particular concern given the size of the country. As well as manufacturing service exports for the month of March hit $22.52bn, a positive growth rate of an impressive 8.31% vis-a-vis March 2021.

There are concerns over food production and security. Heat waves have threatened crops, especially wheat. This, combined with issues over sunflower oil imports from war-torn Ukraine, may have some serious impact down the line in the second half of the year. India’s seemingly neutral position on the war in Ukraine is having some negative effects - exporters who had exported their products to Russia are finding it difficult to get paid due to the sanctions imposed on Moscow by the United States and the European countries.

Still prime minister Modi is taking the signs and data so far this year as generally encouraging given price volatility globally, the China slowdown and the Russia-Ukraine war. Modi is also taking heart from strong growth in trade between India and China – 67% up for imports and 65% for exports. That will be hit in 2022 due to China’s covid lockdowns, but it’s still a stronger relationship at a trade level. And Modi is working to improve ties with Europe, visiting several EU countries and also welcoming prime minister Johnson from the UK to India in April. ● maritime ceo

ECONOMY REGULAR BRAZIL

The repetitive nature of stagflation Latin America’s largest country continues to struggle

A

pologies if you get a sense of déjà vu reading this column, feeling you’ve read it before.

But Brazil’s economy is in stagnation and so the news and analysis is tending to the repetitive. And it seems that it is likely to continue this way throughout 2022 and into 2023. Unrelenting inflation is curtailing consumer spending creating a cycle of stagnation. Meanwhile politicians and policymakers appear to have few sensible answers to the problem. After recovering 4.6% in 2021 after the worst of the coronavirus pandemic onslaught, Brazil’s gross domestic product (GDP) is forecast to expand a paltry 0.5% Brazil: Major Energy Consumption by Fuel Type, 2021 Fuel Type

% of total

Petroleum

38

Hydro

29

Renewables

16

Natural gas

11

Coal

5

Nuclear

1

Other

5

Total

100

Source: US Energy Information Bureau

ISSUE TWO 2022

this year and an uninspiring 1.5% in 2023, according to the median estimate of 43 economists polled last April. These new numbers are a downgrade on previous government and International Monetary Fund (IMF) estimates.

Brazil, of course, is benefitting from both higher commodity prices and the attempts by many countries to diversify away from Russian commodities in the wake of the war in Ukraine. This is improving the near-term outlook for Brazil’s economy and is likely to encourage greater levels of investment in the commodities and energy sectors.

However, this boom may be offset by rising inflation hammering consumer sentiments and consequently spending and retail sales. Most analysts expect the central bank to raise interest rates again this year, at least once. Consumer prices have now risen, on average, over 11% in the last year.

It’s not clear what levers president Jair Bolsonaro feels able or willing to pull to try and jump start the Brazilian economy out of stagnation. Salary rises for government officials now look less likely than before. Even though it might

be a temporary salve Bolsonaro already has a lot of government debt to resolve without adding to it for temporary political gain.

It’s worth taking a moment to consider that though Brazil remains in stagnation it is still arguably doing better than some other neighbouring and regional economies.

Mexico’s growth estimates have been slashed more than Brazil’s - to 1.9% in 2022 and 2.1% in 2023 from 2.8% and 2.2% respectively following higher than expected inflation rates.

Similarly Argentina is seeing some resumed growth post-covid, but nothing exceptional.

As mentioned before Brazil’s exports are doing reasonably well, especially fuels. However, there are other factors aside from the covid lockdown in China and Ukraine war issues. Drought has ravaged the country’s soybean and corn crops, particularly the lucrative soybean second crop. Brazil’s corn exports in the 2020-21 marketing year were 40% lower than in the prior season because of the poor crop. The US Department of Agriculture predicts 2021-2022 exports at a record 44.5m tonnes, more than double the previous year. ●

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MARKETS DRY BULK

No Shanghai headache The coming months look promising for dry bulk

T

he bulk carrier freight market has shrugged off China’s lockdowns in May. China’s iron ore imports continued to lag their year-ago numbers, reaching an estimated 90.3m tonnes in April after 87.7m tonnes in March and 85m tonnes in January, according to bulk cargo tracking outfit Oceanbolt. For reference, volumes in February to April 2021 were 88.3, 97.5 and 91.8m tonnes. May’s imports could turn out to be highe. Estimated imports were already 61.2m tonnes for the first 17 days. Second, iron ore freight rates from Australia to China have improved 77% from $8.91 on April 19 to $15.74 on May 18. Improved activity levels in the capesize fleet have moved the dial on the Baltic Exchange’s capesize 5TC average from $11,127 on April 19 to 34,531 on May 18, a three-fold increase.

The Baltic Exchange’s panamax time charter average for April was $25,181 compared to $26,110 in March, while in the first 17 days of May it was $27,533. The year to date average is $23,270, following the 2021 average of $25,408. A theme is emerging here of steady, profitable levels – a kind of sunlit uplands whence panamax owners would be disheartened to depart. Fortunately, the fundamentals of supply and demand, and the auguries of most shipbroker research departments, suggest that their sun-soaked sojourn could last

ISSUE TWO 2022

several years yet.

Grain export volumes this year are over 200m tonnes, suggesting that (with seasonal adjustment) last year’s 587m tonnes could be beaten, because of rather than despite the potential loss of exports from Ukraine as other exporters take up the slack. In May, India banned wheat exports, which amounted to 7m tonnes over the previous seven years, so the announcement has caused more media excitement than in the commodity trading markets.

Even so, wheat prices added 6% on the news and traders suggest the export ban will add to the shape-shifting global grain market.

Coal, the other major panamax cargo, also continues to rise in price, with Australian exports hitting $400 a tonne on May 15. China and India remain the big buyers of Indonesian and Australian coal respectively.

Although China wants to raise domestic production by 300m tonnes from this year to insure against high prices, importers are being encouraged to source more overseas product as domestic lockdowns limit the cabotage trade. Global coal exports were 122m tonnes in March, the third highest monthly total on record. April export volumes were down to 114.5m tonnes, while estimates for May are around 112m tonnes. A hot summer beckons in the northern hemisphere, which may

drive coal demand for electricity generation as several billion air conditioning units are switched on.

As usual, supramax time charter equivalent earnings have broadly tracked and exceeded those for panamaxes. The Baltic supramax 10TC average rose 9% in the month to 18 May when it hit $30,336. The year to date average is $26,533, just $130 a day short of the full year average for 2021. The recent rise could be due to a big recovery in Chinese steel exports.

Global steel exports of 148m tonnes last year returned to the long-term average after the 2020 fall to 126m tonnes. Global export volumes of 47.5m tonnes in the first four months of this year suggest that they should approach last year’s total. Last year’s 132m tonnes global forest products exports will take some beating, being an all-time record above 2018’s 125m tonnes. But 44m tonnes of exports in the first four months of 2022 including 12m tonnes in March and 11m tonnes in April suggest another bumper year this year.

For now the geared bulkers are doing very nicely thank you with the Baltic Exchange’s handysize average rising from $28,800 in April to $29,718 for the first 18 days of May. No wonder that handysize five-yearold values have almost doubled this year to $28.5m according to handy specialist broker Hartland. ●

11

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MARKETS TANKERS

Why it pays to be long on product tankers China’s health policies have a lot to answer for when it comes to tanker fortunes

T

anker owners’ opinion of the last few weeks will be formed by the constitution of their fleet. On the whole, owners who are long products tankers and short crude oil tankers will be happier.

The problem is China, the world’s biggest crude oil importer, the second biggest refiner, ahead of the EU but behind the US, and usually a leading exporter of refined products.

The Chinese government’s public health policies have now shuttered in around one third of the economy for over a month. Transport fuel demand is down in China with consequences all the way along the supply chain to the tanker markets.

Chinese demand for gasoline, diesel and aviation fuel fell about 10% year on year in April – or about 1.2m barrels per day to about 12.7m barrels per day. Independent refiners slashed utilisation rates to barely

ISSUE TWO 2022

above 50% of nameplate capacity as onshore storage for crude and products filled up. The big state-owned oil companies were running refineries at about 70% capacity. This led to pleas to central government to be allowed to export more product. Those pleas appear to have been denied. The rest of the world should thank President Xi for his intransigence; higher Chinese oil demand could have added another $10 or $20 to benchmark oil prices.

The Baltic Dirty Tanker Index recorded a fall of 38% from April 12 to May 18 giving up all the unseasonal gains it had made in March and April. Thanks, China.

China’s oil demand is expected to show a recovery of up to 0.5m barrels per dayin May and to move upwards from there as lockdowns ease. But this might not offer succour to crude oil tanker owners, as refiners have to work their way through expensive inventories before making additional spot purchases of crude. China’s crude oil stocks hit a 10-month peak of 924.7m barrels according to data crunchers Kpler.

In the clean tanker market, the consequences of China’s refinery go-slow have been more beneficial to tanker owners as Asian consumers have turned elsewhere for product.

Earnings on TC1, the Baltic’s Mid East to Far East LR2 benchmark, soared from $9,094 on April 12 when VLCC earnings topped out, to

$43,305 on April 29 and rose further in May to a peak of $64,444 on May 11, since when they have given up around 12% to land at $52,631 on May 18. TC5, the Baltic Exchange’s measure of earnings for the same route but on smaller LR1 ships, has shown a four-fold increase over the same dates, from $11,787 on April 12 to $44,074 on May 18. TC15, which measures earnings on Algeria-Japan, has shown similar improvements, rising from $-8,150 on April 12 to $5,183 on April 29 then on to $18,434 on May 18.

By contrast, Europe’s ban on Russian oil products has not led to an increase in rates for ships bringing gasoil to Rotterdam. MR tankers carrying gasoline from ARA to the US East Coast have done better.. US gasoline prices are over $4 a gallon in every state now, averaging $4.48, but this is not dampening demand which increased 3% week-on- week to May 16, as analysts say consumers can bear prices as high as $6 per gallon before they lift their feet off the throttle.

The hot LR2 market coincided nicely with a four-ship newbuilding order from Navios Maritime Partners, which is reported to have paid $58.5m each for the ships with five-year charters attached for the first couple. After a blank first quarter for crude oil tanker orders, there still have been none in the year to date. ●

13

MARKETS CONTAINERS

How to spend those billions of dollars Cash-rich liners are spreading their wings

O

cean Network Express (ONE) is the latest liner company to report record full year net profits, in its case for the year to March 2022. Its net profit increased near four-fold to $16.8bn as it put the last of its restructuring costs behind it and focused on wringing every dollar it could from the booming freight market.

The big liner companies have been spending their profits on massive quantities of newbuildings which now are approaching nearly 30% of the fleet’s capacity, a number which threatens to derail the prospects for the liner freight market, once they all deliver by mid-2025.

This year alone 149 fully cellular ships have been ordered across all size ranges, but only two contracts have been inked in April and May, a pair of 2,713 teu vessels, both for clients of Columbia Ship Management.

Having maxed out on new ships, the liners are now looking for ways to integrate themselves more firmly into global supply chains. Air cargo is fashionable and CMA CGM is the latest to take to the skies, taking a 9% shareholding in Air France-KLM. The tie-up includes a 10-year deal to share and cross-sell freight capacity. CMA CGM will also contribute four air freighters it bought in 2021

ISSUE TWO 2022

to the six currently owned by Air France-KLM. Across the border in Switzerland, MSC is jointly bidding with Germany’s Lufthansa to acquire ITA Airways, Italy’s successor to Alitalia. Maersk announced in April its new Maersk Air Cargo business, a physical aircraft operator to act as air freight provider to the rest of the group, taking over the old Star Air brand in the process. Maersk aims to control one third of its air freight directly.

The profits meanwhile look like they will keep coming in during 2022.

The Freightos Baltic Containerised Freight Index has slipped further from its September 2021 peak to $8,236 on May 13, but that is still more than four times the pre-pandemic long term average of around $1,800. T In part, these still high freight rates remain a function of shoreside bottlenecks. ONE’s CEO Jeremy Nixon told a recent analyst call that shortages of rail, port and trucking workers continue to hamper global supply chains. Congestion appears to be increasing now in Guangdong province as liners have moved port calls from Shanghai to Shenzhen.

Genscape data show a huge rise in containerships in or near Pearl River

Delta ports from 85 to 184 between April and May, as the count around Shanghai, Ningbo and Zhoushan has fallen from 230 to 187.

A May 2022 survey of 200 market participants for Container xChange found that 51% of respondents expect the 2022 peak season to be worse (as in more disrupted) than 2021, while 26% expect things to be better and 21% expect the level of disruption to be the same. 38% of respondents said they have been shipping early to beat peak season delays and costs, though the addition to inventory days carries its own cost burden.

The liner companies are incurring extra costs from chartering in tonnage to fill gaps in their schedules. The time charter indices are just as stratospheric as the freight indices though they also show a month-onmonth decline. Take for example the VHBS Time Charter ConTex index, which rates a 12-month time charter on a 5,700 teu ship at $119,067 per day in May compared to $46,210 in May 2021 – amazing numbers for a ship which was looking at being scrapped a few years ago when the new locks opened in Panama. These prices may explain in part why the liners have decided to order more ships and directly control more of their own fleets. ●

15

MARKETS FINANCE

Shipping readies to party Dagfinn Lunde from eShipFinance.com on the likely talking points at Posidonia

U

nquestionably there is an extraordinary buzz about June’s return of Posidonia, shipping’s most fun gathering - it is clear the Greek event has been missed.

Up for discussion I imagine will be the demise of international banking. Latest data for Q1 shows the lowest syndicated loan volumes to shipping on record. Both the number and the volume of deals are so minimal as to be amazing - and when it comes to offshore it is non-existent.

More syndicated loans have been club deals, with fewer open deals. It really is astonishing.

Looking at Petrofin data pertaining to the Greek market, while most international banks continue to scale back, local banks are upping their game. Greek banks now rank second, third, fourth and seventh in the Petrofin Greek ship finance charts - only Credit Suisse is bigger.

Among the traditional banking names that have serviced this market for so long it is only BNP Paribas that continues to grow.

More generally we see the east gaining ground led by the

ISSUE TWO 2022

Japanese and Chinese and a lot of private equity firms are growing very strongly, mainly via leasing structures.

Despite the tough times most households are facing in 2022, I am expecting some rather lavish parties in Greece - shipping can afford to lay on a mega bash this year.

I recently spent a few days in Hamburg and the German shipowners were discussing what to do with all their cash. In 40 years in this industry, I’ve never heard such talk. Ships in so many sectors are raking in money - the cross-sector ClarkSea Index stands at $44,357 a day, with the average in the year to date up 158% on the 10-year average.

Likewise, I love the stat I read from John McCown recently that container shipping profits in the first quarter of 2022 beat out those of FANG—an acronym for Facebook, Amazon, Netflix and Google—by 103%.

With all this cash pile, owners can’t do their normal instant reflex which is to sign contracts with yards in Asia. For once, they are sitting on huge reserves and cannot destroy

their markets as they’re unable to get a newbuild berth before 2025. We are truly in a new world of shipping with the only risk as I see it being demand destruction.

Elsewhere at Posidonia, I imagine all things green or sustainable will be the main talking point.

Incoming pollution regulations and the urgent need for green tech solutions will likely dominate discussions as will talk of carbon levies and spiralling bunker bills.

You look at what some bureaucrats are saying about cars - such as banning petrol cars by the end of the decade - and it gives one pause for thought. What would happen if they did the same for shipping? A wholesale fleet replacement would be an environmental disaster in terms of the products and pollution needed to build a new fleet. I’ve been saying for years shipping needs to focus far more on retrofitting. Retrofit finance is readily available - you just need to call it something green and/or sustainable and financiers will fall over themselves to lend you capital these days. I look forward to catching up with many of you in sunny Athens shortly. ●

17

EXECUTIVE IN PROFILE DEBATE

Shipping and inflation Are ships a good hedge against today’s sky-high inflation? Many owners reckon so, but famous economists show the historical pitfalls of such theories

T

he last time global inflation was this rampant Ronald Reagan had recently turfed Jimmy Carter out of the White House, Raiders of the Lost Ark was about to be premiered and Soft Cell’s Tainted Love was top of the UK charts.

Inflation is now a daily front page news item, with families around the world tightening their belts, looking at every aspect of their weekly spends as soaring bills hit home.

Inflation has become a “clear and present danger”, a recent blog post from the International Monetary Fund (IMF) stated. The IMF is projecting inflation will remain elevated for a long time.

18

“The risk is rising that inflation expectations drift away from central bank inflation targets, prompting a more aggressive tightening response from policymakers. Furthermore, increases in food and fuel prices may also significantly increase the prospect of social unrest in poorer countries,” the IMF warned.

The World Bank has also been discussing inflation, saying recently that the ongoing war in Ukraine will result in expensive food and energy

“

for the next three years, intensifying fears that the global economy is heading for a rerun of the weak growth and high inflation of the 1970s.

For shipping, however, many would argue today’s once-in-a-generation economic outlook is favourable.

At Slide2Open’s recent Shipping Finance conference in Athens many shipowners discussed inflation.

“We are in a high inflationary environment and obviously this

High energy and steel prices will push up newbuilding and demolition prices and so be supportive of the entire secondhand price curve

”

maritime ceo

EXECUTIVE IN PROFILE DEBATE

helps – it is good to own hard assets today because it helps protect investments,” Goldenport’s John Dragnis told delegates, a point picked up by George Gourdomichalis from Phoenix Shipping & Trading on the same panel, who said: “We are living in an inflationary world and that’s good for shipping.”

Tobias Koenig, managing director of ship investment vehicle Lexington Maritime, reckons hard assets, such as ships, will indeed generally benefit from inflation and protect investments.

In a high inflationary environment, real hard assets like ships ought to appreciate, agrees Khalid Hashim, the managing director of Thai dry bulk owner, Precious Shipping. Moreover, with the ongoing inflation of commodity prices, shipping rates ought to also increase, Hashim reckons, especially with the likely increase in ton-mile demand thanks to the ongoing Russian war in Ukraine.

Lexington Maritime’s Koenig suggests that right now, at this point of the cycle it pays to be a shipowner.

“The charter rates are very healthy, the asset values are good and as long as the prices for raw material and the cost of labour will go up, you know that new vessels will be more expensive,” Koenig says.

This is even more relevant, he argues, as Chinese shipyards are still hurting from Covid-19 disruptions and the focus is on high quality Korean shipyards, which has an impact on pricing exceeding inflation. In addition, rising ship values are meeting increasing financing costs.

“That’s more than a shipowner could hope for,” Koenig says.

Phillip Clausius, who heads up ship investment corporation Transport Capital, points out that whilst ships will always remain depreciating assets it is reasonable to assume that the depreciation rate of vessels in the water will significantly slow – or even intermittently turn into value appreciation – in the current high inflation environment.

ISSUE TWO 2022

Tim Huxley, chairman of Hong Kong-based shipowner Mandarin Shipping, tells Maritime CEO that while historically inflation is beneficial for shipowners as it is an investment in hard assets, he warns that if inflation shrinks growth and prompts a recessionary environment, then it is not good for anyone.

Roar Adland, shipping professor at the Norwegian School of Economics, agrees that owning real assets, like ships, can be a way to protect an investment portfolio.

“High energy and steel prices will push up newbuilding and demolition prices and so be supportive of the entire secondhand price curve,” Adland says.

However, the kind of inflation the world is experiencing now is supply-driven, Adland argues, telling Maritime CEO: “There’s simply not enough stuff to be shipped around.”

In addition, as mentioned by Huxley earlier, high prices of inputs eventually lead to demand destruction, and so, says Adland, this kind of inflation is likely bad for the growth in seaborne transportation.

“Add in the effects of less easy financial conditions from global central banks and a potential deconstruction of global trade into the West versus the rest and you could easily see poor earnings at the same time,” Adland says, referring readers back to the 1973 oil tanker crisis.

Also diving into the shipping history books to provide perspectives on today’s economic environment that shipping finds itself in is Dr Martin Stopford, the world’s most famous maritime economist, who tells owners to be careful what they wish for.

While a modern panamax is worth $36m today, a massive 64% more than its $22m price 18 months ago, this is down to volatility, not inflation, Stopford argues, pointing out that 20 years ago in April 1990 a modern panamax also cost $22m and it’s been going up and down ever since. Even a $22m deposit at LIBOR in 1992 would have done better – it’d be now worth $44m.

“Using ships as an inflation hedge may sound good but needs careful thought,” Stopford advises.

An objection to the above is that there was not much inflation in the last 30 years, which is true. The US consumer price index has averaged only 2.5% per annum. However, if readers dial back the clock to the time of Carter handing the keys of the White House to Reagan, the period from 1979 to 1981 saw rampant inflation – 11.5% in 1979, 13.5% in 1980, and 10.3% in 1981.

The scenario shipping faced in 1978 was very similar to the one shipping faces today, according to Stopford, the author of Maritime Economics. Initially ships did well.

In 1978 a new panamax bulker cost $15m and by 1980 it had doubled to $30m.

“Investors saw the merit of getting their cash – and their bankers’ cash – into floating assets and the predicted boom in the thermal coal trade fanned the flames,” Stopford recounts, adding: “Just to clinch the deal, the yards did a great job selling their new generation of ‘market proof’ eco bulkers.”

The year 1980 saw a new record for bulk carrier contracting but inflation was only half the story. As today, the inflation was driven by escalating oil prices. This proved to be deeply deflationary, grabbing consumer cash and driving world industry into deep depression. Inevitably, the record new bulker deliveries coincided with the trough, causing a deep bulk shipping recession and driving the panamax newbuilding price down to $13.5m in 1985. To illustrate the depth of the depression, Stopford recounts how a new panamax bulker contracted for $30m in the early 1980s was delivered in 1986 and resold a few months later for $8m.

“This was shipping’s only encounter with super inflation over the last 70 years, and let’s hope history does not repeat itself,” Stopford says, adding: “So although ship asset price inflation feels good, super inflation is deadly serious and you need watch your back.” ●

19

IN PROFILE

Bob Burke p.33

Gary Vogel p.31

In profile this issue Maritime CEO correspondents report from the recent Capital Link and Marine Money conferences where many top shipowners spoke

20

maritime ceo

IN PROFILE

Constantin Baack p.25

Simeon Palios p.22

John Xylas p.27

Philippos Phillis p.29

ISSUE TWO 2022

21

COVER STORY

The life and times of Simeon Palios The winner of this year’s Capital Link Greek Shipping Leadership Award reflects on his 53 years in shipping

S

imeon Palios is a well-known Greek businessman and shipping veteran who has spent more than 50 years in the industry. He founded Diana Shipping Agencies in 1972 and is presently the

Dedicated coverage of Greek shipping

22

chairman of Athens-based bulker owner Diana Shipping and president of Diana Shipping Services.

Coming from the island of Chios, the birthplace of many powerful Greeks, Palios has been named the “game-changer” of Greek shipping many times during his journey.

He transformed Diana Shipping from a purely family business that began to develop its fleet in partnership with friends and family, into an international investment firm listed on the New York Stock Exchange.

“I have had no regrets or doubts that it was the right thing to do for the long-term survival and growth of the company,” he said, interviewed at Capital Link’s recent Greek shipping event.

“It was also the only way forward in pursuing a successful business

“

I am optimistic that shipping is going to do well

”

strategy, which I and my senior management had to set out as a long-term business plan for Diana Shipping,” Palios said.

Palios’ career path includes being an ensign in the Greek Navy, a naval architect, and a marine engineer after graduating with a bachelor’s degree from Durham University.

His maritime contributions include membership in leading classification societies and service on the board of the UK Freight Demurrage and Defense Association. He was also chairman at Performance Shipping. maritime ceo

IN PROFILE

“

I have witnessed and enjoyed my fair share of good fortune

”

In terms of where he sees the shipping industry, bearing in mind the economic and geopolitical circumstances, Palios recently told Capital Link that covid, which he also fought off back in 2020, is causing the industry a lot of problems, especially in China, where the shipyards do not function properly and shipowners have delays in passing surveys and doing repairs, taking away a large amount of tonnage from the supply-demand equation.

With regards to opportunities, Palios thinks that a lot of needs have not been fulfilled by moving iron ore, coal, or, for that matter, fuel oil or gas, and it has to be filled by the end of this year. “The consumptions are running on about 4% a year on a cumulative basis so I am optimistic that shipping is going to do well,” he asserted.

This year’s Capital Link Greek Shipping Leadership Award was awarded to Palios in recognition and honour of his outstanding contribution to the shipping industry.

Commenting on the award, Palios reflected on his professional career, which he believed was guided by respect, decency, and transparency since the establishment of Diana Shipping Agencies.

Spot on

Diana Shipping Founded in 1971 and listed in New York, Diana Shipping has become one of the most famous names in dry bulk. Also owned by the same family is aframax specialist Performance Shipping.

ISSUE TWO 2022

Three words also came to him when thinking of dealings in the international world of shipping: transparency, discipline and clarity which he stressed are all so important yet sometimes either ignored or even made fun of by many.

From the early days, Palios managed to select and work with good and trusted partners and employees, all of whom were dedicated to the business and its success.

“Call it good fortune, or skillful choice of associates; it really does not matter because it does not change the fact that the team of senior regular executives gave me the chance to take advantage of work opportunities as they presented themselves all through the peaks and troughs of the shipping cycle,” he pointed out.

Palios is a firm believer that luck plays a huge role in the success of any venture, be it in shipping or any other industry. However, he noted that there are times that things do not come to pass as planned and that good luck needs to occasionally be given a helping hand as well.

“I’m proud to say that in my professional career I have witnessed and enjoyed my fair share of good fortune but also managed to steer the companies I have led out of troubled waters,” remarked Palios.

In February last year Palios stepped down as CEO at Diana Shipping, the company he had founded 50 years prior, handing over the reins to daughter Semiramis while retaining the position of chairman.

Similarly, another daughter, Aliki, now serves as chair of aframax specialist Performance Shipping, taking over from her father in January with her husband,Andreas Michalopoulos, the tanker firm’s CEO. ●

23

IN PROFILE

Boxship availability thins further Constantin Baack, chief executive officer of German feeder boxship specialist MPC Container Ships (MPCC) expects a tighter charter market next year

M

PC Container Ships (MPCC) supremo, Constantin Baack, reckons the market will see even fewer vessels open for charter next year.

The boss of the German feeder boxship specialist believes that despite the significant increase in macroeconomic uncertainties over the past couple of weeks, such as the Russia-Ukraine conflict, the zero covid policy in China, inflation and reduced growth outlook, the container vessel market has remained fairly tight.

For Baack, these uncertainties have basically caused a bit of a wait and see position when it comes to the charter market. Time charter rates have softened a bit over the last few weeks, but Baack argues they are still at historically elevated levels.

He observes a structural shift in the charter market within the past year towards more of a forward fixing, which for him takes a lot of capacity out of the market and basically translates into a very low level of muscle availability going forward.

“Usually in the last three years

Spot on

MPC Container Ships Founded in April 2017 and listed in Oslo, MPC Container Ships has 65 ships, most of which are fully owned.

ISSUE TWO 2022

we had around 1,500 vessels being available to the charter market and we entered this year with only 400 to 450 vessels being available and most of them are now charted out on longterm charters. So for the remainder of the year, we only see 200 to 250 vessels available to the charter market, which is unique and which, in my view, will be a very decisive factor when looking at the market going forward,” Baack said on the latest Capital Link podcast.

The Oslo-listed MPCC has had the most Lazarus-like reincarnation in the busy boxship market, swinging back to the black in 2021 with a net profit of around $190m against a net loss of $64.5m a year earlier.

It anticipates revenues in the range of $550m to $575m for 2022. The company reported another strong quarter recently, booking a profit of nearly $120m, and on the back of that, was able to increase its dividends to roughly $70m.

Baack joined the MPC Group in Hamburg in 2008, where he has since held various senior positions, including managing director of Ahrenkiel Steamship, head of shipping of the MPC Group, and CFO of Frankfurtlisted investment and asset manager MPC Capital. He has served as CEO of MPC Container Ships since its establishment in 2017.

He thinks that due to the fact that there are fewer charter vessels on an annual basis available, that will lead to a more sustainable charter market in terms of rates and periods.

“I’m sure we will see a bit of a softening down the road, but we are at

historical highs. We have a situation where you can lock in three-year charters at $40,000 or $50,000 for vessels of our size, which is very sizable and secures very strong revenue, Baack told the podcast.

He went on to note that all the market parameters suggest that the sector not go down to the very short charters anytime soon, in particular because the disruption is not over yet. “China is in lockdown as we speak and the port of Shanghai has handled 25% fewer containers in April, so there’s a lot of backlog and once this backlog is resolved, there will be more congestion and more disrupted supply chains, which will also fuel more demand for vessels,” Baack predicts. ●

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IN PROFILE

‘Regional regulations are problematic by definition’ Greek owners including John Xylas have plenty to say on the industry’s future green governance

A

t Greek shipping events these days, discussion does tend to focus on the governance of green shipping, something that will no doubt form a key plank of debate at Posidonia in June.

Discussing the latest developments in shipping regulations at the recent Capital Link Greek Shipping Forum’s twelfth annual conference, John Xylas, board member of the Union of Greek Shipowners (UGS) and president and CEO of Ariston Navigation, suggested that the European Union’s emissions trading system (ETS) is unnecessary for shipping and has two shortcomings, being both a regional system and a trading scheme.

“EU regulations are regional, and regional regulations are problematic by definition,” he said, warning that the system had originally been designed with land-based industries in mind and that it would be small- and medium-sized enterprises who will bear the lion’s share of the burden as and when the ETS starts for shipping.

Instead, Xylas proposed a levy system as something more appropriate and effective. He argued that to safeguard the sustainability of EU shipping, any proposed legislation by the EU must be compatible with the inherent characteristics of the international shipping industry while remaining compatible with the rules and standards of the International Maritime Organization (IMO). “The viability of EU shipping, which is primarily international and crosstrade, depends on the existence of an effective global regime,” explained

ISSUE TWO 2022

Xylas.

Launched in 2005, the EU ETS was the first large greenhouse gas emissions trading scheme in the world. For Xylas, the so-called “polluter pays principle” must be properly implemented, with suppliers of alternative green fuels taking their share of the responsibility as well.

“The commercial operator, the actual polluter who determines the cargo carriage, who determines the itinerary, the route, and the speed of the ship, must be made responsible for the cost of the compliance with the EU ETS directive,” Xylas said.

Citing Eurostat, Xylas said the EU accounted for around 15% of the world’s trade in goods with about 35%t of the fleet. He noted that half of that fleet is being used for cross-trading and servicing third parties, of which the majority is tramp shipping, which faces an additional burden as by nature it does not follow regular routes.

“Tramp owners do not know when, where, or at which speed the commercial operator will take the ship, so the commercial operator is structurally part of their business.

It’s not incidentally part of their business, therefore he should bear his

share of responsibility,” he argued.

On the subject of the EU’s proposal to set up a fuel standard and place the responsibility for compliance on the shipping company, Xylas and th UGS supported the proposal for the legal responsibility to be on the EU marine fuel suppliers and ships at EU ports, as well as the exclusion of the incoming voyages from the application of this regulation.

“The availability of the required compliant fuels worldwide is a matter of additional concern, as is the potential distortion of competition between EU and non-EU suppliers and ports, so I think it’s highly inappropriate to oblige ships to comply with this proposed regulation,” he said.

Xylas asserted that shipping needs a larger audience to influence how public opinion perceives the industry.

“Discussing things amongst ourselves is not good enough. I think the message has to be to go further away to the wider audience, not only to the regulators and the politicians and the NGOs and the media,” he told the conference. ●

Spot on

Ariston Navigation Piraeus -based, and now run by the fourth generation of the Xylas family. Principally involved in the dry bulk sector.

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IN PROFILE

The four pillars of decarbonisation Philippos Phillis, president of the European Community Shipowners’ Associations, on shipping’s green path

P

hilippos Phillis, president of the board of directors of the European Community Shipowners’ Associations (ECSA), is a strong believer that in a regulatory environment without enough clarity, cooperation between the operators and the shipowners is one of the most important links necessary to drive forward the decarbonisation of the maritime industry.

Speaking at this year’s Capital Link Greek Shipping Forum, the Cypriot shipowner and immediate past president of the Cyprus Shipping Chamber (CSC), highlighted four pillars of shipping decarbonisation: a technical pillar, a commercial one, a regulatory one, and what is called the fourth combustion revolution (alternative green fuels).

The founder and CEO of Lemissoler Navigation believes shipping entered the transitional period 15 years ago, with every ship delivered after 2013 already technically advanced and contributing to the actual reduction of the emissions of about 20% to 30%. As a mechanical engineer from RWTH Aachen, and a Harvard Business School (HBS) graduate, his Lemissoler is also active in research and development, with a focus on enhancing ship efficiency and decreasing carbon footprint.

For Phillis, close collaboration between owners and operators is now required to determine speed, consumption, and other factors, but he also stressed that coordination

ISSUE TWO 2022

with ports and direct communication with ships need immediate improvement.

“I think cooperation is a must and it’s something that will create a platform where commercially we can manage to gradually reduce the emissions. It is of course important to say that a missing part, and maybe something IMO should regulate, is the coordination between the ports and the direct communication with the ships to achieve the just-intime arrival,” he asserted.

Phillis raised questions and doubts about several new regulations being discussed or coming into force shortly, including the implementation of the EEXI, and CII criteria, and whether they would actually reduce carbon intensity.

He emphasised that from ECSA’s perspective, the upcoming regulations should be followed but also noted that they need to be “technology-neutral”.

“The aim of ECSA is to create or to at least have these regulations implemented without impacting on the competitiveness of European shipping first and to maintain the level playing field, which is very important,” he stressed.

When it comes to future fuels, Phillis reckons what is now very important is the lifetime cycle analysis for alternative fuels. “We need to calculate all these alternative fuels from well to wake and this is the reason we need green alternative fuels.

If they are black, it’s like you charge the battery car from the electricity

coming out of fossil fuels. It’s exactly the same effect, so it’s something that is very important for the IMO,” he said at the conference.

Phillis raised doubts about biofuels without changing the engine.

“I’m an engineer. I know that if you ask the main engine manufacturers they’ll say yes, but, and I think this might be a trap for the shipowners, therefore we have to look at it a little closer.” He pointes out that in order to incentivise shipowners to move to cleaner fuels, which are multiple priced, the industry needs somebody to bridge the price gap difference and maybe the instrument with the carbon contracts for difference. He also pointed to fuel suppliers, saying that there should be some kind of shared responsibility. “You cannot leave them out because they are the ones supplying the fuel. They have to issue their necessary certificates and be responsible for what they are doing,” he told the conference. ●

Spot on

Lemissoler Dry bulk concern, founded in Cyprus in 1996, with 12 ships in operation today.

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IN PROFILE

The public - private debate Eagle Bulk’s Gary Vogel on the merits of being listed

I

t’s been one of shipping’s most contentious debates for decades - the merits of being a public or a private shipping company., At Marine Money’s recent London Ship Finance Forum two well-known names in shipowning were on the same panel, one preaching the bonuses of being listed, the other (carried overleaf) on why private is best.

Gary Vogel, CEO of New Yorklisted Eagle Bulk, made a strong case for being a public company. His background, which included 15 years at privately held Clipper before taking the reins at Eagle Bulk in 2015, makes for a compelling case too.

The trick to being a successful public shipowning entity, according to Vogel, is to nurture supportive shareholders.

“It’s about you saying what you’re going to do and then doing what you said you were going to do and I think doing that through the cycle garners a trust from investors,”

Spot on

Eagle Bulk New York-based dry bulk player focused on supramaxes and ultramaxes with a fleet of 53 ships with an average age of nine years.

ISSUE TWO 2022

“

You get the shareholders you deserve

”

Vogel told delegates attending the event.

Having a clear investment focus, being transparent with strong governance, these are vital characteristics for a successful listed shipping company, according to Vogel, who quipped, “You get the shareholders you deserve.”

Of course there are many public companies who are making money on the side, something Vogel hit out about during the panel discussion, saying: “There are public companies that have related party transactions with fees going out to related parties in terms of commercial management and and technical management.”

Since Vogel took over nearly seven years ago, Eagle Bulk has been recapitalised through two private placements worth $200m and then

has carried out 49 S&P transactions.

The company is now cash rich, and as Vogel said, if it wanted to it could issue $30m of equity in just a few days to buy some ships very efficiently at the market levels.

When quizzed as to why ultimately public companies tend to still trade at a discount, Vogel argued that it was not all about NAV. “It’s about where you’re buying assets, it’s about using leverage when you issue equity and put on leverage and buy assets,” Vogel argued, going on to highlight how his company had bought nine ships in the latter part of 2020 and early 2021 that have gone up by almost 100%.

“Issuing equity at that time and using leverage to buy them has been incredible very accretive to our shareholders,” Vogel maintained.

Looking at market fundamentals for the dry bulk sector, especially the extremely low orderbook, Vogel said he was very positive for share prices for public dry bulk companies going forward. ●

31

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IN PROFILE

‘Shipowners at heart are somewhat of a gambler’ Bob Burke on the freewheeling freedoms of being a private shipowner

A

rguing the case skilfully for being a private rather than public shipowner was Bob Burke at Marine Money’s recent London Ship Finance Forum, who found himself on a panel with Gary Vogel from listed Eagle Bulk (see page 31).

The Ridgebury Tankers boss said he preferred the free reins he had to operate and argued his access to capital was as good as any listed counterpart’s.

“Public companies have a bit of a different agenda than the private companies,” Burke told delegates.

At Ridgebury, Burke said he could buy up an assortment of assets based upon how his company sees value with different parts of the age profile or asset class while most public companies have a “story” or “investment thesis” that they have to stick to fairly consistently.

“They can’t be all over the place otherwise their investors don’t know what they’re doing, they send mixed signals and it takes time to change,” Burke said.

Spot on

Ridgebury Tankers US-based owner with mix of VLCCs, suezmaxes and product tankers led by Bob Burke.

ISSUE TWO 2022

At Ridgebury, Burke recounted how he was able to very quickly transition from product to crude tanker purchases.

He did praise public companies for being efficient, professional sellers, unlike many private firms who can dither and change terms.

Burke also took time to slay the often trotted out line that public companies can access capital easier.

“With good investors behind you and a proven track record of what those investors will do if there’s a problem and a management team that has responded over time proactively to what the what the lenders expect you to do there’s as much access to capital as a public company,” Burke said, adding: “ As a private company we don’t have an ATM and a lot of the other things that [listed companies have] access

to but we have shareholders with big wallets.”

Then there is the issue of NAV the purchase price, the cash flow and the exit price.

Buyers of public companies often do not realise the exit value, Burke suggested, quipping: “What buoys the S&P market is the biggest fool in the world at that point in time puts a higher value on on the exit price so it over-inflates what’s the so-called NAV.” Ultimately, Burke said it was horses for courses. “Shipowners at heart are somewhat of a gambler and I think what the public companies provide is more of a trading platform for that asset class during a shorter period of time. They know they can get in and out efficiently if they have confidence in what the management’s doing,” he concluded.●

33

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ine ran through the veins of ancient Greek culture: it was central to religious ritual and to everyday life.

The Greek god of wine Dionysus, also known as Bacchus by the Romans, gave his name to Bacchanalian rituals which, as depicted on so many antiquities, were basically parties in which heavy drinking was combined with singing, dancing and lots of sex.

Mortals duly followed suit and wine was enjoyed as a social lubricant by all social classes, and by women

as well as men. Wine was also an important trading commodity and was exported all over the ancient world. It was stored in clay vessels called amphorae that were sometimes sealed with a pine resin which imparted its flavour into the wine – a drink that is still alive today in the form of retsina.

Trips to Greece at the turn of this century were not fondly remembered for the wine - they tended to be more retsina and beer fuelled.

Greece has however, in the last

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Up with the best

D

rop have teamed up with EPOS, Sennheiser’s gaming unit, to produce what many have lauded as the best gaming headset available. A step up from their previous PC37X offering, with newer drivers, these are open-backed headphones. This means you will be able hear what’s going around you, and other people will be able to hear some of what you can, so you may come under fire from people other than just gamers. However, open backed headphones make things sound bigger and better, and audiophiles heartily recommend them. The microphone is also wonderfully clear compared to many competitors. It comes with a bag, a different set of ear pads and cables for separate or combined 3.5” jacks.

Drop + EPOS PC38X Gaming Headset drop.com $170

DAC attack

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ith a cracking gaming headset like the above, it might also do you ears good to get a DAC system. You could do a lot worse than the Sennheiser GSX1000: This USB driven DAC is beautifully designed, easy to use, and offers the best 7.1 sound simulation we’ve heard so far: the audio positioning is just completely intuitive — characters in the game are to be found exactly where they sound like they are. It has settings for music and movies, although we’re a lot less blown away by this as we are by the 7.1 staging. And it has a separate mixing channel for chat, so you can adjust your chat channel independently of the game audio.

EPOS Sennheiser GSX1000 www.sennheiser.com $230

Octopus’s garden

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lade Runner 2049 fans will be disappointed to learn that although you can now be a Nexus 9, it has nothing to do with replicants. Submarine enthusiasts on the other hand will be ecstatic. We mentioned U-Boat Worx’s previous two-seater offering, the Nemo: they now have the Nexus on offer, which seats up to nine people and can dive down to an astonishing 200 m (20 m shy of the rated depth for a WWII U-Boat). It pootles along at three knots, weighs 12 tonnes and has an 18-hour endurance. The company provides training (or crew), maintenance and tech support, and builds each to customer specifications, which means we can’t give a price, but if you have to ask…

Nexus Submarine www.uboatworx.com Price unknown

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REGULAR BOOKS

The Middle Kingdom in the Middle East

How China interacts with its key oil supplying region is the source of a raft of new studies

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hina has long relied on the Middle East to secure much of the oil needed to fuel its rapid economic development. Since China became a net importer of oil in 1993, the Middle East has emerged as an increasingly important source of this critical commodity. Despite China’s years-long efforts to ramp up local production and diversify its sources of supply, the PRC’s dependency on the Middle East for crude oil remains. In 2020, China imported crude oil that totalled approximately $176bn. Almost 50% of oil imports came from Middle Eastern countries so it is perhaps worth understanding a little more about SinoMiddle Eastern relations.

The Routledge Handbook on China– Middle East Relations brings together a range of scholars to provide valuable analytical insights into how China’s growing Middle East presence affects intra-regional development, trade, security, and diplomacy. China is clearly the largest extra-regional economic actor in the Middle East. China is also the biggest source of foreign direct investment (FDI) into the region and the

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largest trading partner for most Middle Eastern states. Essays cover political and security affairs, as well as the value of Chinese assets combined with a growing Chinese expatriate population in the region. The handbook also looks at the ups and downs of the Middle East’s relationship to the United States, Russia, India, Japan, and the European Union in comparison to China.

Motjaba Mahdavi and Tugrul Keskin’s Rethinking China, the Middle East and Asia in a Multiplex World is more for those who have a deeper interest in AsiaChina-Middle Eastern relations. While the Middle East is the central focus there are also interested and related chapters on China’s complex relations with Iran, Turkey, Egypt, Pakistan, central and south Asia. Mahdavi is professor of political science at the University of Alberta while Keskin is professor of global economy studies at Shanghai University.

Dawn Murphy’s China’s Rise in the Global South: The Middle East, Africa, and Beijing’s Alternative World Order is a very prescient title that raises many issues about Beijing’s relationship with

the Middle East and sub-Saharan Africa beyond. Murphy, an associate professor of international security studies at the US Air War College, draws on extensive fieldwork and hundreds of interviews, compares and analyses 30 years of China’s interactions with these regions across a range of functional areas: political, economic, foreign aid, and military. From the now much troubled Belt and Road Initiative (BRI) to the founding of new cooperation forums and special envoys, China’s Rise in the Global South offers an in-depth look at China’s foreign policy approach to the countries it considers its partners in SouthSouth cooperation. Of course, the book considers the increasing competition for power between China and the US for influence in the Middle East.

With oil and gas supplies back on the agenda in a big way with the Russia-Ukraine war, China’s relationship with the Middle East, where many, especially perhaps the Europeans, will want to source more oil as sanctions are enforced, the Sino-Middle Eastern relationship has never been more important to understand. ●

maritime ceo

REGULAR TRAVEL

Cue Crete Sam Chambers and family head to Greece’s largest island

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he strategic island of Crete was fought over for 3,000 years before finally becoming a part of Greece in 1913. For the uninitiated it is a pretty big place, the fifth-largest island in the Mediterranean and the largest of all the Greek islands - to drive east to west would take a good six hours.

At the risk of being pilloried by our Greek readership for the next massive generalisation, the island can be split from west to east with the former being best for beaches and the latter for archeological sites. With a wife who is an archeologist and an eight-year-old full of energy and a keen swimmer, the option was a tough one when we visited in May, but the child won over and we focused on seasides over antiquity.

Crete is wonderfully independent as befits a place that has been tussled over by so many races for so long. It has its

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Crete is the fifth-largest island in the Mediterranean

own vibe, an extraordinarily welcoming place that is big enough to withstand mass tourism - it still feels wild despite a doubling in tourist numbers over the last couple of decades. Come earlier in the year, as we did in May, and be greeted by unexpected snow-capped peaks while taking a dip in idyllic, azure seas.

If you only have a week or 10 days then stick to one part of the island - in our case, the west.

Beach places to visit in this corner of Crete include a number that rank among the most stunning in all of Europe. Must visit sandy spots include Elafonisi, tucked away in a remote pocket of Crete’s southwestern corner, Falassarna, a broad sweep of beach out

in the far west, and the vivid turquoise waters and wonderfully wild and remote setting of Balos in the northwest, for which an entire day’s boat trip is recommended.

Base yourself out of the wonderful Venetian surroundings of the former Cretan capital of Chania, go for cocktails at the yacht club at the far end of the marina, visit the maritime museum, eat at Semiramis to enjoy the local music or Stelios for the seafood. Stay at the Hotel Amphora on the edge of the lovely harbour, and, please, honourable mention here, if in need a quick coffee pitstop while heading west to one of the beaches do call in at Freshness at Kolymvari. ●

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REGULAR OPINION

Encouraging diversity Claudia Paschkewitz, managing director at Hanse Bereederung, tackles one of shipping’s thorniest issues

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hipping must attract talented people if it is to grow and prosper, but to attract the right diverse workforce, it must be seen to be interesting. And to achieve this, shipping needs to understand what interests’ society, particularly when it comes to the younger generation. The maritime sector needs to sell itself better to gain market interest and new recruits. We need to move away from the staleness of the maritime sector with suit-wearing businessmen, to a more hybrid approach where the young have the work freedoms they desire.

The problem with diversity is that some organisations can overthink it by making it a tickbox operation as opposed to a natural operational mindset change. Also, we can’t change the existing structure immediately as this would disrupt business operations. Change takes time. To start change, businesses need to review their messaging from senior management down.

The market needs to be more open-minded and generous in its outlook on what the next generation

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requires The key issues interesting the next generation are the environment, sustainability and diversity. The maritime industry needs to deal with these topics and implement them successfully to recruit fresh blood.

Young people use social media, and so the maritime sector needs to jump on the band wagon and use it to proactively raise shipping’s profile and make our sector attractive. No-one will want a career in a traditional business which lacks excitement, drive and interest.

Covid shone a light on the maritime sector which helped to raise its profile. Because we ordered our goods online and needed them quickly, the public quickly recognised shipping’s importance. Trade is pivotal but if the man in the street doesn’t acknowledge or value it, then we’re going to struggle to drive in fresh talent. The industry must be open to change. I’ve been in the sector for 30 years and have seen a lot of change, but as with everything there’s still room for improvement.

It is a process that must come from

We need to move away from the staleness of the maritime sector

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within businesses; the leadership culture has to match the set targets otherwise progress will not be made.

However, as we’ve seen with Covid, external circumstances often influence and accelerate this process.

When the younger generation become the decision-makers, the issue of diversity will strongly improve because there won’t be any divides. Industry will naturally evolve to become more diverse.

Research on Generation Z shows they seek meaningful work where they’re making a difference. They care about brands and what business they work for, so implementing strong core values in a business is vital. The younger generation is also looking for more hybrid work as digitalisation takes hold. The market needs to be more open to these new ways of working. Lockdowns pushed a fast-forward button on digitalisation which showed the many strengths of technology. There will be a natural movement back to the office, albeit with a certain degree of work flexibility but the market needs to be more open-minded and generous in its outlook on what the next generation requires and needs to enable change, growth and diversity. ● maritime ceo

REGULAR OPINION

Why ammonia is best Carl Martin Faannessen, CEO of crewing specialist Noatun Maritime, has a firm idea which fuel will win the race for the next generation of vessels

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n April 20 this year, the future of marine fuels changed and very few noticed.

During Singapore Maritime Week I had the pleasure of sharing a table with Guy Platten from the International Chamber of Shipping.

During our conversation it came up that multiple owners all have the same concern: Zero carbon can be done, but they need assurance that their fuel of choice will be available as well as certifiably zero-carbon.

They all feel this assurance is lacking.

As a result owners make decisions that are either transitory (LNG) or they buy dual-fuel knowing that this hedge will keep them in business for the next decade or two.

These decisions are not “bending the curve”, to borrow a phrase from Professor Lynn Loo at the Global Center for Maritime Decarbonization in Singapore. At best they perpetuate the status quo, in a world that is rapidly driving towards zero carbon.

Again we in the maritime industry come across as polluting laggards, in spite of our efforts not to.

But there is increasing clarity on which fuels will dominate in the future, and recently a certified zero-carbon source has emerged.

There are many fuel contenders, but few (if any) bunker-stations will be willing to invest in and run the infrastructure needed to deliver all of these. Commercial gravity will take over, and we will see consolidation to two zero-carbon fuels: Ammonia and methanol. Not overnight, but it is where we will end up.

Methanol (CH3OH) gets a lot of attention, thanks to Maersk deploying its muscle behind it as their

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initial choice of zero-carbon fuel. It is a workable option, as long as you have the biogenic carbon on hand and you can capture the methane it releases. Both of these are considerable challenges. Let us also not underestimate the safety-aspect: Ingestion of 10 ml of pure methanol can destroy your optic nerve; from 30 ml and up you are in lethal territory.

The most common antidote is rapid administration of pure ethanol, so zero-alcohol policies onboard will be rewritten to allow ‘drunk as a skunk’ following methanol ingestion.

Ammonia (NH3) starts with the safe handling of the molecule. It has been handled safely as cargo on ships for decades. There is obviously a need to industrialise the processes and protocols needed to manage it safely as a fuel, both for the crew and the environment. Singapore is on it, together with a consortium of companies, which means we know it will get done and done well. Unlike methanol, there is no carbon in ammonia.

Zero. If it is manufactured using only renewable energy, it becomes a

zero-carbon fuel.

Enter a gang of adventurous entrepreneurs, who on April 20 secured the world’s first TÜV Rheinland certificate for green ammonia and green hydrogen.

Scatec of Norway and ACME of India secured this milestone. Their facility in Oman will scale to produce up to 1.2m tons of green ammonia annually. Scatec has announced a similar project in Egypt, in a Suez-favourable location.

Granted that these are but the first few locations, but Singapore is on record with ambitious and thorough plans for this. Rotterdam, too. In addition, there are whispers of ambitious plans centred on Gibraltar and South Africa, not to mention Australia and Chile.

With the energy industry beginning to deliver zero-carbon fuels, the onus of action is again moving to the owners. It is good to see that some are rising to the challenge: According to Clarksons, 12% of the orders placed during Q1 this year are set to run on ammonia. ●

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SPLASHBACK REGULAR

Your thoughts Splash readers like to their express opinions, something we encourage. Here are some of the topics that have sparked the greatest debate recently

The big debate: crew pay

An interesting concept

At a time of global inflation not seen for more than 40 years where household items prices are soaring, seafarers, repeatedly hailed by the industry as heroes during the pandemic, were granted a 4% pay increase in May for the coming three years. Cue heated debate among our readers.

Anastassios Copitsas argued: “Seafarers are trapped by, and have always been the victims of their own unions who sign the deals on their behalf.” He went on to suggest: “The maritime industry is chopping the branch of the tree it is climbing on.”

Don’t be ridiculous, fired in David Boffey, pointing out what the basic wages are in places like Sri Lanka and Manila.

“You are conflating local and global,” Boffey responded.

Not happy with this line, Carolyn Graham, a regular champion of crew rights, replied that the easiest way for shipowners to have been genuine about their appreciation of their sea staff over the past couple of years would have been to line their pockets.

“All this talk about seafarers and their contribution to world trade and how they kept and are keeping world trade afloat during the pandemic is just talk,” she wrote.

Martyn Benson asked whether containerlines are becoming more like tramp operators?

“When there is high demand they pile in the tonnage and sort out the chaos later but when there is a dearth of cargo they pull back sailings and equally disregard their schedules,” Benson observed, going on to add: “Historically, shippers paid a reasonable price for a reasonable and committed service, rain or shine, but currently the container lines seem to operate on a feast or famine basis and roll their services with the market punches. Service frequency and reliability (as reported by a couple of the ‘consultants’) is said to be low but this is increasingly of the lines’ own choosing.”

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Stat alert!

Mikal Boe, who heads up atomic maritime propulsion specialist Core-Power, had this little gem for readers: “Of the world’s fleet, about 20% of ships consume about 80% of the marine fuel, and hence cause 80% of the airborne pollution.” maritime ceo

Posidonia 6 -10 June 2022

Metropolitan Expo, Athens Greece

www.posidonia-events.com