Maritime CEO Issue One 2022

ISSUE ONE 2022

BY

‘We want to be an organisation that can walk and chew gum’ The non-binary thinking of Andreas Sohmen-Pao

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MANIFEST

3 At The Prow

Profiles

Economy

22 Cover Story Andreas Sohmen-Pao 25 John Platsidakis 26 Dimitris Fafalios 27 John Dragnis 29 George Gourdomichalis

5 6 7 8 9

US EU China India Brazil

Markets 11 13 15 17

Dry Bulk Tankers Containers Finance

Executive Debate 18 Tech developments

Recreation 30 31 32 33

Wine Gadgets Books Travel

Opinion 34 Santosh Patil 35 Andrew Craig-Bennett 36 Splashback

33

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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 ONE 2022

Lessons learned on the one-year anniversary of the Ever Given grounding

M

arch 23 saw the Splash editorial team ‘celebrate’ for want of a better word the one-year anniversary of the grounding of the Ever Given across the Suez Canal. A lot of water has flowed under the bridge since that momentous day, which saw shipping thrust into the mainstream limelight like never before, providing countless memes and hours of dissection on rolling news channels.

More than 350 ships backed up in a queue behind the Ever Given, and some vessels even took an unusual detour, down around the Cape of Good Hope.

The legal tussle that would ensue once the ship had been freed would run into the hundreds of millions of dollars and the accident would force the Suez Canal Authority to kick off a widening project for the southern portion of the canal.

“Never in the field of global shipping has one ship ever given so much entertainment and laughs.

The grounding of the ultra-large container ship made a splash in global news and drew an equally big response online as people rushed to their meme-making apps and cracked open a smile,” wrote Steven Jones from the Propeller Club Liverpool one week on from the grounding last year.

Looking at its significance to global supply chains one year on, the long-term damage to international supply chains from this and following events became apparent in the coming months.

Global news is now very much supply chain news and visa versa.

Shipping has had to contend with many other supply chain blockages in the intervening months – not least Covid outbreaks in China and record-breaking queues outside American ports and latterly the fallout from the Russian invasion of Ukraine.

Businesses need to be versatile when it comes to their supply chains and procurement. Modern technology makes agility possible. When a seismic event like this blockage, or a Covid-related port closure or natural disaster, happens, businesses that have visibility across their supply chain can adapt fastest and use data to find alternate solutions and prosper. ●

Sam Chambers Editor Maritime ceo

3

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ECONOMY US

On solid ground Joe Biden is presiding over a decent economy and yet approval ratings remain muted

A

rguably President Joe Biden should be in a better place in the opinion polls than he is if economics was the main determinant of ordinary American feelings.

But Covid-19 responses, the pull-out from Afghanistan and other issues are weighing on the Democratic White House. Yet the economic numbers look surprisingly healthy.

US gross domestic product (GDP) expanded 6.9% on an annualised basis in the fourth quarter, up from 2.3% growth in the third quarter, according to the US Commerce Department.

The employment numbers are not bad either. The United States economy added a robust 467,000 jobs in January, more than expected by analysts. Of course, more people working and higher wage demands may mean some inflation but it seems the US will avoid the higher levels of inflationary pressure seen

in, for instance, the European Union. Despite this comparison US consumers still see more inflation and rising living costs than they are traditionally used to - food, gasoline, and rent are all up. However, it seems possible that so too is consumer sentiment. US retail sales rose 3.8% in January from the prior month at the end of 2021, according to the Commerce Department in Washington DC. This rebound followed a sharp decline in December 2021 as fears over the omicron variant slowed sales and dampened sentiment. This is important because of course consumer spending accounts for the bulk of economic activity in the United States. However, the Federal Reserve is expected to raise interest rates later in the year, perhaps several times, and rising borrowing costs could also dampen spending by consumers and businesses.

American jobs by sector, 2021 Sector

% of US employment

Food, Drinking and Eating Establishments

5.5

Food & drink retail sales

3.3

Farming

2.6

Food, beverage & tobacco manufacturing

2.0

Forestry, Fishing and Related

0.9

Source: USDA

ISSUE ONE 2022

Exporters may also be bullish in America at the moment, at least in some key sectors. In January 2022, for the first time ever, US exports of liquefied natural gas to Europe exceeded Russia’s pipeline deliveries.

Russian exports, which normally account for about 30% of Europe’s gas use, dropped substantially initially because of Russian pricing and latterly because of the Ukraine invasion. And with European gas prices about four times as high as normal, US exports have surged to fill the gap.

According to the Department of Commerce in 2021, exports of goods and services from the US hit $2,528.5bn, up $394.1bn after decreasing nearly $400bn in 2020.

Imports increased $576.5bn to $3,387.7bn. In percentage terms exports of goods and services rose over 18.5% in 2021, largely making up for the pandemic-induced 15.6% decrease in 2020.

Much of America’s export rebound was, however, regional with the biggest growths being to Canada to the north and Mexico to the south.

Though, as a single market, the EU remained America’s top trading partner with Germany the major destination after the UK (a situation remaining in place after Brexit). ●

5

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 jobs 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

Under pressure The People’s Republic is not making friends via its Covid policies

T

he Winter Olympics are over, but China appears to be staying largely closed as it continues to pursue its zero-Covid policy. Consequently, there is little good news for foreign manufacturers, shippers, logistics operations or investors hoping the various squeezes on their businesses and supply chains will ease. Even without the adverse effects of Covid-19 China’s current five-year economic plan emphasises “high-quality” economic growth – basically less focus on GDP growth overall, and more on its composition. However, the Chinese economy’s isolation from the western economies seems to be growing and is also becoming more obviously oriented towards the Russian economy.

China’s economy has remained robust despite pandemic-related factory closures, port delays combined with shortages of some key components (semi-conductors particularly), many companies and sectors with unsustainably high levels of debt (property being the largest and most obvious example, but not the only one), and dampened demand for Chinese-made goods in overseas markets hit by Covid-19,

inflation and sharply rising living costs are eroding consumer spending levels.

So, despite a lot of rebalancing over the last decade, away from simply manufacturing to becoming a consumption engine, China’s traditional growth model based on exports, infrastructure and real estate investment is now a bust. Beijing needs to continue to up consumer spending, control rampant debt and move towards a significantly less carbon-intensive economy. Global economic problems, in many cases, but requiring Chinaspecific responses.

For most readers supply chains will continue to be an issue throughout 2022 at least. The Bank of Korea noted how much the recent lockdown in Tianjin and Xian affected trade: “Production lines and logistics facilities are being underused to add to supply chain uncertainties,” BoK said, adding, “Samsung Electronics is located in Xian, LG Electronics, Volkswagen and Toyota are located in Tianjin, both regions were recently shut down due to omicron, and the shutdown temporarily reduced their manufacturing operations.”

Still, despite Covid-19 China

Foreign businesses planning to leave China, December 2021 Region

plan to leave

plan to stay

total

US businesses

13

87

100

EU businesses

11

89

100

Japanese businesses

4

96

100

Source: National Bureau of Statistics, China

ISSUE ONE 2022

is still planning to improve logistics in the longer term. On January 18, China’s State Council released the fourteenth five-year plan for improving its transportation system. This plan includes additional improvements to the eight “vertical” (north-south) and also the eight “horizontal” (east-west) high-speed railways which aim to eliminate bottlenecks in regular speed railways. The plan also envisages improvements in the infrastructure of suburban railways to match those within and between major metropolises, multimodal freight transportation, and specialised transportation services. There is also a lot of talk about intelligent transportation technology and low-carbon transportation as well.

Despite China seemingly managing to reduce its exposure to Covid-19, many global institutions are now trying to apply pressure on Beijing to move away from its Zero Covid policy to a more liberal and open regime while some firms are leaving altogether (see chart).

Both the Bank of Japan and the International Monetary Fund (IMF) have called on China to open up to a greater level to improve the supply chain shortages (Japanese car manufacturers are suffering under the current policies). The IMF has noted the circularity of the zero-Covid policy – lockdowns and restrictions reduce production; shortages mean prices rise internationally; order levels fall. A trap China should be keen to avoid. ●

7

ECONOMY INDIA

Brighter future predicted Moving beyond Covid, Modi aims to get back to earlier economic goals

B

ack in 2019 prime minister Narendra Modi spoke of building a US$5 trillion Indian economy by 2025. This was ambitious but not totally unrealistic – then India’s GDP was approximately $3.1trn. Covid-19 has obviously dealt that dream a death blow, though some of the fundamental elements of Modi’s goal remain, especially the country’s potential demographic advantage. The median age in India is 28, compared to 37 in China and the United States and 49 in Japan.

In India more than two-thirds of the 1.4bn population is of working age. However, job creation has not matched India’s reproduction rate and unemployment remains stubbornly high - 53m people out of work Indian GDP: Looking to the future, 2020-2026 Year 2020

GDP Growth/Fall (%) -7.25

2021

9.5

2022

8.52

2023

6.57

2024

6.29

2025

6.19

2026

6.08

Source: IMF

8

and a participation rate of just 40%, one of the lowest globally.

India’s economy contracted by 7.3% in 2020. Consumption, private investment and exports all dived. New Delhi opted not to offer a large or broad based fiscal stimulus programme. While there was some stimulus and increased state spending – around US$528bn – it was mostly targeted at infrastructure investment. While this was a worthy and necessary aim it does not provide long term employment necessarily. This spending also indicates that there will be a fiscal deficit of 6.4% of GDP. So now, with Covid-19 hopefully receding, the talk among Indian economists and fiscal planning is ‘reset’, a term apparently initially coined by the Delhi Finance Ministry’s Department of Economic Affairs (DEA). For 2022 the DEA predicts 8% GDP growth for the year and a hopeful 11% in 2023.

The government is also hoping that, as the manufacturing sector increasingly hollows out in western countries, India is hoping it can pick up the slack. Green, or clean energy, is another sector also highlighted as set for serious growth in India. Still traditional industries are also not

forgotten. The government believes that India’s annual textiles exports can rise to $100bn in the next five years from the current $40bn, according to the country’s Apparel Export Promotion Council (AEPC).

The government favours the textile industry as it has the combined ability to expand with low investment while creating a lot of job potentially.

Many major players in the Indian textiles business believe that the growth and increasing importance for many international firms and brands to have a “China plus one” sourcing strategy will see India increasingly become the favoured “plus one”.

India’s commodity business is also tipped for growth. The country’s steel industry contributes to slightly more than 2% of national GDP. As is well known, Indian steel companies have been on a global expansion buying spree in recent years. Steel is also dictating a substantial amount of central government investment in infrastructure and logistics investment and projects, including rail transport network, dedicated freight corridors, and high-speed railway tracks. The industry is also benefitting from state subsidised low-cost power transmission. ● maritime ceo

ECONOMY REGULAR BRAZIL

Election fever begins Political posturing is to the fore

B

razil’s sometimes seemingly never-ending election cycle is back in full swing ahead of the October 2022 presidential vote.

As well as the top job of [resident, the vice-president, the national congress, the federal district legislative chamber, and some district councils are all up for election too. So, it’s time to start the debate about where Brazil’s economic policy is set to go. The far-right incumbent Jair Bolsonaro is looking likely to lose – his controversial response to Covid-19, double-digit inflation, and the strong possibility of economic stagnation in 2022 are all major issues. Many commentators’ money is on a third time win for his main opponent and political opposite, the 76-year-old former trade unionist Luiz Inácio Brazil: Energy consumption by fuel type Fuel Type

% of use

Petroleum

38

Hydroelectric

29

Renewables

16

Natural Gas

11

Coal

5

Nuclear

1

Other

5

Total

100

Source: US Energy Information Administration

ISSUE ONE 2022

Lula da Silva – aka “Lula” – who has been espousing a strongly left wing economic agenda of high taxes on the country’s wealthy. Though opinion polls seem to favour Lula, he is yet to officially declare as the Workers’ party, or PT, candidate for president. Most though expect the PT platform to include increasing public investment, stopping privatisations, strengthening labour laws and raising workers’ incomes.

This means that predicting anything into late 2022 and 2023 is difficult. Lula’s last presidency ended with Brazil’s deepest recession on record and then a massive political-economic scandal that saw the end of Lula’s anointed successor Dilma Rousseff’s political career. So, all eyes are on the October polls.

The Brazilian economy minister Paulo Guedes, an ally of Bolsonaro, is still in ebullient mood, and campaigning mood. Guedes has long been an advocate of fiscal sustainability and privatisation and is thought to oppose election friendly measures such as Bolsonaro’s pledge to lower fuel prices (which would, in a time of sharply rising prices, require government subsidy). As part of the surging inflation rate of the last year fuel prices have soared in recent months.

As far as Brazil’s exports are concerned some key areas appear to be losing ground. Brazil, a long-time leader in global beef exports, has been losing ground to the United States for some time. Multiple problems have occurred – a 7% drop in export volumes between September and mid-December 2021 due to China’s ban on beef imports from Brazil in a CJD-related scare.

Last year, the United States exported 1.44bn tons, up 15% over 2020, with revenues reaching $10.58bn, up 38% (considering only fresh meat) while Brazil exported 1.77bn tons and earned $9.24bn, up 9%, including processed and fresh beef. America has clearly been the big winner, able to gain ground after Brazilian beef was excluded from China.

Brazil is however doing well on building its market share in some smaller markets - diversifying its export destinations. For instance, Brazil’s sales to Arab countries saw exports reaching $14.42bn, the highest since 2012. Similarly with exports to Japan and Southeast Asia.

By Q2 2022 it will be clearer who is running for the left and how Bolsonaro plans to win another term and hence, perhaps, the future way of the Brazilian economy in the next few years. ●

9

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MARKETS DRY BULK

Wind in bulk carriers’ sails March has been highly profitable, and with the need to search for alternative cargoes, the outlook is strong

C

hina remains paramount in the bulk carrier pantheon.

This is becoming increasingly worrisome for the bulk carrier market, as the urgent issues in President Xi’s in-tray stack up in a year he would have wished would go smoothly as he seeks a constitution-busting third term in office. As the cult of personality builds around him, he must take on personal responsibility for a slowly imploding property market, managing the pandemic, rising energy and commodity prices driving factory gate and foodstuff inflation, China’s response to the war in Ukraine, ongoing strategic competition with the US and a stalled Belt and Road Initiative.

The resurgence of the Covid-19 pandemic has caused lockdowns across swathes of the country’s most important industrial areas, such that 30% of Chinese GDP is now said to be shuttered. If this lasts for a month, it could wipe 1% off Chinese GDP growth this year. It is affecting steel production in key areas such as Tangshan, a city which produces around 13% of all Chinese steel, but where output has been suspended at many mills due to public health measures. This is driving up steel futures prices and the prospects of reactive monetary loosening by the People’s Bank of China. The bank now has a fine balancing act to

ISSUE ONE 2022

perform between supporting industrial activity and exports but not overheating the already oversupplied housing market.

Capesize freight rates from Australia to China stood at $8.86 on February 21 (a TCE of $15,331) then enjoyed three firm weeks to peak at $12.38 on March 15.

Life is even better for panamax operators, who have enjoyed a rising market for a month now. The Baltic Panamax Index stood at 3,413 points on March 25, up 28% in a month.

Ukraine, the fourth biggest exporter of wheat and coarse grains, shipped almost 50m tonnes of wheat, barley, sunflower seeds, etc to global destinations last year, with 11m tonnes going to China, 4.6m tonnes to Egypt and 3.6m tonnes each to the Netherlands and Turkey. The Ukraine government says a disrupted planting season this year will result in at least a 50% fall in the harvest. As Ukraine’s Black Sea port approaches remain mined, any exports will have to find alternative routes out. Russia shipped around 20.5m tonnes of grains by sea last year, of which 3.7m tonnes went to Turkey and about the same amount to Egypt, with most grains loading at Novorossiysk. If Egypt and Turkey are not to suffer significant food inflation and possibly social unrest, they will need the support of other suppliers.

China, the biggest wheat importer globally, has this month warned that its winter wheat crop condition is “the worst in history.”

Agriculture minister Tang Renjian reports that heavy rainfall last year delayed the planting of about onethird of the normal wheat acreage and that the harvest may be down 20% this year. The US, Brazil and Argentina all shipped over 100m tonnes each of wheat and coarse grains in 2021. The grain seasons from those countries this year should prove very busy, to the delight of panamax bulker owners in particular.

Russia shipped almost 53m tonnes of steel in 2021, 17m of those by sea, as well as 1.5m tonnes of iron ore. Ukraine exported around 15m tonnes of steel, of which 5.5m were by sea plus 9m tonnes of iron ore. Those figures may be significantly lower this year - certainly the Ukraine figures, as tens of thousands of steel workers are currently occupied in the National Defence Force.

Lockdowns in China may prevent it from repeating its 53m tonnes of steel exports of 2021 when it led the world, again. Globally tight steel markets could see construction corporates scouring the globe for alternative sources of supply, to the delight of geared bulk carrier operators, for whom steel is a key cargo.

The result in the freight markets has been a 25% month on month increase in the Baltic Supramax Index to 3,020 points on March 25 and a 27% increase in the Baltic Handysize Index to 1,782 points on March 25. Truly, the capesize market has become decoupled from the freight markets for smaller ships.

Nonetheless, the BDI is running ahead of Q1 last year and market bulls look to have the wind in their sails for the time being. ●

11

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MARKETS TANKERS

Black days in the Black Sea Tanker freight rates have followed variable paths since the start of the invasion of Ukraine

T

he tasteless cliché is that tanker markets enjoy a good war. But while oil prices have risen above $100 per barrel and stayed there, tanker freight rates have followed variable paths. The BCTI leaped 53% from 690 points on February 23, the day before the invasion, to 1,054 on March 11 but has subsequently slid back 28% to 961 points on March 24. The BDTI more than doubled from 725 points on February 23 to a peak of 1,517 points on March 7 but has also slid by 28% to 1,093 points on March 24.

Traders scrambled for Russian crude exports after the invasion, with the result that the aframax time charter equivalent (TCE) reported by the Baltic Exchange jumped from $-1,047 on 23 February to $90,265 on March 1; one of the fastest spikes in freight market history.

Baltic Exchange route TD17, the aframax voyage from Primorsk to Wilhelmshaven, was slumbering at $ 4,216 on February 15 before leaping over $100,000 a day to $121,741 on February 24, then on to over $200,000 just four days later. It stayed above $200,000 until March 18 having peaked at $266,650 on March 14. By March 24 it had

ISSUE ONE 2022

retreated to $116,947. Cargoes are still moving, but fewer buyers are willing to identify themselves.

Similarly, TD18, the Baltic-UK Cont fuel oil run of 30,000 tonnes, stood at an anaemic $576 the day before the invasion then zoomed to a peak of $26,890 on March 2 before falling back to $8,444 on March 24.

TD5, the suezmax trip from Russia’s Black Sea port of Novorossiysk to Augusta in Italy, lay slumped at $-2,320 on February 23. It perked up to $107,382 just two days later, peaked at $ 157,771 three days after that, but has since deflated to $ 70,196 on March 24.

TD24, the aframax route from Kozmino in Russia’s Far East to Qingdao in northern China, spent most of February hovering around a freezing $250. It also climbed exponentially to hit $41,449 on March 16 and has since stabilised, levelling off at $41,526 on March 24.

Where the Russian export markets go from here is a political rather than an economic matter and thus beyond prediction. But outside of the Russian export markets, tanker freight rates have not budged very much. The Baltic’s V2TCE average was $-21,647 on February 23, it rose

to $-2,301 on March 1 but has since sunk back to $-27,656 on March 24. Fears over lockdowns in China, which now cover 30% of Chinese GDP output, and what that does to China’s oil import requirements, are a reminder that we are still in the midst of a global pandemic and that the world’s largest oil importer is economically more fragile than it has been for many years.

In the clean tanker markets, the benchmark TC1 LR2 route from the Middle East to Far East has mounted a strong recovery after a negative first six weeks of 2022. From a low of $-945 in late February, earnings have averaged almost $21,100 in March, peaking at $27,196 on March 16 as traders stocked up, fearing further price rises if global fuel supplies remain tight.

The MR Atlantic basket average had already recovered from a low of $5,032 on January 25 to $16,162 by February 21. It spent most of March over $20,000 a day, slipping back a quarter to $15,503 on March 24.

Road fuel prices may be rising in the US and Europe, but they aren’t yet denting demand, while jet fuel demand is rising again, not least due to all the military aircraft activity in Europe. The Pacific MR market followed suit, improving from $6,703 on February 7 to a peak of $23,986 on March 16. From there it has lost momentum, ending up at $17,921 on March 25. The other star performer was the Jamnagar-Chiba route for MR tankers, which leaped from a low of $737 on February 15 to a peak of $12,849 on March 16. This too has subsequently declined by around a third to $8,383 on March 24 as traders, having replenished inventory, now take stock of the situation and plan their next move. ●

13

MARKETS CONTAINERS

Everyone’s a winner Conditions remain firmly in liners’ favour for this year.

T

he container market bonanza continues unabated. OOCL is the latest to declare record 2021 profits, in its case, $7.1bn in 2021 compared to $903m in 2020.

70% of profits will be paid as dividends to shareholders. The top liner companies made more than $100bn in profit in 2021 assuming that MSC’s performance tracks that of Maersk and CMA CGM. Non-operating owners are taking advantage of high newbuilding prices and blocked shipyards to negotiate eye watering time charter rates for tonnage that can be deployed this year. Seaspan reported in March that it has fixed 18 of its ships – mostly panamaxes - for one to two years at a total of $200m in “incremental cash flow” which may suggest “over and above current cashflow”. Seaspan’s parent, Atlas Corp, posted net profits of $142.3m for 2021, compared to a net loss of $26.1m in 2020.

Liner companies remain confident about 2022 as the main drivers of last years’ boom market largely remain in place. The vast new orderbook of around 600 ships has not yet begun to deliver. Congestion remains a problem as public health measures

ISSUE ONE 2022

block ports around the world and as port operators have been slow to catch up with the 1m teu per month step-change up in demand for container shipping experienced during the pandemic. Demand is holding up well so far this year in spite of Lunar New Year, lockdowns in China, the rising cost of living in the major consuming nations and the war in Ukraine.

Bottlenecking remains a problem, with global waiting days estimated at 18m teu-days by Kuehne+Nagel. The lockdowns in China have resulted in several terminals running below capacity, forcing exporters to hold back cargoes and wait longer to get them onto ships.

Shenyang in Liaoning province was the latest city to be locked down after only 47 cases, shuttering manufacturers including the BMW auto plant. So far, Shanghai has avoided a full lockdown. If its port should be shuttered, the liner trades would melt down. But China is now operating so-called closed loop systems in which some activity is allowed. For instance in Shenzhen, this prevented chip maker Foxconn from shutting down during that city’s lockdown as workers agreed to live on-site for the

duration of the lockdown. Chinese health authorities fear the alternative to lockdowns, as the case load in a population of 1.4bn would swamp healthcare resources In North America, bottlenecking has not gone away, it has simply moved from the west coast to the east coast.

The war in Ukraine is not disrupting the liner shipping markets very much as sailing schedules can be rearranged. But liners are increasingly avoiding calling at Russian ports. As western manufacturers and retailers exit Russia under sanctions, containerised shipping demand in and out of its ports is down an estimated 50%. Rail volumes from China into Russia are up instead as Chinese exporters enter the market vacuum created by western companies’ departure.

Freight rates remain elevated despite a mild downturn in March, a normal post-Chinese New Year easing.

The first quarter of 2022 has then been quite satisfactory for the liner companies. Their attention may turn to costs in the rest of the year as fuel prices rise and as they have to renegotiate time chartered tonnage at rather higher rates than they enjoyed last year. They will have to work hard to avoid a squeeze on profits. If they attempt to raise prices, they will incur further interference from regulators such as the US Federal Maritime Commission and even Congress, with its misguided bill trying to force liners to load US agriproduce into containers to ship to Asia, where the grain terminals are built to receive bulk carriers and not unload boxes. Sometimes, even well-meaning politicians don’t have to go to war to cause unintended consequences. ●

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MARKETS FINANCE

Upcoming European tsunami Readers need to be aware of how the European Union’s taxonomy regulation will upend shipping

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hatting with folk in shipping and skimming through the industry press I am amazed how little awareness there is of the European Union’s upcoming taxonomy regulation.

For the uninitiated, no, this is not some new biological classification system dreamt up in Brussels, rather it is something that will dramatically alter the landscape of ship finance in Europe.

The EU taxonomy regulation, due to come into place on January 1 next year, is a complex system to classify which parts of the economy can be marketed as sustainable investments. It includes a long list of economic activities, plus detailed environmental and social criteria that each must meet to earn a green and sustainable label.

As well as one social objective, there are six environmental ones and these are worth detailing as once you read what they are, you ought to be able to join the dots and work out just how seismic this new law will be.

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As well as climate change mitigation and adaptation, the other environmental objectives cover the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control and lastly the protection and restoration of biodiversity and ecosystems.

These six items will have an amazing effect on shipping and finance when they kick in in around eight or nine months’ time and yet, remarkably, so few in our industry appear to be aware about their significance.

We don’t know all the effects - but one is a CO2 tax, something that will ultimately shape the next generation of ships built.

Fleet renewal will be necessary, but it cannot happen quickly, as slots are booked up through to 2025. Shipyard forward cover has increased to 2.9 years from 2.4 in November 2019, according to Clarksons. It really is such a unique situation where yards are so full it

has become basically impossible to oversupply most shipping segments.

All these new regulations mean vessels will need to go slower, so supply goes down and we will have a very good freight environment for the coming two years for bulkers and tankers.

Frankly, we don’t need a carbon tax at the moment as fuel prices are just so expensive with bunker prices topping the $1,000 per tonne mark earlier this year.

Banks and other regulated lenders will in the future get penalised with more capital requirements of the loans they give when these new EU regulations start and the loans are not green/sustainable enough.

Green loans and bonds will be massive. The Poseidon Principles as we know them today will basically become formalised in EU regulations.

The flip side of all of this is that non-European financiers - especially from Asia - will most likely get an advantage in the future. ●

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EXECUTIVE IN PROFILE DEBATE

Priority development Covid, carbon, connectivity and collaboration. Are these the four Cs to dominate maritime tech in the coming months?

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anish Singh, CEO of Ocean Technologies Group, neatly sums up likely developments this year in terms of what tech breakthroughs will impact the shipmanagement sector the most.

They’ll be influenced by the four Cs, he tells Maritime CEO. First, Covid will continue to seriously disrupt movement of personnel, parts and equipment. This will lead to a continued acceleration of innovation and faster adoption of practices such as remote operational support and 3D printing of parts.

Next up, carbon – in response to decarbonisation targets, the early adopters will lead the way on green fuels and green propulsion and technologies.

The third C, connectivity, is one many polled by Splash are also keen to discuss. In 2022 shipping will start to see costs and bandwidth closer to terrestrial levels and a continuation

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of wider adoption across the global fleet.

“The most connected fleets will shape the way IoT is embraced at scale within the maritime sector and I think they will see transformational gains,” Singh says.

The final one is collaboration.

Expect a lot more collaboration between stakeholders, Singh says, whether it is between states for movement of personnel, or between OEMs, yards, operators and vendors to develop and roll out new technology.

The last two years of the pandemic have seen significant developments in the area of

“

It’s time to accept that tech is an essential piece of that jigsaw, not a nice to have add-on

”

shipping technology, relates Dimitris Tsapoulis, COO of the Signal Group.

“Buyers have extended and matured their requirements from technology while suppliers have grown in numbers like never before,” he explains.

The way Max Wong, head of IT at Eastern Pacific Shipping, sees it is that the glass is more than half-full.

“In our minds, the two biggest opportunities that shipping companies have are decarbonisation and the enabling capabilities of technology. These are levers that give the opportunity to differentiate and create new value,” Wong tells Maritime CEO. Rajesh Unni, founder of Synergy Marine Group, stresses that all the buzz of digital needs to actually translate into increased productivity and potential savings, something picked up by shipowners surveyed for this article. Unni is hoping that maritime ceo

EXECUTIVE IN PROFILE DEBATE

this year will see a real breakthrough in artificial intelligence adoption, something he feels is long overdue.

“Clearly shipowners see the need for digital transformation, but what they are grappling with today is to find practical ways to transform the business and operating models,” Unni says. “The transformation needs to have technology, people and process, and aligning these three to make shipping more sustainable, decarbonise and improve the efficiency, are the key.”

Unni’s viewpoint is taken up by William Fairclough, managing director of Hong Kong-based shipowner Wah Kwong Maritime Transport Holdings, a man who is constantly being marketed all manner of “groundbreaking” and “innovative” products.

“Would it be too much to ask for a big tech breakthrough that enables shipowners to evaluate whether all the other big tech breakthroughs can actually deliver savings?” Fairclough muses.

Shipowners will specifically ask their tech vendors to demonstrate how their product, software or service will deliver savings to the purchaser, Fairclough reckons.

Connectivity Morten Lind-Olsen, CEO of Scandinavian tech firm Dualog, foresees a growing focus on understanding how to integrate ships with shore and the cloud.

“Internet connectivity is rapidly becoming a commodity, however still not with a terrestrial performance.

So vendors that are able to brings ship and shore closer via smart data integration independent from air time and general infrastructure will be high in demand,” he says.

Nevertheless, high bandwidth maritime connectivity is finally coming to shipping, and with that the trend in 2022 will be to extract greater value from vessel performance data, argues Tore Morten Olsen, president of maritime at Marlink.

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“2022 will be the year when customers and seafarers alike come to see seamless IoT services at sea as an entitlement,” says Ben Palmer, the new president at Inmarsat Maritime.

James Collett, managing director of Sperry Marine, says shipping ought to be aware of the importance this year of new Low Earth Orbit satellite networks reaching an initial operating capability disrupting the VSAT space with OneWeb the first of these to provide a service to maritime users.

“This type of high bandwidth, low latency connectivity will unlock a new level in the kind of applications that can be used onboard ship and enable a completely new type of collaborative work and knowledge sharing between ship and shore,” Collett says.

“Only with such a major leap in data transfer efficiency and cost are we going to be able to fully drive and utilise the necessary human augmentation technologies needed to support more efficient, cleaner, safer and less costly vessel operations,” claims Andrew Airey, managing director of shipmanager Highland Maritime.

Carbon Emissions management will be the hottest topic in 2022 for the maritime industry worldwide, reckons Mike Konstantinidis, the CEO of Greek tech firm METIS. “As a shipowner, I would most likely focus on getting the best environmental rankings for my existing vessels with a decade or more of service ahead of them. Better Energy Efficiency Ship Index (EEXI) and Carbon Intensity Index (CII) rankings, which will come into play in 2023, come less from old design decisions and more from how the vessel is used,” says Splash columnist Kris Kosmala.

Andy McKeran, maritime performance services director at UK class society Lloyd’s Register, stresses the importance of owners getting their fleets ready for EEXI and CII now.

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2022 will be the year when customers and seafarers alike come to see seamless IoT services at sea as an entitlement

”

“For a shipowner perspective, they need to ensure that they have a ship that will have a ‘License to Trade’ after 2026,” McKeran says.

The maritime industry has been talking about the importance of data for many years, but the big breakthrough is moving data into insights and actions to unlock efficiency for the existing and future fleets, McKeran argues.

Hong Tin Wei, co-founder of Chord X, a decarbonisation platform based in Singapore, speaking with clients, is well aware of the resolve in the global green agenda which is currently also dominating the maritime narrative.

“Shipping has always being plagued by the lack of good data.

Being an industry in transition, we expect to see more development of intermediate solutions. These solutions would accommodate the current mode of working, while also bringing the power of data and cloud computing to marine decision makers,” he says.

“Compliance to EEXI could spark breakthrough technology development to further improve emissions,” suggests Carl Schou, president and CEO of Wilhelmsen Ship Management.

“2022 is the year that more operators realise that they will need the software and connectivity to understand and report their emissions profile and that means finding an on-ramp to technology that can help them do that,” predicts Neville Smith, a Splash columnist and founder of Mariner Communications, neatly tying up the twin main themes of connectivity and carbon. “It’s time to accept that tech is an essential piece of that jigsaw, not a nice to have add-on.” ●

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IN PROFILE

George Gourdomichalis p.29

Rome John Platsidakis p.00 p.25

In profile this issue Maritime CEO correspondents report from the recent Capital Link and Slide2Open conferences where many top shipowners spoke

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maritime ceo

IN PROFILE

Dimitris Fafalios p.26

John Dragnis p.27

Andreas Sohmen-Pao p.22

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21

COVER STORY

Non-binary thinking Andreas Sohmen-Pao urges his shipowning peers to think more outside the box

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long with Maersk’s Soren Skou, arguably there are few shipowners who are so vocal or determined when it comes to shipping’s decarbonisation than this issue’s cover star. Also like Skou, our cover star is one of shipping’s great consolidators.

Andreas Sohmen-Pao is chairman of BW Group, one of the world’s largest maritime conglomerates with interests in tankers, bulk carriers, gas, offshore and latterly renewables.

Always someone who comes across as an eloquent, thoughtful and intelligent speaker, SohmenPao, educated at Eton, Oxford and Harvard, has been Singapore’s most high profile shipowner for years, a position he is increasingly taking up on the world stage.

Speaking as keynote at

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CapitalLink’s 16th International Shipping Forum late last month, Sohmen-Pao discussed shipping’s all too often narrow mindset and the need to think outside the box.

“I think we spend a lot of time these days thinking in binary terms - either, or - the false dilemma, the false dichotomy, where we say either we have energy security or we have climate change mitigation, it’s impossible to have both,” SohmenPao told delegates, stressing: “Either we use traditional fuels or we can’t progress as humankind.”

Sohmen-Pao, the third generation at the helm of the BW Group, argued that the Ukraine war had shown the imperative of energy security and that without it, it would be impossible to tackle climate change thanks to potential social instability.

He said one likely outcome of the war would be a boost to renewables as countries seek alternative energy sources urgently.

“This is how we define ourselves as an organisation in that we want to deliver energy for the world today and find solutions for tomorrow so we want to be an organisation that can walk and chew gum,” SohmenPao said.

On the war in eastern Europe, Sohmen-Pao said the industry needed to be careful how it responded and to calibrate accordingly - a corporate position being far

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We want to be an organisation that can walk and chew gum

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maritime ceo

IN PROFILE

“

In charting our future fuels for shipping we can help to shape and inform what happens in other industries

”

different from a person point of view.

“I think as individuals we have the right to feel as indignant as we want to - I am shocked by what I am seeing in Ukraine and I think it is very disturbing,” Sohmen-Pao said, going on to explain: “I think states and politicians have the right to make laws because they have access to good information and consequences. Corporates are in a very tricky position in the middle. We can’t act purely on emotions because we represent a small community and we also don’t have the right or information to make laws so if we all decide to make our own laws in defiance of international laws that leads to chaos and that is where corporates have a tricky role right now to calibrate an appropriate response.”

Among his many titles,

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Sohmen-Pao, 50, is chair of the Singapore-headquartered Global Centre for Maritime Decarbonisation (GCMD), an organisation that has been making lots of headlines of late.

Like the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping in Copenhagen, the GCMD, explained Sohmen-Pao, is a collaborative effort, bringing together multiple stakeholders, rather than representing a singular point of view.

“One of the aspects of the center that we have in Singapore is to really focus on doing as opposed to only researching because I think it’s very easy to get stuck at the level of theory and it’s really important then to to be taking concrete action,” he said, giving the safe handling of ammonia, a likely future fuel, or carbon capture onboard as examples

of taking action today.

Sohmen-Pao does not buy into the thesis that shipping struggles to punch above its weight, that because it does not control what happens upstream it is not in control of its green destiny.

“In charting our future fuels for shipping we can help to shape and inform what happens in other industries, so you know some of the aspects of future fuels - how you move them, how you consume them - has applicability for other industries,” Sohmen-Pao argued.

Quizzed about the role China will play in the global decarbonisation transition, Sohmen-Pao said of the land where his famous grandfather, Sir YK Pao, hailed from, that because of superpower dynamics, big emerging countries are sometimes hesitant to sign up to multilateral institutions which they’re not leading because it restricts their freedom to manoeuvre. The Chinese government is pragmatic, and want to be able to manoeuvre in the event - as now - some energy prices spiral. Plenty of other nations such as Germany have to wrestle with this pragmatism versus idealism energy debate, Sohmen-Pao pointed out, bringing the conversation back to the opening focus, namely the balancing act between energy security and climate change.

On further consolidation, for which Sohmen-Pao has been a leader in the non-container space for the past five years, the BW boss said: “There are great opportunities for it because the landscape is shifting so much and so I think we are seeing and we’ll continue to see new constellations of companies coming together, working together.”

The next Capital Link event takes place in Athens in May. ●

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IN PROFILE

Reframing the green debate John Platsidakis on where shipping got it wrong with regulators and the environment

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ohn Platsidakis is a great champion of the traditions of Greek shipping, having acted as a de facto consigliere to many of the biggest names in the business such as Costamare and Angelicoussis over a 40+ year career in the industry. The ex-banker is also honorary chairman of Intercargo and a board member of the Union of Greek Shipowners as well as being on the executive committee of the Hellenic Chamber of Shipping.

Grilled at the Ship2Open Shipping Finance conference, which took place in Athens in March, Platsidakis discussed sustainability, how shipping needed to defend its green corner, and the importance of upholding the management techniques of previous generations of Greek shipowners.

Shipping’s day-to-day operations and long-term planning will be hugely influenced by sustainability and the protection of the environment, Platsidakis conceded.

“Shipowners have been on the defensive and personally I believe it is a very unfair treatment,” Platsidakis said, going on to explain that when the International Maritime Organization (IMO) first came up with its greenhouse gas strategy, it was a mistake for shipowners to meekly said they’d comply. This, he said, sent a bad message to the public, to consumers.

“We ought to have said we would comply to the extent that we are responsible for but because we said we would comply, the public thought we were at fault,” Platsidakis said, adding: “Shipowners do not manufacture engines, they do not build ships, they don’t produce bunkers

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themselves - simply they are consumers - they go out in the market and find among the producers what is best for their needs. The fault is the responsibility of the producer.”

In the automotive industry, by contrast, regulators in the US or Europe map the standards and tell car manufacturers that unless they produce a car that meets those specific conditions they will not be allowed to sell, Platsidakis said, pointing out the same conditions applied in aviation.

“What happened to shipping,” Platsidakis told the conference, “is that the regulators went to the consumers - to the ones who bought the car - so it is as if we bought a car today and they don’t blame the manufacturer but they blame us, that we have to meet certain criteria.”

Platsidakis also hit out at shipping’s lack of clout when it comes to lobbying. “Regrettably big countries such as the US, Germany, France, the UK, they do not have substantial shipping any more so they don’t have the weight, they don’t have the interest to come up with the right framework,” he said.

Asked what elements the upcoming generation of Greek shipowners

need to bring to their business to ensure success, Platskikardis said Greek shipping over the years has proven to be highly adaptable. The new generation of shipowners must stay close enough to the ship, he urged, because their fathers and grandfathers were hugely attached to the vessels, attached to the crew.

“The crew is the key in shipping in the sense that this viable asset is trading thousands of miles away from the shipowner, the shipping company, and you have to trust the crew to comply with regulations, with the performance under the charter party, etc,” the shipping veteran argued, adding: “Over the years what has made the difference between Greek shipping and non-Greek shipping is the fact that management was on-hand management so if we lose that and we create a very corporate structure with a lot of reporting and we lose the attachment to the ship and the crew we don’t have any other competitive advantage with other shipping communities.”

Concluding his chat with event organisers, Platskikardis said: “You entrust a ship to 22 people and at the end of the day those people make the difference.” ●

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IN PROFILE

INTERCARGO and the green battle ahead Dimitris Fafalios and the challenges faced by shipping’s green transition

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ince taking over from John Platsidakis (interviewed on the previous page) as chairman of the International Association of Dry Cargo Shipowners (INTERCARGO) Dimitris Fafalios has been busy taking on the key daily battles his shipowner membership have faced such as the pandemic, the environment and latterly the war in Ukraine.

Fafalios, who heads up his own small eponymous dry bulk concern in Greece, was invited to speak last month at the Slide2Open Shipping Finance conference in Athens where he was grilled about the wave of green regulation heading shipping’s way, not least from Brussels.

Fafalios told delegates that while next year’s Energy Efficiency Existing Ship Index (EEXI) regulation was manageable cost-wise, the Carbon Intensity Indicator (CII), which comes in at the same time, will prove to be far more onerous.

For newbuilds, the International Maritime Organization (IMO) already has the Energy Efficiency Design Index (EEDI), something that Fafalios said had been “financially quite challenging” in the transition from phase II to phase III. For existing vessels the application of EEXI from 2023 is not an insubstantial expense but it it was what could be considered a manageable one, Fafalios said, typically between $50,000 and $100,000 per ship.

Regarding the CII however, Fafalios warned: “I feel the costs will

26

be far higher and, in fact, almost impossible to quantify.”

In the bulk tramp sector, the INTERCARGO chairman explained time charters are dominant and a vessel’s CII rating will be determined primarily by a time charterer and not the shipowner. In order to attain the required CII improvements the vessel’s time charter description will have to change regularly and this will happen despite the formulation of the much needed BIMCO CII clause.

“The financial impact of these changes will be significant, but will change according to the freight market,” Fafalios said.

When quizzed about European Union intentions to crack down on marine emissions, Fafalios said

“

that the inclusion of shipping in the bloc’s emission trading scheme (ETS) as well as the incoming FuelEU Maritime rule will bring additional bureaucratic burden especially on small- and medium-sized shipowners and operators.

“Many smaller owners will have to see significantly higher freight rates to and from EU ports to justify this extra bureaucracy or this extra uncertainty which is going to be brought on by the less than stable prices and the prices of the credits,” Fafalios said, pointing out how the price of European emissions allowances tripled in 2021 alone.

“If the freight premium is not there they may well steer clear of the EU ports altogether,” Fafalios warned.

In concluding, a little like his predecessor, Platsidakis, whose comments are carried on the previous page, Fafalios stressed that all stakeholders in the maritime venture should bear the costs of the decarbonisation transition.

“This is not just shipowners and operators, it is charterers, fuel suppliers, cargo shippers and cargo receivers,” Fafalios said. “One step back from these players are other stakeholders like financiers, insurers, shipbuilders, engine and equipment makers. We have to stress that simply by regulating the owner is not going to achieve the desired effect.” ●

Simply regulating the owner is not going to achieve the desired effect

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maritime ceo

IN PROFILE

When to invest and divest Goldenport’s John Dragnis on how best to buy into shipping

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n recent weeks John Dragnis celebrated his 10th anniversary as CEO at his family’s famous shipping firm, Goldenport Holdings, a dry bulk and containership company he has been working at since 2001.

Dragnis also co-founded Oceangold Tankers in 2007, a product and chemical tanker specialist.

With such a wide fleet purview, Dragnis is well versed in how best to navigate the ebbs and flows of individual shipping markets. At the Ship2Ocean Shipping Finance conference held in Athens last month, Dragnis was quizzed on when best to enter and exit shipping segments to which he gave delegates a masterclass in shipping.

“We are in a high inflationary environment and obviously this helps - it is good to own hard assets today because it helps protect investments,” Dragnis told delegates attending the conference.

With regards to the value of assets - whether to divest or invest and how to place yourself within the shipping sector, each sector has its own dynamics, Dragnis stressed.

Generally, he said, because of the inflationary environment, the increasing costs, the very low shipyard capacity to construct and build new ships all point towards rising values of most ship types already trading around the world.

“In China,” Dragnis relayed, “it is not so easy to place newbuilding orders. The orderbook is filled up with container vessels, so again that gives more value to the fleet at sea.”

Looking at the tanker sector, Dragnis said that for more than a year rates have been at near zero in TCE terms, however because of the

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very high liquidity that exists in the general shipping environment values held up very well irrespective of the category of ship, whether it was younger ships, middle-aged ships or older ships.

“They were all very liquid assets and they could very easily be sold even though the market was very subdued,” Dragnis said of the topsy-turvy tanker sector.

Where the Greek would sink more cash is into younger, more eco ships, aware of rising fuel bills.

“Generally I think the value on younger ships is well justified,” Dragnis said. “With bunker prices so high the eco ships delta will continue opening vis-a-vis the non-eco ships because of the bunker cost and I think that the prices are justified.”

Dragnis said that there will come a point where taking some profit off the table could be a good choice, like for example in the container sector, selling out on a 20-year-old vessel

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Shipping is shipping - it is not a bank bond, there are risks

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that is non-eco that was acquired at a low number and can log in a hefty profit today.

However, before readers pile in and think shipping is a licence to print money, Dragnis concluded with some cautionary remarks.

“Shipping is shipping - it is not a bank bond, there are risks: credit risks; counterparts risks; and time charter risks,” he said. ●

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Singapore / September

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IN PROFILE

‘We are living in an inflationary world and that’s good for shipping’ George Gourdomichalis explains why he is bullish on earnings potential for this year and next

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anker, broker, owner, investor, manager - George Gourdomichalis’s far ranging 33-year career in shipping has earned him the right to call out the markets as he sees them.

On the same panel as Goldenport’s John Dragnis (see page 27) at March’s Ship2Ocean Shipping Finance conference held in Athens, Gourdomichalis picked up on some of the points made by his compatriot shipowner on how to play the markets during periods of high inflation.

Gourdomichalis, the CEO of Blue Wall Shipping and managing director of Phoenix Shipping & Trading, told delegates: “We are living in an inflationary world and that’s good for shipping.”

According to Gourdomichalis, as of the mid-March timing of the conference, bulk carriers are still cheap for their earnings, containerships look expensive and tankers are more expensive than what they should be given their earnings, but he admitted they have upside.

Born in London and educated in Greece and the US, Gourdomichalis started out working for a bank in New York, before becoming a shipbroker and then a shipowner on his return to Greece in the 1990s, where he went on to get FreeSeas listed on the NASDAQ before pursuing

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new shipowning and investment opportunities.

“Shipping is one of those beautiful businesses where you can divest and invest at the same time,” he told the conference.

“I’m fairly positive across the board for this year and next year,” Gourdomichalis said, admitting the unfortunate events of the past couple of years - whether it be the pandemic or the war in Ukraine - are providing a “backbone” to the business of shipping.

In terms of investing in shipping, Gourdomichalis said by all means take money off the table where possible, but he advised caution about how to reinvest this money.

“Reinvesting today in newbuildings has a big question mark that has to do with the upcoming regulations and on the idea that you when you invest in your newbuilding you should have a 20- or 25-year cycle ahead of you,” Gourdomichalis said, going on to predict: “That’s why I think that the 20- to 25-year cycle is is is not a reality these days, but there’s definitely a 15-year cycle for ships.”

The issue of the declining lifetime of ships has been much discussed of late. Oil companies do not officially charter tankers older than 15-years-old. Likewise, most banks and financiers want to ensure that any financing does not extend beyond the 15th anniversary of the vessel, past the third special survey and dry dock. Financing is generally limited to seven to 10 years with the leasing houses who are now responsible for the lion’s share of financing in the maritime world.

Vessels delivering today are unlikely to have the full benefit of a full design life of 25 years when the industry still does not know many variables for future designs, such as a future fuel let alone the possible competitive benefits brought about by technology and automation.

“Let’s see what the future holds there,” Gourdomichalis mused. ●

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REGULAR BOOKS WINE

China special Up in Shandong province, a vineyard is giving spicy food a proper match

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hile it was, once again, a somewhat subdued Chinese New Year this February, domestic wine sales in China held up remarkably well in the shopping run up to the holidays.

Top e-commerce platform JD.com reported Chinese-made wines, Ningxia wine in particular, saw a nine-fold boost in sales in December compared with the same period in 2020. Perhaps this reflects the improving quality and reputation of domestic wines, thanks to local investment and support from international firms like Pernod Ricard and Rothschild. What is more, there’s also a flourishing niche independent market whose wines are available internationally to drink.

Take Treaty Port Vineyards, a venture started in 2004 by Yorkshireborn and long-time Shanghai resident Chris Ruffle. The vineyard is in Mulangou Village, in the Qiushan Valley near Penglai in Shandong Province. Shandong’s first all-organic producer, it is 190 m above sea level and with its own advantageous micro-climate. There’s also a faux-Scottish castle that doubles as the vineyard’s HQ and a boutique hotel.

Treaty Port Vineyard now produces eight varieties of reds, whites,

and a rosé, as well as a recently launched Ruby XO Brandy, eleven years old and sweetened up with a splash of merlot. Ruffle is keen to pair his wines with Chinese and other Asian cuisines. For instance, his newly launched The Drunken Beauty is the vineyard’s first sweet red wine, which he believes can stand up to mapodofu, tofu set in a spicy Sichuan sauce. In China, he is marketing it to Sichuan and Hunan restaurants whose fare is usually considered far too spicy for accompanying wines. The vineyard’s white Viognier/Chardonnay, The Lady of Fashion, pairs particularly well with sushi and seafood, while their Petit Verdot/Arinarnoa red, The Prince is

considered a good accompaniment to braised pork or the classic dish of Peking Roast Duck.

The Treaty Port Vineyards continues to experiment and try new varieties. Most recent is The Commissioner, a 2014 reserve Marselan, a cross between Cabernet Sauvignon and Grenache, a grape type that, according to Ruffle, is now doing very well in China. Success didn’t happen overnight for Ruffle and Treaty Port Vineyards. Business in China, including the wine business, is never without its frustrations and challenges. Ruffle recounts his struggles in his engaging 2016 memoir, A Decent Bottle of Wine in China.

The struggle has been worth it. ●

Two (more) to try THE MANCHU BRIDE is Treaty Port’s 2018 Muscat, cold-fermented in stainless steel tanks and held there until bottling which keeps it super fresh. A floral, lychee-like aroma and palate best drunk chilled on a hot day. Pairs excellently with fish and seafood - or just as an aperitif on its own.

Chinese rosés are not a common

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thing so well worth trying is Treaty Port’s Grenache Noir/Muscat The Debutante. The vineyard harvested, crushed, soaked and pressed the grenache noir fruit in a single day.

After fermentation it was blended with the vineyard’s muscat.

The result has hints of strawberry, cherry and rose petal and, drunk chilled, is a very decent

accompaniment to any Chinese banquet. ●

maritime ceo

GADGETS

High res

V

R technology has come a long way in a fairly short time. The Varjo Aero is arguably the next big step in the technology. Whilst the horizontal field of view (115°) is somewhat underwhelming, the use of aspherical lenses instead of the standard fresnel lens coupled with the enormously high resolution (1920 x 1920px per eye at the focal point and 2880 x 2720 per eye peripheral) means the problems of god rays, screen door and mura are gone. If you use VR for simulations with lots of dials and buttons to read, this is the solution for you: the detail and clarity is basically the same as looking at a monitor. There are no base stations & controllers included.

Varjo Aero aero.varjo.com $2,000 (+taxes) (VR headset only)

Phone downtime

M

ore and more people are trying to cut down on their smartphone addiction nowadays: even we insist on collecting everyone’s phones in a single bag at family dinners. The Light Phone II is a fairly good compromise between a dumb phone and the smartphone. You can call people, SMS and group message them, you can tether it to get the internet on another device, you can listen to music and podcasts, and it has a GPS map/ directions system. Getting to the point, though: the phone has no social media, email or internet browsing and no apps. The only major downside is that text typing is restricted to English characters, so Cyrillic and CJK is not an option, although you can view incoming messages in several languages/ characters.

Light phone II www.thelightphone.com $300

Super Mac

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pple’s M1 Chip has come of age, with its appearance in a mid-to-high-end offering firmly aimed at professionals, called the Mac Studio. Looking like a twostorey MacMini, the Studio comes in two flavours, the M1 Max and the M1 Ultra, the M1 Ultra essentially being two M1 Max chips on a single board, doubling the CPUs, GPUs and RAM. The minimum specs are a 10-core CPU, a 24-core GPU, a 16-core neural engine, 32GB RAM and 512GB SSD; the maximum is a 20-core CPU, 64-core GPU and 32-core Neural Engine, with 128GB RAM and 8TB SSD. You’ll likely want a Studio Display to pair it with which goes for $1,600-$2,300 depending on options.

Mac Studio www.apple.com $2,000–$8,000

ISSUE ONE 2022

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REGULAR BOOKS

Where the bear and the dragon meet Paul French thumbs three contrasting books on the Amur, a river that separates Russia and China

T

he border between Russia and China winds for 2,600 miles through swamps, forests and, mostly, river – the Amur, or the Heilongjiang to the Chinese. It is controversial, contested and a story of two halves. Much of the Russian side is territory seized from China in the 19th century where now Russia prioritises defence. The Chinese side has exploded economically, outstripping the northern bank. Yet the two have to coexist and the river is their shared ground. And so, a trio of books comes travelling along, analysing, describing and predicting the future of the Amur and the Sino-Russian borderlands.

Franck Billé and Caroline Humphrey have the most academic and perhaps most detailed analysis of the region and the river in On the Edge: Life Along the Russia-China Border. Billé is program director at the Tang Center for Silk

“

The Amur’s history is embedded in an ongoing clash of empires

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”

Road Studies, University of California while Humphrey is at King’s College, Cambridge, where she founded the university’s Mongolia and Inner Asia Studies Unit. Dominic Ziegler’s Black Dragon River: A Journey Down the Amur River Between Russia and China is the journalistic account of the region.

Finally, Colin Thurbon’s The Amur River: Between Russia and China is the traveller’s account of the region. Together all three books give us a contrasting, but cross referenced, picture of the region.

Billé and Humphrey’s book is particularly analytical and contains a lot of detail. Maritime CEO recently spoke with the authors who explained their general thesis. “High-level diplomatic alignment between China and Russia has only a very diluted impact on the ground. The two countries are both authoritarian, but in very different ways – as we attempt to describe in the book.

In the future, we expect the relationship to remain pragmatic but fundamentally distanced, with a good deal of puzzlement on either side about why the people on the other side of the border behave as they do.”

Dominic Zeigler’s journey down the Amur was taken in 2015 though perhaps now seems especially prescient. Ziegler, The Economist magazine’s Asia editor, believes that, “to understand Putin’s imperial dreams, we must comprehend Russia’s relationship to its far east and how it still shapes the Russian mind. Not only is the Amur a key to Putinism, its history is also embedded in an ongoing clash of empires with the West.” This analysis may now be especially interesting given the war in Ukraine which appears to be driving Russia and China closer together – a meeting that, physically at least, occurs at the Amur River.

Thubron, as with all books by the veteran British travel writer, is the most lyrical of the accounts of the Amur.

Thubron has visited the area before and so is, in some ways, the most qualified of the authors mentioned here to comment on changes in the region.

Thubron’s journey is metaphorical as well as physical – Mongolian camps to buzzing Chinese towns as well as the decline of Russian imperialism and the rise of a pivotal world of cross-border connections. ●

maritime ceo

REGULAR TRAVEL

Mexican playground Puerto Vallarta is one of North America’s greatest beach destinations.

Maritime CEO explains why

O

ne of Mexico’s most enchanting coastal destinations, Puerto Vallarta has been a jet-setter’s destination since the 1960s — thanks in part to John Huston’s sultry drama Night of the Iguana, which helped put the then-sleepy region on the map.

It’s easy to see why so many fall under the spell: Beautiful beaches, a thriving culinary scene, and great nightlife are a few reasons to book a getaway. You’ll also find appealing outdoor activities from kayaking and surfing to horseback riding and mountain biking.

Puerto Vallarta has lots of options for beach-going. The centrally located Playa de los Muertos, just south of the Zona Romántica, is a convenient spot for some seaside action, but you’ll find the best beaches a bit out of town.

Playa Palmares, about 6 km south of the centre, has white sand and calm waters that are ideal for swimming. More remote beaches like Playa Las Animas

ISSUE ONE 2022

“

Beautiful beaches, a thriving culinary scene, and great nightlife are a few reasons to book a getaway

and Yelapa can be reached only by water taxi. Another way to experience the water is to go diving and snorkelling amid the stingrays, tropical fish and brightly hued coral. You can also take sunset cruises, explore the picturesque Islas Marietas on a boating excursion or go whale watching.

When you need a break from the beach, head to Puerto Vallarta’s botanical gardens. On a hillside, some 25 km south of the city, this 64-acre expanse is full of orchids, bromeliads, wild palms, cacti, and ponds of water lilies. You can often spy hummingbirds and other avian species along the nature trails.

You can also go swimming in the river here.

Foodies are spoilt for choice in Puerto Vallarta. The city that loves to

”

eat, whether munching street tacos in the Zona Centro or lingering over a multi-course meal while taking in the views at a seaside dining room. The densest concentration of restaurants lies in the Zona Romántica. The best street food is probably Tacos Revolución while the best classic Mexican is El Mole de Jovita while for Michelinstarred greatness check out Tintoque.

In terms of where to stay the Marriott Puerto Vallarta Resort is hard to beat. Set on a lovely stretch of beachfront the Marriott has all the features you’d expect from one of Puerto Vallarta’s top resorts. Lush grounds, an ocean-view infinity pool, a luxurious full-service spa, a swim-up bar where you can sip cocktails poolside are just a few of the noted features. ●

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REGULAR OPINION

Is maritime media Eurocentric?

Santosh Patil argues shipping coverage does not reflect the reality on the ground with Asia not getting the reportage it deserves

R

ecently Twitter was abuzz with the criticism of western mainstream media’s coverage of the Russian invasion of Ukraine, which prompted the Washington Post to publish an article.

The coverage, which was criticised involved reporters and experts who commented that this war was different as it involved ‘relatively European’ ‘blue eyed’ and ‘not Iraqi/ Afghan/Syrian’ people. The Post article sought to highlight long held biases of western media. In the age of western virtue signalling and social justice movements, well propagated by the media, it is of particular concern to see uncovering of this bias within the media itself.

Thankfully leading maritime media publications do not manifest such a bias; but if one follows the reportage, some observations do not miss the eye.

Three years ago, I wrote an article published by Splash musing why doesn’t Asia influence world shipping more. I underscored the lack of Asian presence the with reference to influence, technology, leadership in all things maritime when searching the internet. If one looks at why it’s difficult to find Asian references, you cannot help noticing that maritime media has relatively lesser coverage of Asia.

Leading maritime publications’ coverage is mostly Eurocentric,

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notwithstanding the Asian tilt in maritime affairs. Simply adding up the number of stories by region reveals how disproportionate the coverage is. A leading industry publication has almost twice the number of articles focusing on Europe as against Asia for topics like seafarers, pandemic, decarbonisation and digitalisation.

There are two probable reasons one can cite for the low visibility of non-European players – most Asian stakeholders are not as media savvy (barring a few) as their western counterparts. Secondly, there is a bit of reticence amongst leading maritime media to reach out to a wider section of industry players.

The maritime industry has been Eurocentric for a large period in history and Europe continues to hold significant stakes in the maritime world even today. However, a lot has changed in the last few decades, but this change does not get reflected in the reportage of leading maritime publications.

Let’s look at some regional metrics of the maritime industry.

All leading shipyards are currently based in Asia with more than 90% ships being built there. Four out of top five seafarer supplying nations are from Asia – Philippines, Indonesia, China and India. Nine out of top ten container ports are in Asia.

A large number of flag states are

Asian. A significant chunk of owners by nationality are Asian. Clarksons data shows that Asia has the largest share of ownership. Ship recycling is overwhelmingly Asian. Almost all the container manufacturing is in Asia.

The DNV Menon 2022 report on ‘The Leading Maritime Cities of the World’ includes three Asian cities amongst the top five with Singapore taking the overall top spot.

The UNCTAD Review of Maritime Transport 2021 lists three Asian nations in top five shipowning nations by value and four out of top five in dwt terms. International maritime trade figures of the same UNCTAD report highlights the lion’s share of Asia.

‘Shipping and Globalization in the Post-War Era’, a 2019 book published as a part of Palgrave Studies in Maritime Economics series, provides a good perspective on the declining role of Western Europe in shipping and shipbuilding. Yet the maritime media’s coverage does not reflect this reality.

Several years ago, when a leading maritime editor was asked about why mostly grey-haired white men are pictured in their coverage; pat came a reply that it’ll stop when they no longer control the world fleet.

While the numbers paint a different story, it doesn’t appear that this view has changed much. ● maritime ceo

REGULAR OPINION

The deck chairs of the Christina How the Russian invasion of Ukraine could upend the cosy set-up most shipowners have enjoyed since the 1950s. By Andrew Craig-Bennett

T

he Russian government decided to do the unthinkable this February, and invade a neighbouring state on the grounds of old-fashioned irredentism.

It is easy to start a war, but as every schoolboy knows, plans never survive contact with the enemy, and things start to happen fast in ways that political leaders cannot control.

Stopping a war can be difficult.

From this, some things follow.

The nation which is most closely associated with Russian offshore money and with wealthy Russian expatriates is Britain. Britain is seen as a politically stable place to park money in real estate, whilst the British legal and banking systems, and indeed British purveyors of luxuries, like superyachts and private jet aircraft, are well able to look after people with serious money.

These systems for hiding wealth safely and for looking after the seriously rich were developed in London 70 years ago, to look after a different group of wealthy expatriates – the Greek shipowners who were worried that the Greek civil war might end with Greece becoming a communist state. The subtle political impetus for the development of these systems to protect the wealth of Greek shipping families came from a well-known friend of Greece and Greek shipping, Sir Winston Churchill, who liked to spend holidays as the guest of Aristotle Onassis, onboard Onassis’ yacht, the Christina (pictured), and who had agreed with Stalin 10 years earlier that Greece would stay “in the West”.

If you are in shipping, you have

ISSUE ONE 2022

grown up with a set of legal fictions which were originally American, but which were developed by London lawyers, with the encouragement of Churchill, to help the Greeks.

These are part of your “mental furniture”, and if you are in shipping and less than, say, 50 years old, you have grown up with the formal acknowledgement of those fictions, and with a series of codes written round the fictions, in the form of the ISM Code, Port State Control and the procedures and processes that hang off them. The effect has been to remove national governments’ ability to tax, and otherwise to control, merchant shipping, whilst giving shipping quite effective international regulation. Two cheers for that London institution, the IMO. You have seen shipping become safer, and a great deal cleaner, with the help of classification societies and other industry bodies and indeed with the help of insurers, as national governments have abandoned the attempt to regulate the ships that operate under their flags. We don’t find this strange, until we try to explain it to non-shipping people.

The searchlight of public interest that is now being shone on London’s

rich Russians is going to catch shipowning. The British are starting to feel ashamed of, and even embarrassed by, the close relationship between Russian offshore money and British politics.

Prime minister Johnson is careful to say that cash gifts to his political party all come from Russians who are also British citizens, 700 of whom became British by spending a couple of million pounds in Britain, and he carefully forgets to say that the law requiring political donations to be made only by British subjects is there because 40 years ago John Latsis bunged the Conservative Party, then headed by Mrs Thatcher, two million quid, and there was a scandal.

There is another scandal now. It’s bigger. We don’t know how big this one will become; it’s still growing.

What we can see at this stage is that if governments look past the veil of incorporation to grab an oligarch’s superyacht, the legal fictions that they brush aside are those that protect shipowners’ assets. This isn’t surprising; the legal fictions have the same origin and the same purpose.

What we can’t be sure of, now, is whether they will survive. ●

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SPLASHBACK REGULAR

Your thoughts Splash always welcomes reader comments. Below are some of the juiciest we’ve published in recent weeks

Ed Enos ridicules shipping’s move towards unmanned operations at sea “At the end of this effort, there will still be humans monitoring robot ships, inputing data to send them off on their voyages. These ships will then be greeted by human technicians who will be scrambling to use what little time they have in port to perform maintenance and repairs. Thus no humans will actually be removed after all. What money is saved? Are these ships actually safer? If not safer and construction and operation are as expensive or more, what’s the point of it all?”

Peter Gartsjö on the cut-throat shipmanagement business “There are too many kings, too much silo thinking and tunnel vision for them to be able to have a common voice” Ed Ion on maritime media “The less than virtuous cycle of advertorial, phoney paid for awards /events and PR companies masquerading as independent media is still all too prevalent in the Eurocentric shipping media”

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‘Sailor Bill’ discussing Egyptian corruption “The Suez Canal Authority is like the Mob. You don’t get a job unless you’re an earner, and send money up to the bosses. Canal pilots are like vacuums, they suck up everything in their path” Arjun Vikram-Singh sticks up for the carriers in the face of a barrage of criticism from shippers “Freight forwarders have long been the bane of ocean carriers, with their predatory negotiating tactics, their manipulations, their shopping around for space, their notorious last-minute cancellations” Martyn Benson on shipping’s murky reputation “Shipping has many of the traits of the bar of wet soap that can’t be easily found and, even when located, is difficult to grasp. The persistence of flags of convenience, pirates, tax-free fuel, a general unwillingness to publish detailed financial records and ethereal debates about carbon offsets and credits all contribute to an image of an industry which really does not want to be transparent to the man/woman/non-binary in the street”

maritime ceo

Posidonia 6 -10 June 2022

Metropolitan Expo, Athens Greece

www.posidonia-events.com