Is the shipping black-out over? Contrasting signals from Posidonia
During the Athens show, shipowners within the dry and liquid cargo sectors discussed consolidation, volatility and environmental sustainability at the Tradewinds Shipowners Forum
Athens – The Tradewinds Shipowners Forum, traditionally held on the first day of the Posidonia show in Athens, was attended by some 300 participants.
On its 50th edition, the exhibition fair gathered over 2,000 exhibitors from 92 countries, while the hall that hosted the Forum remained in the dark for over 90 minutes due to a black-out that seriously compromised the second debate organized by the Anglo-Norwegian specialized magazine.
Said black-out was an emblematic metaphor of the current situation of shipowners, and consequently of all their related satellite activities.
As Euronav Managing Director Paddy Rodgers observed, the fact that the energy deficit took place while dry cargo shipowners were about to leave the floor to wet cargo ones seemed a reference to what actually happened in the world's shipping markets, as bulk carriers' serious decline is thought to have plunged the tanker market into chaos, jeopardising its performance.
At the end of the black-out, Tradewinds Editor in Chief Julian Bray chaired the double round table with his usual “democratic” attitude, asking the same questions to all 16 participants, including shipowners, operators, charterers, shippers, banks, registers and institutions.
The latter were confronted with the important issues related to consolidation within their industry, market volatility and shipping environmental sustainability in light of the urgent regulations related to polluting emissions.
Predictably, the main world's stakeholders did not share the same views, and in some occasions they stood in sharp contrast.
The debate was livened up Goodbulk Chairman and CEO Michael Radziwill who, having just applied for a listing in the USA stock market, explained that “in one way or another, we will make money. After a decade of suffering in the dry cargo sector, slow steaming is welcomed if it can help us reducing operating costs and the hold capacity offered on the market. The important thing is obtaining a good margin”, Radziwill pointed out, counting also on the Greek tycoon Peter Livanos.
His optimism about the improvement of the markets is based on the new coal exchanges and on the fact that iron flows are going better than expected. “These traffics will not be a prerogative neither of Valemax nor of VLOC”, Radziwill continued, pointing out that 51 VLOCs are over 20 years old and they must be dismantled, thus compensating for the number of Valemax newbuildings scheduled by 2020.
Cargill – the giant operating an average of 600 ships per day, i.e. 5% of the world's dry cargo fleet – Chairman Jan Dieleman expressed his “surprise for current volatility, affected by the great political impact. Will there be a consolidation? It would definitely suit us”.
“Each tweet of USA President Trump creates uncertainties on the markets, and uncertainty is not good for our activity”, CMB Compagnie Maritime Belge and Hunter Maritime spin-off Managing Director Alexander Saverys observed, praising China's efforts to increase trade through the One Belt One Road.
This position was shared by BIMCO President Anastasios Papagiannopoulos, also chairman of the Greek company Common Progress. “I am worried for the general protectionist trend. Forecasts about the near or far future are difficult to make. The basic factors related to the dry cargo sector are positive, but there is great uncertainty about contradictory political issues, while evaluating the impact of other factors is more difficult. Smaller vessels are doing better, panamax are out-performing and crowded out by protectionist trends”.
Then Savery started a debate about the potential damage to navigation resulting from the scrubber technology adoption, explaining that these systems are detrimental to the industry. “I do not believe that public opinion will appreciate the fact that we are taking sulphur from the air to throw it into the ocean. Scrubber manufactures are happy about this new business, but this is not a positive thing for our category because we are already regarded as a polluting sector”.
This view was shared by Pavimar Shipping founder Ismini Panayotides. “We are using BWT to preserve the environment, while scrubbers are doing the exact opposite. Therefore, probably the solution is travelling at low speed. Market uncertainty creates anxieties, but also opportunities to be seized, provided that we know how to reduce costs”.
This solution is not convincing to Star Bulk sales director Milena Pappas, who mentioned a study carried out by Carnival showing that sulphur already forms 7% of the oceans' composition, while the addition of sulphur released by scrubbers would be less than 1%. “Besides, sulphur in the water is not harmful, while in the air it kills 600,000 people per year. The demand is strong, IMO regulations impose many scrappings and the current order book is sound. As regards cargoes, consolidation is harder than in the container sector, and some economies of scale are more difficult to be achieved. Although this kind of market favours consolidation, I do not believe that this will be the leit-motiv of the future. The fact that the shipping sector is far behind in digitalization is not a positive sign; each means to increase fleets' efficiency must be taken into consideration”, the firstborn of the family company leader Petros Pappas observed.
SwissMarine Director Peter Weernink agreed with her: “We are laying the foundations for a better future. Some geopolitical trades will always be under pressure, therefore there could be unexpected situations”.
Euronav managing director Paddy Rodgers suggested that long-term investors are focusing again on oil products transport companies, while a more active development of a futures market in liquid cargo could contribute to the increase of equity prices.
“Some large Boston funds purchasing shares, as well as other investors, are investing in us because they know that we are going through a countercyclical phase, and they believe we are reaching a turning point”, Euronav CEO added. Euronav should complete the take-over of Gener8 Maritime shortly, aiming at achieving a 100 tankers fleet.
During the Posidonia trade show, TEN Tsakos Energy Navigation probably formalized its order related to some crude carrier tankers.
CEO Nikolas Tsakos pointed out that at present shipping companies transporting oil products find it more difficult to attract investors compared to their dry bulk counterparts. “This is due also to the lack of a wide and liquid market for the futures of our market segment. The dry cargo market is very liquid and easily comprehensible due to the daily quotations, while in the wet cargo sector futures markets are still depending on the World Scale, which is incomprehensible”, the Greek shipowner and Intertanko Chairman observed ironically. The latter also revealed that, to that end, the oil tankers independent companies international association is negotiating with the World Scale to find a way to provide analytical interpretations making it easier for charterers and investors to gain understanding, in order to protect respective risks. “However, it is not necessary to aim at 100 units fleets, rather at being profitable”.
TEN CEO's opinion was shared by Navios Maritime Holdings CEO Angeliki Frangou, who pointed out that “the tanker market is damaged by the essential problem that its reference index does not represent objective reality! We must become a green industry, irregardless of our corporate interests”.
When asked whether he would use futures on oil tankers if they were more liquid, Capital Maritime & Trading Corp Evangelos Marinakas declared: “Off course, we already did that for dry cargoes for several years”.
The shipowner known for his passion for the Pireaus and as the owner of the football clubs Olympiacos and Nottingham Forest, as well as owner of the disco Island in Varkiza hosting the most lavish party of the entire Posidonia, observed that “in a few years over tonnage should end, although you can never know what will happen in the shipping sector...”
WeberSeas (Hellas) managing director and experienced broker Basil Mavroleon believes that “tanker companies listed in the Stock Exchange such as TEN and Navios are underestimated by the market, which prefers dry cargo ones. Selling shares of a tanker company is definitely more difficult, but I am sure better days will come also for them”.
The broker also warned about the excess of financial levers for development: “If you want a fleet to be successful, you must not exceed 50%”.
As regards football & shipping, Sovcomflot senior executive vice president Evgeniy Ambrosov confirmed that the Russian state fleet will sponsor the forthcoming football world cup. “Our company is ready to enter the stock market, although this does not depend on us, rather on shareholders”.