Investment Opportunities


Amsterdam Mare Forum 2012 Final Part and Meeting Takeaways

Investment Opportunities – the Final Session of Amsterdam Mare Forum 2012 (see site for presentations).

Invest in Fuel-Saving

Alisdair Pettigrew of the Carbon War Room (Ship Ops) explained how each ship on ShippingEfficiency.org is given an EU style efficiency rating A to G. The A is the highest rating, while G is the lowest. According to Mr Pettigrew, some charterers are now using this rating as part of the decision making process when deciding on which ship to hire. Cargill, apparently will not take ships rated F or G. Such a “threat” to a ship’s charterability was clearly of great interest to shipowners, but Mr Pettigrew had to leave before questions were taken. But there was good news on offer, too. According to a calculation in the presentation, the cost of converting a VLCC to a fuel-saving regime is around $1.8m. The payback period was 13 months, which makes this sort of conversion a realistic proposition.

Invest in Offshore

Wilhelm Magelssen of Pareto Project Finance started his presentation on direct investment with an anecdote from the 1970s. Apparently the Norwegian government wished to have a stake in the Swedish car manufacturers Volvo and SAAB, which at the time were very successful. In exchange Norway would give a stake in the North Sea oil. Sweden turned down the offer, and as we know, Volvo nearly went bust and was sold to Ford, and SAAB cars are no longer built. I googled this story, and the version I found is that Volvo proposed a merger with SAAB-Scania, which was not interested. Volvo then approached the Norwegian oil industries, but the Volvo board rejected the deal. But whatever the version, it illustrates Magelssen’s point that direct investment is a useful tool for investors.

The direct investment on the table is offshore assets. Exploration and Production budgets will total $500 bn this year and will double in the next five years. The day rates and asset values are increasing in the offshore sector (see slide 6), and in Pareto’s opinion, now is the time to invest.

Invest in Green – RINA can help.

According to Michele Nicora, RINA has produced the first green ship mortgage in conjunction with Medio Credito Italiano. Under this agreement, the ship under the loan is analysed for its environmental qualities.

Invest in LNG Bunkers

Apostolos Poulovasilis of Lloyd’s Register detailed a model Lloyd’s Register has developed to analyse demand for LNG bunkering going forward. The model covers the main ship types, and takes into account the regions the ships operate. The inputs are bunker fuel prices, newbuild demand, and the regulatory timetable. The model runs over three scenarios, low, base and high through to 2025. The findings are published in a report “LNG-Fuelled Deep Sea Shipping – the outlook for LNG bunker and LNG-fuelled newbuild demand up to 2025”.

Invest in Brazil-China Trade.

Charles Tang is the chairman of the Brasil-China Chamber of Commerce and Industry. His presentation laid out the massive growth expected in trade between China and Brazil. China, of course, is sucking up Brazil’s iron ore and crude oil, and Brazil is using the funds to build up infrastructure (Football World Cup and the 2016 Olympics) and industries. In 1999 Chinese investment in Brazil was $1.5bn, in 2012 it will reach $100bn.

This was all good news, but there some uncomfortable questions in the debate that immediately followed.

Debate

Almost immediately after Charles Tang finished his presentation an owner stated he could not do business in Brazil. The level of corruption in Brazil, he said, was unmanageable. Charles Tang countered he had never encountered corruption in Brazil. (There will be a Mare Forum in Brazil in September 2013, so maybe corruption could be a topic – or maybe not.)

The debate moved onto to more positive topics. There were several queries about LNG as bunkers and Jan Valkier volunteered that Anthony Veder has ordered two Ethylene carriers for the North Sea trades. In agreement with the charterer the ships will run on LNG, stored in two tanks on the deck.

Chairman Gourdomichalis introduced Leonidas Polemis of Remi Maritime with a question of the SPAC (Aquasition Corp) he and his partners had started in New York. “It is a tough market. Stock market is still speculative, but we did the SPAC at the right time.” he said.

On the question of fuel efficiency and the EEDI, Michel Fransen of Spliethof pointed out the EEDI formula uses total power “..which is a mistake” (the use of total power in the formula means that potentially ships will be under-powered in order to gain a better EEDI rating). But it appears that Spliethof has fitted scrubbers to some of its ships.

Amsterdam 2012 Mare Forum “Takeaways”.

  • Think long-term about the bigger picture. Are you prepared to weather Moisi’s storms?
  • Have you a plan for your bank / company to cover the worst case scenario; a hard landing in China and the US falling off the fiscal cliff?
  • Is your bank / company able to cope with two more years of a low freight rate / over-supply environment before the predicted upturn in 2014?
  • Talk to your bank now and on a regular basis. After four years of crisis there is no excuse for surprises.
  • Banks prefer committed and prudent owner/operator with access to cargo. What can you do to be one of those?
  • Banks are restrained by capital requirements and can’t do as much as business. Look into the alternatives presented during Mare Forum.
  • Banks are willing to talk about Eco-Ships and / or financing fuel-saving devices, but it would appear from the debate, they have no firm opinion on the subject. More data needed!
  • Mare Forum is also about about making new contacts and networking. Don’t let those business cards go stale. Get them into your contacts and update your LinkedIn connections.
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About Craig Jallal
A shipping analyst whose feels the need to comment on the industry.

One Response to Investment Opportunities

  1. Seems all are good opportunities in investment, I like your article, I was wondering for such opportunities and my search has been finally stop on your article.

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