Bunker Credit – Right or Privilege?


 

Ship & Bunker Magazine have given me permission to reproduce this interesting Inside Opinion article.

Inside Opinion is an op-ed industry blog by Ship & Bunker’s anonymous maritime expert. With well over a decade of experience working in world’s biggest bunker markets, our industry insider offers an alternative view on the maritime industry’s talking points of today and tomorrow. Views expressed do not necessarily reflect those of Ship & Bunker, or any companies connected with the Inside Opinion blog.

Industry talking heads have been talking for a few years about a tightening in the credit insurance market. Most bunker companies (with a few notable exceptions, the world’s largest bunker company being one that springs to mind) insure their credit risk and it is mostly done via household name credit insurers you will very likely know the names of.

For some time now cover has been dropping and premiums have been going up. Credit is therefore more expensive to give out. Where there is any realistic possibility of a default or loss, the insurers will not even entertain the possibility of cover.

Increasingly the only accounts you are likely to get insurance cover on are the ones you will never need it on. Bunker companies are under pressure from their banks and trade creditors to have as high as percentage of credit insured as possible, so as cover levels drop the credit managers are under more and more pressure to push the levels up. It isn’t easy.

Typically, as a broad (and slightly irresponsible generalisation), accounts where it is not possible to obtain financials mean no cover or cover at levels so far below what you are trading at it is barely worth the bother.

The insurance companies will not typically look at fleet, deployment or freight CoAs in lieu of financials, so for example great swathes of household name Greek shipping companies have cover levels way, way below where you might expect. Yes, even the really huge ones.

 

Credit is a Right not a Privilege

There has been a feeling amongst some sections of the market generally that credit for bunkers is a right not a privilege, and that there is no need to work hard for it. Because bunker suppliers are in some instances desperate enough for volume that they are tragically willing to forgo proper due diligence for credit, the bunker companies who do do things properly and do request financials are at a disadvantage. So a lot of companies have a policy not to reveal financial information because there is little compelling them to do so.

It is the equivalent of demanding to borrow a million dollars from the bank at a ludicrously low interest rate for a short period of time but then getting uppity and insulted because the bank want access to your credit record information.

It is ridiculous of course, but it is merely an unpleasant by-product of the super-competitive markets we work in.

To carry on the metaphor, it is the further equivalent of leaving the bank who wanted access to your credit record in a huff, going next door to a different bank who will give you an even dafter rate, take you out for dinner and drinks somewhere obnoxiously expensive, complement you on your tie and not ask a single question about your credit record. You cannot blame anyone for “going next door”.

 

No Assets, No Owned Vessels

It happened to me just this week. A company approached us for credit for a stem – no assets, no owned vessels, a pure charterer only been trading for a couple of years. Offshore holding company owned, Hong Kong office, Chinese backed, request right out of the box apropos of nothing for three quarters of a million US$ credit on 45DD terms. I asked for some financials, and information about the fleet and employment of the tonnage, plus some indication of the level of cargo contract cover. They refused outright citing company policy.

Someone else fixed it later the same day for $2 margin per tonne. Mindblowing isn’t it?

The only ones who benefit really are the law firms who end up arresting the vessels because “the guys next door” had a stupid credit policy that played second fiddle to commercial ambition. We can only hope that in the future this sort of irresponsible credit policy is finally put out to pasture as expensive lessons are learned, re-learned and learned again for good measure, and the markets finally wake up to the fact that if you want credit for your bunkers you have to have some sort of transparency. Let’s just say I’m not holding my breath.

 

Reproduced with kind permission of Ship & Bunker (http://shipandbunker.com/)

 

New Data Pages in Tradewinds


New Data Pages in Tradewinds

Tradewinds  have quietly updated the data pages in the back of the weekly paper. There was no announcement and I have to admit, it was a few weeks until I noticed. The range of data is more comprehensive, with relative new-comer Alibra Shipping (link) providing timecharter equivalent data and VesselsValue leveraging their Big Data approach to introduce some comparative value tables. For those of you without a copy of Tradewinds to hand, below is a description of the old and the new tables.

 

Old Pages

The previous Data Pages consisted of World Stock Watch, which ran over one and half pages. The alphabetical listing of share prices was supplemented by a table of high yield shipping bonds, a forex table and half page entitled Scorecard, which was showed share price movements in data and graphical form. These were followed by two pages entitled Market Figures. These consisted of graphs of the Baltic Exchange (link) indices (SSY Capesize, ICAP Handymax and Supramax), the Howe Robinson Containership Index (link), the Riverlake Tanker Index (link), and Clarksons Container Index (link). This page also contained list of tanker and dry bulk carrier fixtures. The facing page was largely taken up with the Fearnleys report. The VesselsValue.com ship prices table was a recent addition, plus Peninsula Petroleum’s bunker report. Finally, a couple of Baltic Exchange tanker graphs were tacked on for good measure. Altogether you had a share prices, the freight rates for the bulk, gas and container trades, ship value and a freight market report.

 

New Pages

The new version kicks off with a dramatically re-designed Stock Watch from Bloomberg, with companies listed by sector. The lists are alphabetical, and it is easy to pick out key comparators like market cap. The companies with the largest market cap in each sector feature separately in another table, but not in the main table, which I am not so keen about. Maybe duplicating the listing might be useful, so that the largest cap companies appear in both tables, making comparisons with peers easier.

The share price info is now confined to one page, giving more room for Markets Data. This starts off with (in my opinion) the most useful chart in the history of shipping analysis, the Clarksea Index. The Clarksea Index is the heart rate monitor of shipping, and the best chart to illustrate the current and historical health of the industry. Next to this are the Baltic Exchange indices, which are important to people in shipping, but difficult to understand for those on the outside (as shown by the mainstream business press reporting on a steep fall in the BDI with a picture of a containership). Below this is a new table of dry bulk carrier time charter estimates, provided by Alibra Shipping Limited, who I had not heard of before, but good for them for getting exposure in Tradewinds. You should check out their website, too. It has a useful TCE-required to service a sale price calculator, which later in the year will be the focus of a separate blog.

Alongside is the SSY Capesize indices, and below a welcome addition of the dry bulk and iron ore futures contracts from FIS. This is supplemented by the iron ore prices from The Steel Index. We then go straight to wheat prices from the Chicago Board of Trade.

The Peninsula bunker tables returns in an expanded form. The Howe Robinson Container Index also returns, with the addition of the Hamburg-based New Contex Time Charter Assessment, which is similar to the Clarksons container time charter rates in that the size range ends at the old Panamax size. Maybe Alphaliner or Dynamar could provide Tradewinds with some assessments for the larger size ranges? The third container chart is the World Container Index.

The final page contains the tanker data. There is a table of time charter assessments from our new data friends Alibra Shipping. The ICAP table of Worldscale TCE estimates has a very useful assessment of the impact of slow steaming. In the 7 March table, a VLCC on the standard Ras Tanura to LOOP route fixed at WS29.5 was calculated as a loss of USD3548/day whereas the same voyage slow steaming is a positive US$6281/day. The Baltic Exchange tanker charts are still on the page, as is the table of crude oil prices.

Sales and purchase data from VesselsValue (VV) cover the final third of the page, and there are some interesting additions. The VV Momentum Index indicates the direction of prices for a particular vessel type during the previous 90 days. If in those 90 days there was an upward movement in price for 45 days, and a downward movement for 45 days, these would cancel each other out and produce a flatline growth, equal to an index number of 50. Therefore, any index number over 50 indicates upward momentum, and an index number of less than 50 indicates downward momentum. VV also contribute a price Volatility Index, or any sort, is brave, because the standard deviation is not well an everyday concept, but here in graphical format it is clear. There is a sharp upward turn in the red line (or there was in mid-March 2014) when I wrote this) and this means there is a high level of uncertainty of the direction of VLCC price. The Tonnage on the Water table is a bit like the fleet table in the Shipping Intelligence Weekly but without the aggregate numbers, so it is lacking context. Below this is the Seasure demo table. The untitled table at the bottom right of the page is US$ per cargo unit, either dwt, teu or cbm. The Fearnleys data re-appeared last week (18 April 2014) as an additional page

So next time you pick up a copy of Tradewinds, do not close the paper after glancing through the job adverts, take a closer look at the new and more comprehensive data pages.

 

Sponors Needed


 

This Sunday new Infospectrum analyst Angela Velasco will be running the Virgin Money London Marathon on behalf of the fantastic charity, Seafarers UK who provide support for mariners and retired mariners who are in need of support, whether at sea or at home. Here is the link if you would like to donate. http://www.justgiving.com/Angela-Velasco1

 

 

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