Brexit and Shipping FAQs


It is no exaggeration to say that in most boardrooms of any major institution in the City of London there will be an ancient lithograph or painting of the River Thames in its heyday as a major shipping port. Commercial shipping was fundamental to the development of the City of London, and while it is rare to see a cargo vessel as far up river as London Bridge anymore, providing services for the global shipping industry is still one of the main activities in the City. Therefore, it is reasonable to expect the vote to leave the EU, known as Brexit, would have an impact on shipping in the UK and beyond.

A week after the Brexit vote to leave, it is still difficult to quantify what Brexit means in the short-term, the medium-term and in the long-term. I have created this Brexit and Shipping Frequently Asked Questions (FAQs) document as a way to try and answer some of the questions.

Brexit and Shipping FAQs:

  • Did you vote Remain or Leave? Sorry, I can’t comment on personal matters. However, the latest polls show that the main reason the vote to leave won was due to the desire for laws applicable to the UK to be made in the UK, and not by the EU. The immigration issue was secondary.
  • What was the immediate impact on shipping? There was not direct impact on shipping. No French warships blockaded English ports. The Honda car factory continued to produce cars in the UK for export, and no shipping company declared it was moving its HQ to inside the EU. One or two shipowners have been quoted as saying that they move headquarters out of London, but no one has physically done so yet.
  • Which sector is likely is gain the most from Brexit? The immediate fall in the value of sterling would have benefitted those who had guessed the correct outcome and had traded cargoes that ultimately would have to be paid from sterling funds. This would have been traders in the oil sector, so probably the tanker sector. The losers are likely to be the liner sector, which has multiple cargoes / boxes sourced in the UK, but pay freight in US dollars. According to a report in Tradewinds, James Frew, senior analyst at MSI, expects worsening consumer sentiment and currency depreciation post-Brexit. This could lower MSI’s container vessel earnings forecast by 20%, according to Tradewinds.
  • Did ship values change? No, there have been no changes in value, as vessels are valued in USD. Of course, converting the value into sterling would produce a significant change. However, most publicly quoted shipping companies operate in US dollars and produce their accounts in US dollars.
  • Was there a short-term impact on shipping companies? Yes, in that there was an immediate worldwide speculation in shares, even though nothing had fundamentally changed. Some shipping companies share prices fell despite the lack of direct link to Brexit. In Europe, Euronav took advantage of the fall in its own share price to buy-back shares.
  • Is there a medium-term impact on shipping companies? In the medium-term, it is likely that Asian shipping companies, and other publically traded shipping companies will return to pre-Brexit levels (unless other factors cause investors to divest shares). Some shipping-related public company CEOs have already announced that Brexit only has a secondary economic impact, and they will not change company strategy. However, according to a report in Tradewinds, one South Korean shipyard executive suggested that the pattern of previous financial crisis was for investors to flee to the Yen. This would push up Japanese ship prices, which would be an advantage for South Korean yards. Of course, given the financial turmoil in South Korean shipbuilding, it is questionable if owners would risk placing orders in South Korea until financial stability returns.
  • Will Brexit trigger a Grexit? At Posidonia earlier this month, Greek ship owners were vocally opposed to the EU plans to tax their offshore earnings. Brexit is a good opportunity for the UK to provide the conditions for Greek shipowners to operate in the UK free of EU laws. Therefore, should Greece not leave the EU, there could be an increase in the London-Greek population, unless a new UK Government chooses to tax non-domicile high net worth individuals.
  • Will London lose its pre-eminent status as a maritime capital? If the Brexit process stalls, then the lack of certainty may cause brokers and shipping companies to switch operations to their overseas offices in the short to medium term. However, Brexit is an opportunity to by-pass restrictive EU laws, and create a special environment for the shipping industry. This could include lower company tax to 10%, government subsidies for a shipping hub including seaman training and incentives for shipping companies to locate in the UK from Singapore.
  • Brexit and shipping inoact analysis from UK-based law firms:
  • What is the worst Brexit scenario moving forward? The worst scenario is the UK failing to form a coherent government and stalling the negotiation process. However, shipping needs to learn from the Brexit situation. There were only two Brexit choices, in or out. The political world, and the financial and shipping markets seemed to have assumed the vote would be to Remain. From the reaction to the vote, there appears to have been no strategic planning for the alternative Leave vote.
  • What is the next big external event that could impact on shipping? Shipping is a US dollar denominated industry, and anything that impacts the US dollar has massive repercussions on shipping. Therefore, shipping companies need to start planning now for the impact of the US elections in November. Again, there are only two alternatives, but at the moment, most commentators feel the country will not choose Trump. But what if Trumps wins? There is always a reaction in the markets to a Presidential election, but a Trump President could cause a run on the US dollar as investors flee the currency, fearing he will invoke some of his wilder vote winning promises. Shipping needs to learn from the unexpected reactions to the Brexit vote, and start planning for a possible crash in the US dollar, if Trump is elected.

VesselsValue Offshore Featured in Tradewinds


VesselsValue has spent five years honing its skill in general shipping and now turns its hand to offshore

Darrin Griggs Oslo (http://www.tradewindsnews.com/weekly/486738/big-data-meets-osv-values)

London-based VesselsValue has today rolled out a new online service aimed at the daunting task of giving accurate values, with daily updates, for the world’s entire fleet of offshore support vessels (OSVs).

While asset values are the core of the service, it also includes live, interactive maps of OSVs with a wealth of data per ship. A unique feature is that the OSVs can be overlaid on detailed maps of the infrastructure they serve, such as wells, rigs, pipelines, platforms and licence blocks around the world (see story, right).

Using statistical regressions to achieve a “bell-shaped curve” of results, the company is able to crunch big data via an algorithm to peg OSV values within an accuracy of 10%, indicates VesselsValue offshore manager Miles Cole.

And the service already has plenty of data to crunch. Cole says he and his team, including more than 40 analysts, have spent the past 15 months gathering 96 separate lines of data per ship for a whopping 7,200 offshore ships.

Of the total database, about 6,000 of those are platform supply vessels (PSVs) and anchor handling tug supply (AHTS) vessels, while the other 1,200 are fast support vessels (FSV), emergency response and rescue vessels (ERRVs) and oceangoing tugs.

Cole says VesselsValue has approached some large OSV fleet owners who have expressed “shock” at the sheer amount and detail of data it has collected on these ships.

“If a vessel is sold the night the before, we look to be within 10% on either side of the valuation accuracy on that bell-shaped curve. In terms of accuracy for anchor handlers and PSVs, we are in that region now,” Cole told TradeWinds, adding that the service is set to improve as the data grows.

As proof, Cole points to the historical sale of a Solstad vessel. Working from the data today, VesselsValue’s algorithm predicted a price of $18.66m for the sale of the 10,880-bhp AHTS vessel Nor Captain (built 2007), which went for $19m in June 2012.

Cole uses the example of the past sale because so few sales are happening now. With the help of brokers and owners, his team has registered about 660 trading sales from 1990 to 2016.

Broker valuations are the next best thing to trading sales, in terms of the way they feed data into the algorithm to develop accuracy and make comparisons, says Cole. So they also compare the algorithm’s results to 3,000 to 4,000 vessel valuations from offshore brokers.

VesselsValue is entering offshore at a critical time for valuations. Just about everyone in the industry knows OSV values are way down from book values and most owners, if not all, have been forced into large write-downs.

As these assets are connected to loan covenants, values are one of the most watched data points. And in today’s market, producing valuations is no mean feat, because of the severe downturn, lost charters and hundreds of layups, not to mention an extreme lack of trading sales, especially for newer ships.

Pegging asset values, with accuracy, for thousands upon thousands of individual OSVs is a “big data” promise that is certain to meet a wall of scepticism in the offshore sector — but it will not be the first such wall VesselsValue has encountered.

VesselsValue has spent the past five years building up in general shipping, for tankers, bulkers and the like. As a spin-off of Richard Rivlin’s sale-and-purchase specialist Seasure Shipbroking, the company entered general shipping back in May 2011.

It was also at a low point in the cycle and the company encountered its share of sceptics, says VesselsValue communications manager Claudia Norrgren.

“It has taken awhile but people are seeing the value of having this type of data instantly and in having the level of transparency that the market just never was provided before,” said Norrgren.

Today, it generates in the region of 50,000 live valuations daily and also counts about 80% of the world’s shipping banks among its customers, which includes also lawyers and finance houses.

TradeWinds cites VesselsValue on a regular basis in its stories. Some users say its values are “extremely close” in markets with a high volume of trading sales, such as tankers and bulkers, and show “good accuracy”, around 10% deviance in other markets with fewer trading sales, such as LNG and LPG.

Now, the aim is to duplicate the success for vessels in the oil-and-gas industry but the valuation algorithm is especially tailored for offshore vessels, and it is much more complex than many sceptics may first believe.

For the 96 rows of data per ship for the 7,200 OSVs, VesselsValue has detailed all the points that offshore brokers tend take into account for valuations, based on help from unnamed offshore brokers in seven global regions and shipowners, as well.

Along with obvious capacities like dwt, bollard pull and so on, the 96 separate data rows range from the ship design, to the engine type, to the under-deck tanks, to the generators, to winches, to navigation and communications systems. A value weight is given for the country of the equipment’s origin, the yard that built the ship and for the owner that ordered it, or for the owner that sold it.

In addition to these many features, Cole says VesselsValue has also found a high correlation with the oil price, which influences the predicted value by about 80%.

But why go into offshore?

“All of our clients have been asking for it,” said Norrgren.

“When you see values falling and no one can give an answer about where values actually are, then there is a huge gap in the market. There is a gap for clear, transparent valuations for people who have lots of different vessels on their portfolios and orderbooks. We see huge demand from existing and potential clients.”

Time to Ditch RMS Titanic as a Benchmark?


Senior Lecturer Paul Stott of Newcastle University is no stranger to this blog, and was recently in the national media after drawing attention to the need to use another benchmark when comparing the size of ships. The RMS Titanic is the iconic benchmark most often used – but is it a good comparison?

Despite conjuring up images of vastness and opulence, Titanic was actually no bigger than a North Sea ferry and could easily sit on the deck of a large container ship.

“The reality is that – even if any living person had seen the Titanic – it would not be particularly large in the modern context,” he explains.
“Whilst large in her day, Titanic would be equivalent only to a mid-sized ferry in the modern era, the sort of ship many have sailed on to get to France or Holland, and this normally comes as a revelation.
“Its size was exceeded by a factor of two with the Queen Mary in 1936, almost 80 years ago and it is no more than 20% of the size of the largest ship currently afloat.”

Finding a new benchmark
Benchmarking ship size in the popular context is a complex task. Obvious measures such as length and weight do not do justice to the physical size of ships and weight is unreliable because of the varying nature of different designs of ship.
“Whilst the Costa Concordia is more than double the physical size of Titanic, their weights are very similar (around 55,000 tonnes) because modern designs are inherently much lighter than Edwardian engineering,” explains Mr Stott.
Linear parameters were tried as well as weight but none convey the right message about how heroic the salvage effort is. “Stating that the Costa Concordia is equivalent in length to 26 London buses conveys no impression of the size of a cruise ship. The comparator has to be volumetric”.
The research shows that none of the usual volume comparators, such as the use of Olympic sized swimming pools, are of any use. The research does, however, identify benchmarks that can be used to convey the correct impression of modern large ships.
“Stating that the Costa Concordia is around twice the size of St Paul’s Cathedral in London, in terms of their physical size, conveys in a direct way quite how large the object salvors were manhandling is.
“It also turns out that the Costa is equivalent in size to the Gherkin in London. Stating that the salvors were using brute force to move an object the size of a sky scraper, which many have seen and can therefore relate to directly, really gets across the message of how heroic the task achieved was.”

Source Information: “The Use of Benchmarks in the Popular Reporting of Commercial Shipping: Is the Titanic an appropriate measure to convey the size of a modern ship?” Paul Stott. Mariner’s Mirror
DOI: http://dx.doi.org/10.1080/00253359.2014.866378

Mr Paul Stott, Senior Lecturer, School of Marine Sciences & Technology; Tel: +44 (0) 191 208 6721; email: paul.stott@ncl.ac.uk

Egypt could use Suez Canal to retaliate against Ethiopia dam move: Sabbahi – Politics – Egypt – Ahram Online


CORRECTION – Egypt could use Suez Canal to retaliate against Ethiopia dam move: Sabbahi – Politics – Egypt – Ahram Online.

Hawaii residents renew fight for free market in shipping | Hawaii Reporter


Hawaii residents renew fight for free market in shipping | Hawaii Reporter.

Innovator for US Department of Transportation


President Obama has nominated Democrat Mayor of Charlotte Anthony Foxx to replace Republican Ray LaHood as Transportation Secretary. Most of the press reports on the nomination focus on the fact that 41-year old Anthony Foxx is an African-American, and some see the appointment as a way of deflecting the critics, who say the US Cabinet is an all-white old boy club. Comedian Conan O’Brien recently quipped to the President “Your hair is so white, it could be a member of your cabinet.”

 From a shipping point of view the gain of Mr Foxx is more important than the loss of Mr LaHood. Clay Maitland, legendary commentator on the US shipping scene and the founding chairman of the North American Marine Environment Protection Association (NAMEPA) said “I think that Mr. Foxx’ nomination is a very favourable development. His presumed predecessor, Mr. LaHood, was more landlocked in background, in the sense that Foxx’ reputation is, surprisingly, that he is more ambitious than LaHood.”

 Mr LaHood was a career politician, whereas former lawyer Mr Foxx also worked for a hybrid electric bus manufacturer. Since 2009 Mr Foxx has been mayor of Charlotte. During that time the sixth largest city in the US introduced some of the most ambitious and innovative transportation projects, including a tramway system. More importantly from a trade point of view he oversaw the Charlotte Regional Intermodal Facility, a logistical hub connecting air and road freight to the rail network and onto the ports of the US east coast. He will be bringing a wider vision of supply chains and logistics to the office of Secretary of the Department of Transportation. It will be interesting to see how this plays out on a national level when faced with logistical anachronisms like cabotage in the form of the Jones Act.

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