News, Analysis and Opinion
June 7, 2013 Leave a comment
Unfortunately there is no mention about dimensions or capacity, so it is difficult to gauge the impact on shipping and the Panama Canal – AFP: Chinese firm gets concession for Nicaragua canal.
April 11, 2013 1 Comment
Danish Ship Finance (DS – Danmarks Skibskredit A/S) has released its latest research report on the state of the shipping industry.
It is definitely worth reading the whole report, especially the use of data from IHS Global Insight as a proxy of demand. Below are a few highlights culled from the Executive Summary and the body of the report.
Shipbuilding
Global shipbuilding capacity could decline to 2002 levels by the end of 2014, according to the DS analysis. This could herald a return to 2002 price levels, too, DS feel that marginal construction costs prevent prices descending to 2002 levels. Nonetheless, the prices for standard vessels could fall by 5-10% by the end of 2014.
Containers
There is no good news for the container sector. For the growth in the Post-Panamax orderbook to be balanced owners are going to have to scrap vessels under ten years old. While this is unlikely to happen, another surge in contracting driven by eco-design or market share could extend the suffering for years. In the container sector of the main body of the report DS make points about head haul demand using the IHS Global data (see figure CS 5).
Crude Tankers
Using the same analysis DS show distance-adjusted demand is expected to contract 0.7% in 2013 as the US and Europe import less crude oil over shorter distances. Overall demand has to improve and fleet supply shrink before the market can recover.
Product Tankers.
The MR Tanker sector has been one of the bright spots in the general trough, but this is expected to unwind. In 2013 the loaded distances traveled will shorten and distance-adjusted demand may only increase by 0.7%. From late 2013 longer distances and modest fleet growth will improve the balance. This is likely to favour LR1 and LR2 sectors, at the expense of Mrs.
LPG
If the shine is fading on the MR Product Tanker sector, then it may be shinier on LPG carriers. Demolition in the sector is expected to increase in 2013, and distance-adjusted demand is estimated to increase by 5%. However, DS point out that this can be undone by a surge in contracting.
Dry Bulk
There is a detailed analysis of the dry bulk sector, and DS has some interesting things to say about the long-term drivers of the Chinese economy. But in the short-term the outlook for the dry bulk market is more of the same.
March 18, 2013 1 Comment
Uncertainty still pervades the transport industry, especially shipping, according to the latest results of the latest Norton Rose “The Way Ahead” transport survey, sub-titled “Where are You Now?”.
Norton Rose had great foresight in conducting its “The Way Ahead” Transport survey for the first time in 2009. It was less than a year after the BDI crashed in October 2008, and no one knew what was happening. Was this a short term crisis or something deeper? Norton Rose decided to find out what we thought. The survey is now an established barometer of the aviation, rail and shipping sentiment. The unveiling of the results of the latest surveyis also a pleasant social event, held at the Norton Rose offices overlooking the Thames and Tower Bridge, and hosted by the head of transport, Harry Theochari.
The fourth edition of the survey was conducted between November 2012 and January 2013. There are just over a thousand replies, split equally among the aviation, rail and shipping folk taking part. The replies come from two groups of people, “participants” are those directly involved, such as shipowners. The “participants” group makes up 72%. The remainder are the “commentators” supporting the industry such as lawyers and journalists.
To download a full version of this report follow this link (http://goo.gl/bTFnb) to download your own copy of the Norton Rose “The Way Ahead” Transport Survey. Below is a summary of the shipping results.
Shipping Summary
March 8, 2013 Leave a comment
In researching the shipping conference calendar I came across the “Short Sea 13 European Conference” . Having lived in Falmouth and Plymouth I have always had an affinity with short sea shipping, as these are the ships you see every day. But once working in London the deep sea took over. Now that more and more of the commercial side of deep sea shipping is moving to the Far East, maybe it is time to look closer to home and the UK short sea scene.
The person to speak to is Peter Baker, of PRB Associates. Mr Baker is based in Grimsby, which to Londoners is scarily a long way “Up North”. It is a part of the major Humber ports hub for North Sea ferries. Indeed, having worked for a terminal and ferry operator in Immingham, Mr Baker set up his own consultancy business in 1998. Today, PRB Associates is still closely involved in research and analysis on short sea “unit load” activities.
The term “unit load” is used to differentiate from the homogeneous bulk mode. Mr Baker has produced a cunning methodology that harmonises the complex capacity mix on short sea ferries of lane metre, deck height space and container capacity into a transparent trailer, or feu equivalent. As far as I am aware PRB Associates is the only company producing an annual survey of the UK short sea scene, and to my mind the methodology is an elegant solution to the vexing issue of ferry capacity.
“I have tried to express capacity in consistent terms that are relevant to the market, no matter the type of ferry, or if trailers are accompanied or unaccompanied.” said Mr Baker. The annual capacity report is a valuable tool for ferry operators and ports. Indeed, I wish I had been aware of the report when I was working in the bank. With so little information available the banks rely on the information the short sea ferry owners supply, but have no third party report to collaborate or mitigate the information.
Are other regional reports available? “I produce an annual Irish Capacity Report and have produced a report on Baltic ferry and container service capacity for a conference in the Baltic” said Mr Baker, and could do so again if asked. You can catch up with Mr Baker in Paris next week at the “Short Sea 13 European Conference” or direct through the PRB Associates website.
February 28, 2013 Leave a comment
The Clarksea Index hit an all-time low last week when it fell $223/day to $7,111/day. Of course, shipping slows down each year with the arrival of the Chinese New Year, when the whole country closes down and everyone goes on holiday. Each year, as China’s influence on shipping has grown, so has the impact of the holiday. This year the difference between the last working week and the first week of the holidays was a drop of -2.74% in the Clarksea Index. This is a relatively small amount compared to the last five years (see chart), but then there is little fat left in the Clarksea Index, which has already lost nearly 20% of its value since the start of 2013.
This begs the question how low can the Clarksea Index go? The Clarksea Index is made up of the average weekly earnings of the main shipping sectors weighted by the number of vessels in those sectors. Generally, the diverse sectors tend to balance one another out. A bad week in VLCCs can be cancelled out by a good week for the Capesize or the VLGCs. This can lead to steep falls. During the Boom the Clarksea Index fell over $5,000/day in one week in early 2008, but this only brought it to $37,606/day and few heeded the warning sign.
We are a long way from those heady days, and the Clarksea Index, which is the heart rate monitor of the industry, is now worryingly low. My gut feeling is that $6,000/day is the lowest it could possible go. However, it is not usual for individual routes to go into negative earnings, pulling down that sector. Last week, for instance, the VLCC route Middle East Gulf (MEG) to Europe and MEG to US Gulf fell to Worldscale (WS) 18.0 and WS 18.5, respectively. If any VLCC was to fix at these rates the equivelent earnings per day are a loss of around -$17,000/day. The tanker sector is not the only one showing negative earnings last week. Some of the Capesize routes and Panamax dry bulk routes went negative. Fortunatley this downward drag was halted by buoyancy from the gas sector (pun intended). But in theory it would be possible for enough routes to post negative earnings for the Clarksea Index itself to go negative. Then the Year of the Dead Duck will be upon us.
February 18, 2013 1 Comment
I belong to 37 shipping groups on LinkedIn. These range from the “need-to-be-a-member” like Lloyd’s List (8,905 members) to the obscure Shipping Container Investments (35 members). The table below is my list of groups ranked by the number of members as at February 14 2013.
Originally I joined groups that might direct me toward a new job, and that is still the main aim. Since re-donning the press hat I am also find LinkedIn useful for producing polls and finding experts. Therefore my request is; do you know of any other shipping-related groups you have found useful that are not on the list?
February 1, 2013 Leave a comment
The Capesize orderbook has shrunk from a high of 117% of the fleet in Q4 2008 to just 17% today. Of course, in the meantime the Capesize fleet has swollen from 141.84m dwt (817 ships) to 278.87m dwt (1505 ships), according to Clarkson Research data. Nonetheless, the slowdown in new orders brings the orderbook as a percentage of the fleet down to the level of Q3 2003. There is still another 36.4m dwt to be delivered in 2013, which is actually larger than the total Capesize fleet of thirty years ago.
Clarkson Research list three Capesize thirty year old or older as still live on their database. These include an Odense Lindo-built vessel, the 1982-built, 136,999 dwt “RAM PRASAD” operated by Essar Shipping. After launch she worked for the Danish electricity producer Elsam for twenty years. Clarksons report the vessel was bought by Goldenport Holdings in June 2002, when the Capesize fleet as a mere 88.9m dwt (orderbook 8.1% of the fleet) for $5m. In March 2008, when the Capesize orderbook stood at 93% of the then fleet, Goldenport sold the 25-year old ship to Chinese interests for $25m. Goldenport booked a $20m profit on the sale of the “SAMOS” as she was then called, and traded the ship through one of the best Capesize cycles ever. Seven months later the Capesize market crashed. Shipping, like comedy, is all in the timing.
January 14, 2013 3 Comments
If like me you are looking for a full-time position in commercial shipping and wondering where the jobs are; I have some good news and some bad news. There are jobs out there, but not many, and if you are based in Europe you may have to move.
There are currently 102 shipbroking-related jobs advertised on the websites of the three main shipping recruiters, Spinnaker, Faststream and Halcyon. In fact, the number is probably 10-20% less than that as there will be some overlap between the three agencies, but on the other hand I have taken a tight interpretation of commercial shipping. I searched the websites for commercial shipping jobs that involved chartering, broking (including bunkers), post-fixture and vessel operations.
The chart below shows that most of the advertised vacancies are in Singapore (44%). I asked Heidi Heseltine of Halcyon Recruitment, which has an office in Singapore, why Singapore ranked higher than a “traditional” shipping centre like London. Ms Heseltine pointed out that the list is inherently skewed because competitive shipbrokers feel their networks are sufficiently strong to recruit among themselves. There are probably vacancies to be filled in London and Europe, but they are not advertised as competitive brokers rarely approach specialist recruiters.
This would explain the lack of London-based commercial shipping jobs (only 16% of the vacancies), but why is Singapore so dominant? “Singapore is dominant because it is still in expansion mode. Asia Pacific trades are playing an important role in shipping life and Singapore itself offers some good incentives to companies to base themselves there. As a location at the moment it is often seen to be more attractive due to its low taxation and stable economy, European locations are struggling to entice newcomers in many locations.” explained Ms Heseltine.
This isn’t great news for those of us looking for work in commercial shipping in Europe. There is still a great depth of shipping companies and shipbrokers in Europe but some are moving their chartering and broking operations eastward. Job availability also depends on the fortunes of the shipping sector. Over half (53%) of the jobs related to the dry bulk sector, followed by bunkers (11%) and tankers (6%). So does this mean UK jobseekers in commercial shipping with dry bulk experience can find work in Singapore? Not necessarily. “Some roles in Singapore will take people from the UK but only if they are not available locally. The Singapore government is putting increased pressure on employers to recruit from the local market and of course this also keeps costs down for employers. The employment of individuals from outside of Singapore continues of course but the focus is very much on finding people locally if possible so ‘external’ recruitment will only take place for roles requiring specialist experience that is not readily found in Singapore itself. For recent graduates or those with 2-3 years experience, it is increasingly difficult to be recruited from the UK or Europe for a role in Singapore for the reasons already stated.” said Ms Heseltine of Halcyon Recruitment.
As well as the three above agencies I use LinkedIn a lot for job searching, but how useful is it for finding a job? I would like to hear from anyone who has found a commercial shipping or ship finance job directly through LinkedIn or via an agent who saw your LinkedIn page.
January 7, 2013 1 Comment
Will shipping finance expand, contract or remain the same in 2013? Below is a poll I have posted on various LinkedIn shipping groups to gauge sentiment about the prospects for shipping finance in 2013.
I have found the LinkedIn polls a useful source of copy and opinion but there are some annoying limitations on polls. First, the limit on 40 character length means the questions have to be very simple. The second is that at the moment there isn’t a survey function. Of course, I can do surveys on the blog, but it would be more efficient when LinkedIn has added this feature. It is also interesting to see which LinkedIn groups generate responses and which are billy-no-mates. I haven’t posted this poll on the shipping media groups (although it is not always obvious if a Group has a media link) as I feel this is a point of etiquette. I am not exactly sure what etiquette is involved, and I may have to review. Any thoughts on the issue?
The poll – Ship finance prospects in 2013. Compared to 2012, arranging a newbuilding or secondhand purchase loan from your current bank in 2013 will be;
You can take part in this poll one of the following LinkedIn groups;
Shipping, Trade & Finance group
Finance and Investment Strategies – Shipping
Executive and Expert Search in Ship…
Tanker Shipping and Trade Network
The Institute of Chartered Shipbrokers
The Shipping Professional Network
The results will be posted on the Groups when it closes on Friday 11th January.
December 4, 2012 Leave a comment
Three economic scenarios and what they mean for liner shipping in 2013.
Containerisation International magazine is exploring the possible economic scenarios for 2013 and what these imply for the industry. These scenarios are being developed with the help of James Frew, Container Analyst at Maritime Strategies International. We would like your help in assessing the likelihood of each scenario detailed below. There will be a survey about the scenarios posted on this blog, and on various LinkedIn freight and shipping forums.
Scenario 1; Going Over the Fiscal Cliff.
US – Half a dozen or so tax exemptions expire at the end of 2012 along with a similar number of scheduled spending cuts kicking in at the start of 2013. The aggregate effect is $7 trillion of tax increases and spending cuts over the next decade start in 2013,which economists say the change is too fast and will throw the US economy into recession. The main battleground is the expiry of the temporary Bush tax cuts at the end 2012, and who this will affect. Republicans want no tax increases, while Democrats want tax increases at least for those earning more than $250,000/year. In Scenario 1 Obama and the Democrats fail to reach a compromise with the Republicans, who control the Senate. The non-partisan Congressional Budget Office estimates the inflation adjusted affect will be 0.5% drop in GDP in 2013. The Tax Policy Centre at Moody’s Analytics goes even further (see amazing graphic) predicting a 3.54% drop in GDP. This would be a repeat of 2009 (see chart from Google’s free public data website). MSI estimates housing starts revert to 5-600k/year. Federal Reserve will increase QE to partially offset the economic weakness.
Europe – Greece exits the Euro. Greek losses impact across Europe. Other weak Euro countries (Portugal, Spain, Italy) increase austerity packages and their total GDP falls by 5%. The rest of the Eurozone falls by 0.5%. France slips into recession. Merkel loses election to former finance minister Peer Steinbrueck.
China – The new leaders embark on a mini-stimulus programme emphasising infrastructure and investment, and GDP growth remains over 6.5%. New leaders launch anti-corruption drive.
Scenario 2; More of the Same
US – Democrats and Republicans agree to an extension of tax cuts and increase legal limit of deficit. Scheduled spending cuts are balanced out by agreements on other spending. Failure to agree longer term solution hits investor confidence. Unemployment begins to fall and housing starts increase to 1 million/year. GDP growth 2.4%/year.
Europe – Greece and other weak Eurozone nations implement further austerity measures, and stay in recession. Germany’s GDP marginal GDP growth exceeds 1%, while rest of Eurozone is 0.4%.
China – GDP Growth hits 8.4% with more emphasis on investment and infrastructure.
Scenario 3; Turning the Corner
US – Compromise reached on tax rises and spending cuts. US extends fiscal stimulus and there is a release of pent up consumer and investor demand. GDP growth hits 3.8% and housing starts reach 1.4 million/year.
Europe – European leaders agree on some form of debt mutualisation, which solves the Eurozone crisis. Greece is granted limited debt relief. Greece, Spain and Italy push through reforms of their labour markets, freeing up goods and services from restrictive practices. France implements tax reform. The ECB loosens policy. Eurozone GDP grows by 2.5%.
China – A stronger global economy allows the government to continue with policy of switching from investment and export led growth toward encouraging domestic consumption. GDP growth hits 8.5% and imports rise.
The scenarios are in development, so feel free if you have any questions or comments. Hopefully we will get a good response and be able to paint a picture of what the industry thinks 2013 will look like.
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