Khalid Hashim of Precious Shipping Explains One Belt, One Road in Splash 24/7

This article is from Splash 24/7. I think Khalid Hashim of Precious Shipping presents an excellent explanation of what China means by One Belt, One Road.

One Belt, One Road explained

SEPTEMBER 7TH, 2016 SPLASH 24/7CONTRIBUTIONS, GREATER CHINA, OPERATIONS, PORTS AND LOGISTICS0 COMMENTS

Khalid Hashim from Precious Shipping writes exclusively for Splash on China’s massive intercontinental infrastructure plans.

A Google search for One Belt, One Road (OBOR) gives you about 15,700,000 results. Total spending on OBOR, in those same articles, varies from a low figure of $1.2trn to a high figure of $21trn. This concept currently covers some 65 countries in three continents encompassing 4.4bn people. The projected investment for OBOR at $1.4trn is about 12 times larger than the Marshall Plan, which was about $120bn in today’s value. And to top it all, there are literally hundreds of companies established in Hong Kong with similar names. And that is the hype generated by OBOR.

So what exactly is OBOR? It is a conceptual plan, a vision for greater cooperation, inclusiveness and higher growth among several countries put up by Chinese President, Xi Jinping in late 2013 with an eye on the old historical Silk Road but very much focusing on the current geopolitical tensions in our unipolar world, with the sole hyperpower, the USA involved in many wars/skirmishes mainly in the Middle East, Africa and Afghanistan. OBOR is based on ‘win-win’ cooperation and overcomes geopolitical confrontations that threaten to bring the world close to war. It has the potential to help the world to get rid of its current crises.

If you were to access the official Chinese web site for the OBOR concept you would find the following:

“When Chinese President Xi Jinping visited Central Asia and Southeast Asia in September and October of 2013, he raised the initiative of jointly building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road (hereinafter referred to as the Belt and Road), which have attracted close attention from all over the world. At the China-ASEAN Expo in 2013, Chinese Premier Li Keqiang emphasized the need to build the Maritime Silk Road oriented towards ASEAN, and to create strategic propellers for hinterland development. Accelerating the building of the Belt and Road can help promote the economic prosperity of the countries along the Belt and Road and regional economic cooperation, strengthen exchanges and mutual learning between different civilizations, and promote world peace and development. It is a great undertaking that will benefit people around the world. The Initiative is an ambitious economic vision of the opening-up of and cooperation among the countries along the Belt and Road. Countries should work in concert and move towards the objectives of mutual benefit and common security. To be specific, they need to improve the region’s infrastructure, and put in place a secure and efficient network of land, sea and air passages, lifting their connectivity to a higher level; further enhance trade and investment facilitation, establish a network of free trade areas that meet high standards, maintain closer economic ties, and deepen political trust; enhance cultural exchanges; encourage different civilizations to learn from each other and flourish together; and promote mutual understanding, peace and friendship among people of all countries. We should jointly advance the construction of cross-border optical cables and other communications trunk line networks, improve international communications connectivity, and create an Information Silk Road. We should build bilateral cross-border optical cable networks at a quicker pace, plan transcontinental submarine optical cable projects, and improve spatial (satellite) information passageways to expand information exchanges and cooperation. We support localized operation and management of Chinese companies to boost the local economy, increase local employment, improve local livelihood, and take social responsibilities in protecting local biodiversity and eco-environment. We should increase cross-border exchange and cooperation between credit investigation regulators, credit investigation institutions and credit rating institutions. We should give full play to the role of the Silk Road Fund and that of sovereign wealth funds of countries along the Belt and Road, and encourage commercial equity investment funds and private funds to participate in the construction of key projects of the Initiative. We should increase exchanges and cooperation between non-governmental organizations of countries along the Belt and Road, organize public interest activities concerning education, health care, poverty reduction, biodiversity and ecological protection for the benefit of the general public, and improve the production and living conditions of poverty-stricken areas along the Belt and Road. We should enhance international exchanges and cooperation on culture and media, and leverage the positive role of the Internet and new media tools to foster harmonious and friendly cultural environment and public opinion.”

In terms of fund raising, spending and activity in OBOR countries, so far the following has been accomplished.

· The Asian Infrastructure Investment Bank (AIIB) has been set up and capital funds of $40bn have been injected. The financial firepower of the multilateral AIIB will likely be much larger than the initial capital commitment of $100bn from its 57 member countries.

· The Silk Road Fund has been set up and is expected to have a corpus of $40bn.

· The BRICS’s New Development Bank (NDB), initially committing $100bn.

· The New Development Bank, which is the funding source for the BRICS countries has $100bn allocated.

· China Development Bank has already committed to invest $900bn in OBOR projects.

· Hong Kong-based China Merchants Holdings International intends to invest in 10 overseas ports in Russia, West Africa and Southeast Asia in a bid to drive China’s OBOR strategy.

· PowerChina has four projects in Pakistan with a total installed capacity of 182MW, a 24MW project in Vietnam and a 60MW project in Thailand. In 2015, Goldwind, China’s leading wind turbine manufacturer, won supply contracts for four wind projects in Pakistan with a total installed capacity of more than 270MW. By the end of 2018, Goldwind’s total installed capacity in Pakistan will exceed 400MW, accounting for one third of the country’s capacity.

· The Bangladesh-China-India-Myanmar Economic Corridor has already been translated into reality.

· Ricoh Europe has transported containers from Rotterdam via rail taking maximum 20 days to reach China without any delays. And, a train releases far less CO2 than a plane which would be the alternate means of transport.

· Chinese companies invested nearly $15bn in 2015 in countries participating in OBOR, up one-fifth from 2014. Forty-nine countries along the economic corridor invested $8.2bn in China in 2015, up 25%.

· Europe, gripped by economic weakness and debt, is crying out for Chinese investment. Chinese state enterprises and funds are eagerly participating, buying up ports, real estate and technology firms from Greece to the UK. China views Europe as the terminus for its OBOR project.

· China’s trade with OBOR countries has been growing at an average of 18.2% annually over the past decade and accounts for 20% of the country’s total foreign trade volume. China’s direct investments in OBOR countries increased from $240m to $9.27bn during the past decade for an annual growth of 44%.

· The first cargo train from China arrived in Tehran, Iran, in February 2016 after a 14-day journey travelling a distance of 10,399 km through Kazakhstan and Turkmenistan from China’s eastern Zhejiang province.

· China’s efforts include the $46bn China-Pakistan Economic Corridor.

· Other key initiatives include Chinese investment in Central Europe such as the China – Belarus Industrial Park, signing of 33 deals in Kazakhstan, amounting to $21.6bn covering mining, engineering, processing, transport, oil, gas etc.

· China National Electric Engineering Company is involved in the high-quality construction of Vitebsk Hydroelectric Power Plant in Belarus, an environmentally friendly source of energy.

· According to a PwC report released in February, about $250bn in projects have been built, recently started or have been agreed on and signed in relation to the belt and road initiative.

· Gwadar deepsea port in Pakistan, operated by China Overseas Port Holdings was built by China Harbour Engineering Company.

· In Myanmar a contract has been agreed with China in 2015 to build a deepsea port at Kyaukphyu.

· A new deepsea port at Sonadia Island, Bangladesh is being constructed with Chinese involvement.

· Two projects in Sri Lanka involving China are a Colombo container terminal and new port at Hambantota.

· At the European end of the Maritime Silk Road is China’s investment in the port of Piraeus, Greece.

But the real merit of OBOR lies in its geopolitical benefits, not just for China, but for all countries in the world and not just those involved with this concept. Just to list a few of these:

· More than 80 officials, ambassadors and representatives of 40 Silk Road countries met at Valencia, Spain’s St. Pius V Museum to pray for peace among the route’s four major religions: Christianity, Islam, Judaism and Buddhism stressing the current appalling situation of expulsions, uprooting and refugee flows currently occurring in the Mediterranean.

· OBOR will act like a dam and hold back the stream of refugees clamouring to enter the EU by bringing peace, economic development and job creation that will dove tail with the infrastructure aims of OBOR.

· The jobs created by CPEC would go a long way in addressing the employment concerns of the bulging youth population of Pakistan, and the economic activity generated in the northern parts of the country, would bring back long lost stability and peace to terrorism hit areas.

· China has long been concerned at links between Islamist militants in Central Asia and those Beijing accuses of promoting separatism in the violence-prone far western region of Xinjiang. With OBOR providing massive amounts of jobs, generating and increasing economic activity, it will bring peace and prosperity to the troubled regions in China as well as in the Central Asian Republics.

· OBORs many infrastructure projects would benefit China’s poor inland regions, integrating them with the global economy and helping to mitigate China’s rapidly growing wealth gap.

· China would gain credibility and influence on three continents, 65 countries and 4.4b people via OBOR.

· OBOR ports in Asia, Africa and Europe reduce dependence on trade passing through potentially insecure choke point of the Malacca Straits.

There are, of course, a few benefits that would be very helpful to the Chinese economy and, indirectly, a boon to dry bulk shipping, such as:

· China will utilize the ~30% idle steel mill capacity to produce steel at possibly the lowest cost in the world for the OBOR infrastructure projects.

· Coke, the other ingredient to produce steel, is in a similar oversupply/low price situation, so steel should be produced very cheaply indeed.

· Chinese Cement plants have an idle capacity of ~40% allowing them to produce cheap cement for OBOR.

· Employment in the steel and cement industries in China will no longer be at risk.

· China would be able to shift their labour intensive industries away from the full employment, high labour cost, and expensive real estate of the south and the east to the west of the country where labour is plentiful, is cheap and land isn’t expensive thereby prolonging the life of labour intensive industries that would be connected with first class infrastructure to their respective export/domestic markets.

· The above actions will allow the Chinese economy to smoothly transition to a services and consumption led model.

· And all of the above would be achieved without having to bomb or kill anyone in a pure win-win solution.

And that, dear reader, is OBOR explained.

Just When You Thought You Knew What Shipping Was……

After so long in the business, I thought I had a pretty good idea what shipping was, but it turns out I was wrong!

I have a Google alert set up for the word “shipping” appearing in the news. Of course, this occasionally throws up some non-shipping stories, but today’s shipping news link is a winner. According to the Heatstreet website “shipping” is a word used in the world of fandom to denote a romantic relationship between two characters that did not exist as part of the original story-line. While this sounds a bit fantastic (pun intended), the article by William Hicks seems to be well-research and a bit above the usual lurid click-bait. Therefore I will not reproduce it in full here, but you can read the article here, if you are interested.

Shipping and the Olympics

Team GB is having an amazing Olympics, and after watching the amazing symmetry of the pairs diving into a green swimming pool, I thought I would strive “Citius, Altius, Fortius” to find a tenuous link between shipping and the Olympics.

According to a genuine study entitled, “The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games” by Bent Flyvberg et al of the Said Business School (University of Oxford, 2012, updated 2016), the Olympic games held over the last decade have cost, on average, USD 8.9bn to run. This is a huge capital cost, for what is sometimes a one-time use of the facilities. This average cost is equivalent to one tenth of the value of the Greek fleet. Indeed, compared to shipping, in economic terms, the stadia and facilities built to host a particular Olympic event can be seen as the means of production, in the same way as a vessel is the means of production in shipping.

The accompanying chart compares the cost of the means of production of both industries. In other words, the cost per event at the Summer Olympic Games between 1972 and 2016 (where data is available) and the average VesselsValue market value of the host nation’s fleet. Is there a correlation? No, there is no strong correlation, (the correlation is 0.40 for those who are interested), but we can pick out a few highlights from the data. The USA has the highest value fleet at an average of USD 25.7m per vessel (due to the requirements of the US Jones Act), but spending on Olympic events was only USD 3.3m per event for the 1984 Los Angeles Olympics, and USD 15.3m per event for the 1996 Atlanta Olympics. These figures are below the median of USD 20m per event.

The UK managed to spend the most at USD 40.5m per event at the 2012 London Olympics, but this does include the USD 90m spent on converting the main arena into a football stadium (for West Ham United FC). Interestingly, Brazil’s estimated cost per event is closely aligned to the average value per vessel in the Brazilian fleet (see chart). So while there is no link between shipping and the Olympics, there is some symmetry to be found, rather like watching the pairs diving into that green swimming pool.

Shipping Conference Schedules

I have just updated my shipping conferences and exhibitions calendar, and depending on your role in the industry, I propose two possible schedules.

The Shipping Marketing Executive:
The proposed conference schedule includes attending commodities conferences as well as purely shipping conferences.

1) Tuesday 6 September to Friday 9 September, Hamburg – SMM exhibition. At least one day is needed to go around the halls, preferably two, and the rest of the time attending conferences and meeting clients in Hamburg.
2) Monday 12 September to Wednesday 14 September, Miami – Kingman Sugar Conference. It’s amazing how few Shipping Executives actually attend the commodity conference of the cargo the company ships are carrying. Sugar is one of the most lucrative and highest value bulk trades, and it is worthwhile cultivating a few contacts.
3) Wednesday 21 September, New York – Tradewinds Shipowners Forum. A chance to check out what bankers are thinking when it comes to providing finance.
4) Thursday 29 September to Friday 30 September, Tokyo – Coaltrans. Another commodity conference, and a chance to find out just how poorly the Japanese shipping companies are faring. Will they be bailed out by the government?
5) Tuesday 11 October to Wednesday 12 October, Athens – Marine Money Greek Ship Finance. Every one can learn something from speaking to Greek shipowners.
6) Tuesday 25 October to Thursday 27 October, Copenhagen – Danish Maritime Fair. A new event on the calendar. Like Ireland, Denmark is pushing itself as a maritime hub, offering subsidies and other incentives. Could Copenhagen be the next “Singapore”?
7) Wednesday 2 November, South Korea – Mare Forum. South Korean shipping is going through another massive upheaval, driven by all the bankruptcies taking place. Will South Korean charterers behave honourably?
8) Tuesday 8 November, China – Mare Forum. The latest Five Year Plan (No 13, if you are counting) emphasis streamlining state-owned companies. Mergers among Chinese state-owned companies are already taking place, and this conference would be a good place to ask the question – what does the latest Five Year Plan mean for shipping?
9) Tuesday 15 November, Thailand – World Rice Trades. A notoriously difficult trade to enter, but very lucrative if you have the right contacts. Not making shipping people make the effort to attend this or the Coaltrans conference, which could give you a clear run at the cargo owners.
10) Thursday 17 November to Friday 18 November, Manila – Coaltrans. The coal trade from the near Far East to India has been supporting bulker trades in the near East. How long will imports to India last?

 
The Ship Finance Banker:
Back in the day, a shipping finance conference meant only one thing; the Lloyd’s Shipping Economist Ship Finance conference at the Hyatt. Informa led the market in shipping finance conferences, but those days are long gone, and Informa does not appear to have a ship finance conference listed for this Autumn. However, there are plenty of alternatives.
1) Tuesday 27 September, Monaco, – Superyachts Marine Money.
2) Thursday 29 September, Monaco – Superyachts Mare Forum. There is still plenty of ship owners and two Superyachts conferences in one week in the same location is too good an opportunity to pass up.
3) Tuesday 10 October to Wednesday 11 October, Greece – Marine Money.
4) Tuesday 18 October, Monaco – Mare Forum. Back to Monaco.
5) Thursday 27 October, Rotterdam – Mare Forum. The Dutch banks have been quietly lending to select clients. Find out how they do it.
6) Wednesday 9 November, New York – Marine Money. A mid-week conference in New York gives plenty of opportunity to meet clients throughout the week.
7) Tuesday 15 November, London – Riviera Tanker Trade & Outlook. Not a shipping finance conference per se, but tankers have, until recently, been on of the few bright spots in the industry.

Halcyon Launches Its 8th Maritime Employee Survey

The Halcyon / Coracle Online employee survey is now ready to access.

Apparently last year 3,000 people took part in the survey, if you complete the survey, you will receive a free copy of the report.

Maersk Chairman Says Strategic Options Include Company Split – Bloomberg (see this blog 6 May 2016)

A.P. Moeller-Maersk A/S replaced its chief executive officer as the owner of the world’s biggest shipping company explores a number of “strategic options” that may include splitting up its operations.

Source: Maersk Chairman Says Strategic Options Include Company Split – Bloomberg

What Will be the Impact when the Newly Extended Panama Canal Locks Open?

What will be the impact on shipping when the newly extended Panama Canal open today (26th June 2016)? Figure one below shows the physical changes to the dimensions of the old and new locks on the Panama Canal (time lapse video of the construction).

Under the old dimensions, the widest containership that could pass through the Canal was one with a beam of 33m – Panamax (3,000 to 5,999 TEU). The ships are pulled through the old locks by “donkeys”, which are small gauge locomotives, and often a sea cadet on his first passage would be given a bucket of water and told to water the donkeys. Interestingly, there has not been any clear indication from the Panama Canal Authourity if the old locks will continue to be operated in parallel with the new locks. These old Panamax containerships make up around 16% of the current capacity of the containership fleet.

As trade increased, and due to changes in trade routes, containerships wider than 33m were built. In theory, these older Post-Panamax containership (3,000 to 9,999 TEU – see figure 2) will be able to use the new locks, too. These currently make up 22% of the fleet.

The New Panamax (10,000 to 13,399 TEU) containership, also known as Neo-Panamax, currently makes up 18% of fleet by capacity, according to mapping, ship search and valuation provider, VaesselsValue, but it is expected that this sector will replace the old Post-Panamax.

It is expected that the old Panamax containerships will cascade downwards into the other sectors, and may even “interfere” with the Feedership trades (1,100 TEU), should the rates decline to comparable levels. This will most likely decrease the values of old Panamax vessels, and may lead to a new round of sales for scrapping.

The increase in capacity able to pass through the new locks and the sea-time savings (see figure three) for the larger ships will be significant, but the impact is hard to assess until the liners start using the new locks.

The top five New Pananax containership owners are shown below (figure 4).

According to some studies, the opening of the new locks could double the volume of total trade (tankers, dry bulk carriers, containerships and gas) passing through the Panama Canal. So far, the emphasis has been on the liner trades and their use of the new locks on the Panama Canal, but the LPG and LNG gas carriers are expected to be significant users, too.

BuzzFeed: How It Works

On Thursday evening (23 June 2016) I had the pleasure of hearing from BuzzFeed’s Ryan Broderick, Deputy Global News Director and Ailbhe Malone, UK Lifestyle Editor. Ryan and Ailbhe provided an insight into how BuzzFeed works, how they select content and how to best build mutually beneficial relationships with journalists. The event was organise by PR Newswire.

 

Ryan Broderick, Deputy Global News Director of BuzzFeed speaking in the luscious surroundings of Two Temple Place, London

According to Ryan, the mission of BuzzFeed is to provide a slice of life, to take a human interest story in London and tell it in Spain or India (BuzzFeed has a huge team of translators). BuzzFeed aims at a very select slice of the population, which according to Ryan is essentially young women, and non-whites. The standing rule is DO NOT WRITE ABOUT OLD WHITE MALES – as they have more than enough news time. The most fruitful sources of BuzzFeed stories are obscure nerdy groups like women’s forums discussing Lush Bath Bombs. The BuzzFeed demographics are 60/40 in favour of women, but 80% of the sharing BuzzFeed stories on social media are re-posted by women. Therefore, the question BuzzFeed editors ask about a story is “what is the shareable moment”. The measure of the success of a story are: how long does a story last, and how many comments does it produce?

I confess: I haven’t spent a lot of time on BuzzFeed, and I had assumed that most of the stories were fabrications along the line of Top Ten Things You Need to Know About Cats. Talking to Ryan and Ailbhe, I realised that this is far from the truth. Ailbhe researched, wrote and produced the story on Lush Bath Bombs. She visited the factory, took part in the production line and interviewed the workers, dermatologists and other stakeholders in the story. The Lush Bath Bombs story took two months to produce, but by analysing all the facets, and bringing in experts, the story has been accessed for months and has had more than 500,000 views. To my mind, a story like this on BuzzFeed is closer to a Sunday Times magazine story.

Another surprise was how little content was generated from PR leads. Again, my assumption was that all the stories had a PR basis, and were only written to promote a product. However, according to BuzzFeed’s Deputy Global News Director, in the UK less than 10% of the stories were from PR promotions, and in the US it is only 5%. Overall, the event was a real eye-opener for me, and now I have more respect for BuzzFeed, even though I am not the target audience.

The Great Masquerade of Shipping at Posidonia 2016 – The Barrel Blog (re-published from Platts)

June 16, 2016 08:30 UTC (0)

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The Great Masquerade of Shipping at Posidonia 2016

Shipping is a curious industry. It is a marketplace where massive deals concerning the movement of millions of barrels of oil on behemoth ships can be made over a third pint of Peroni at the local pub. Entertaining clients can be just as important as providing them with a great service.

It is a small world, where faces are remembered, grudges are engraved in stone and favors are easily called upon. It is personal and as such it requires you to wear your best “game face” at all times. And every two years, you can give your trusty business mask the ultimate test at the biggest and fanciest shipping masquerade – Posidonia week in sunny Athens.

“Posidonia” has become a special word for shipping people over the years and for good reason. It is a massive event, with two sides to it.

The first is a biennial international shipping exhibition, which started back in 1969 under the patronage of Greek shipowners and has grown dramatically since. This year it attracted 22,000 people with 1,800 exhibitors from 90 countries.

The other side is the fancy late night parties, mostly concentrated in the seaside town of Vouliagmeni, just south of Athens, which is perfect for this as it boasts amazing, sleek venues and locales.

Suited, booted, armed with business cards and aspirin, thousands of shipping professionals from around the globe attend these parties. They throw back a few drinks, shake some hands, slap some backs and, quoting Jay Z, re-introduce themselves. And that is where the game face masks really come into play.

When you navigate through a busy 5-star hotel seaside terrace splashed in the evening sun, you can see the masquerade in all its glory.

Here are some shipbrokers, usually wearing the faces of wolves and foxes. They emit an image of vigor, cunning and confidence, all the things that clients would expect from their brokers. You can usually find them in groups around their principals, like chartering managers from oil majors, commodity trading houses or shipowner companies.

Principals themselves are often comfortable under the masks of bears and lions. Powerful, somewhat calm and, well, important.

However, if you get to know these people, ask them the right questions, you may sometimes see the strain, gritted teeth, nervous eyes and sad smiles beneath the masks.

Some of that is usual stuff. Like a young broker, who has to switch his markets along with changes in the company, losing some accounts that he worked so hard for, unsure if he has enough energy to do it all over again.

Or an owner’s freight trader, who recently missed a big spike in his market, costing his company a few million dollars and under his bear mask hiding the fear that he cannot afford any more mistakes.

Another shipbroker, who after getting a big principal’s job suddenly found that people who wouldn’t shake his hand before are now throwing rose petals at his feet, standing in line to be his new best friend.

Even a charterer, who understands that shipbrokers that treat him like a king, send him cases of wine, get him the best football game seats, still make much more money than he does and would never call him again if he left the industry.

Still, some things were unique at Posidonia 2016. There is a lot of pain and uncertainty in the shipping market. The dry bulk sector in particular is going through probably its worst depression in three decades. The oversupply of tonnage and limping commodity demand are steadily squeezing the life out of it. So, it is often hard for shipowners involved in this business to stay positive or come up with good reasons for optimism as there are so few to be found.

That’s why, leaning on a bar, in a sea of wolves and foxes, some of them can’t help but wonder if they will have this job in two years’ time when the next Posidonia event comes along.

Yes, there is a view that the situation may get better by then as the investment in tonnage goes down, giving hope to slowing vessel supply, but such opinions have often been wrong before.

Things are not so rosy in tankers either. The crude oil glut that made this market a superstar in 2014 and 2015 is shrinking. At the same time, there is a flotilla of newbuilding vessels due to hit the water in the next two years, boosting supply and thus pressuring freight rates down again.

And all this reflects on Posidonia guests too.

As veterans of the event told me, there were far fewer parties this year where the bar would be open past midnight. Many of the guests, including some top brokers, shipowners and charterers had to share rooms in order to afford staying at the top Vouliagmeni hotels where all the action was.

However, the beauty of shipping is that despite downturns, troubles and bad omens, the show still goes on. Simply because there are so many truly dedicated people who love, live and breathe this business.

That’s why I could see so many of them at the Posidonia parties, taking a step away from a bar to send that charterparty from their smartphone, share a rumor on a fixture they just heard from a client or just check their stem programs or position lists. For them, a game face mask is second skin, even if the makeup may be flaking sometimes.

And so there I was too, on a Thursday night, at the final big party of this over-the-top Posidonia week. With some effort I squeezed through a thick crowd of men in suits and ladies in fancy cocktail dresses.

The gorgeous Balux Café in Vouliagmeni is so packed that it required precise powers of agility not to spill my gin and tonic over someone’s tie or to inadvertently shove a fellow guest into a massive seaside pool.

I finally make it to the other side in an attempt to cool off in the warm Mediterranean breeze. I am out of business cards, my meeting schedule is complete and my plane leaves for London tomorrow.

And as I finally relaxed and took a final sip, I could feel the mask slipping from my own face.

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Tags: Dry Bulk, Dry Freight, Freight, Shipbrokers, Shipowners, Shipping, Tankers,Transportation, Vessels

AUTHOR BIO

Alex Younevitch, Managing editor Alex Younevitch is the managing editor for EMEA freight markets at S&P Global Platts. He Joined Platts in 2013 after previously enjoying a successful shipbroking career. Alex manages Platts’ tankers and dry bulk teams in London, overseeing over 100 of daily freight assessments and three daily publications. He started in his current role in May 2014, having previously been an associate editor for EMEA shipping. Alex has a 1st class BA Honours degree in International Supply Chain and Shipping Management from the University of Plymouth.

Craig’s Post-Posidonia Ponderings

Take-Aways:

• Owners are grateful to be still be in the game, but sources of finance limited.
• Ironically, they blame cheap finance for the over-ordering.
• Hidden stresses – the lowering of opex is breeding poor maintenance.
• Transparency in the shipping markets is being driven by players from outside shipping (see earlier blog posts on the Orange Sofa and VesselBot seminars).
• 125 international and Greek press and media attended Posidonia 2016 (we have obtained the list).

Seminars Attended:

• Lloyd’s List Intelligence Briefing
• Capital Link Shipping Forum
• Orange Sofa
• VesselBot

Posidonia Sentiment

The sentiment of the 2016 edition of Posidonia was one of muted celebrations by the survivors of what is turning out to be the longest shipping recession in living memory. Indeed, “survivor” may be too heroic a term given that most observers blame the owners for over-ordering new ships, and thus prolonging the recession. However, there is also a lot of anger toward the EU (i.e. Germans) and its proposal to tax Greek ship owners’ offshore earnings.

Blame Game

Ship owners blame the banks and private equity (PE) for tempting them with cheap money to order ships they didn’t really need. One owner wryly observed that PE and other new finance providers thought they could learn shipping after a few meetings. PE was treated as sheep waiting to be shorn of its money, and now PE’s expected 40% return on investment is just a dream, it is trying to exit an illiquid market. The remaining banks in shipping claim to have no money for second-string owners, but competition is intense to lend to the top tier owners. However, according to Norwegian bank DNB, deal-flow in 2016 (ytd) is down 50% on 2015. Bankers feel consolidation among the liner services and containership owners is inevitable. Despite the fragmentation of the dry bulk industry, there will be consolidation among the top tier owners, too, according to bankers.

Owner Feedback

On the owning side, there is said to be a split in the dry bulk market, consisting of those ships that are fixed (working), and those that are not. One dry bulk owner described how three years ago the required opex level for his Handies was USD 8,000/day. Today, by reducing crew from 22 to 19 people and / or putting more cadets on board (and other savings), opex has been shaved to USD 4,000/day. But there are risks, and he related how his representatives inspected a Chinese-built, 2008-built Supramax, with a view to purchase. Maintenance on the vessel had been minimal, there was rust everywhere, and she was only fit for scrap, in the representatives’ opinion.

 

Posidonia Quotes:

“We Greeks are happy with low returns…you need to know how to play the game… it’s about cash flow.”

“We treat ships like family members”

“What would I buy now? A seven-year old ship, every time.”

“Germans know as much about shipping, as Greeks know about car manufacture!“

“Shipping is a stable industry…in that it is always unstable!”

“…the US exporting democracy ruined economies in the Middle East.”

“…shipping is not a team sport..”

“We have to look at the banking cycles. In five years’ time, there will be new faces [in the banks], and new miracles.”

“Greece is the leader in shipping in Europe. But instead of examining why and copying, the EU is trying to destroy (Greece).”

Posidonia Exhibition

According to the organisers, the Posidonia exhibition itself was visited by over 22,000 shipping industry professionals (a 15% increase on 2014). There were more than 1,800 exhibitors from 90 countries deployed across 40,000 sq. metres at the Athens Metropolitan Expo. The next Posidonia event is scheduled to be held between 4-8 June 2018.

Parties I Attended:

Friday 3 June – Lloyd’s Register Party at the Astir Palace. I flew in that evening, but the lock failed on the apartment door. By the time this was sorted out, I arrived at the party at 2.0 am – just as it ended.

Monday 6 June – Lorentzen and Stemoco Party at Club Banane on a beach near Glyfada. I was invited via Tod and Lulu (see below), two S&P brokers from Stemoco, I met at the Lloyd’s List Intelligence Briefing the day before. This was held at a beach club in the afternoon. Club Banane was not closed to civilians, who were wandering around in bikinis.

Lulu Zheng and Craig at the Stemoco party

Tuesday 7 June – Drinks at the TW stand. Following a sudden thunderstorm, Posidonia was deserted, and there were no guest left on the TW stand. Zero networking.

Tuesday 7 June – Korean Shipyards party at the Astir Palace. This was a formal reception, with suit and tie required. This was an open invite party and a good networking opportunity.

Wednesday 8 June – Vancouver International Maritime Centre (VIMC) party at the Vorres Museum of modern art in a village near the airport. I was invited after chatting to VIMC peeps at Posidonia Expo. This was a very difficult to get to location as the village roads were not wide enough to take E-class Merc taxis, but the hosts and location were charming. The museum holds some of the most valuable modern art in Greece, and the galleries were open during the party. Networking limited to Canadian shipping people and Greek lawyers. After the party, I shared a taxi with the Canadians to the Tradewinds party.

Christian Waldegrave, Head of Research at Teekay at the Stemoco Party with Craig operating the selfie stick.

Wednesday 8 June – Tradewinds party at the Island (where there appeared to be two other events on at the same time). There was a strict entry policy. The DJ was very good and the local group, The Melisses, played everything from Greek pop to Robbie Williams! The loud music made networking a little bit intimate, but by the third day of Posidonia, many of the faces were now familiar.

Thursday 9 June – Marshall Islands Party at Ble. This is a beach peninsular that is taken over by a catering company, Ble, and officially holds 2,500 people. This event was the unofficial end of Posidonia party and was packed, and included the glamour girls from the Posidonia stands. Marinakis was given an award. With several quiet areas with seats away from the music, this was a good last minute networking event.

James Leake, Head of Research at Arrow, and Paddy Stern of VesselsValue.

Marinakis receives an award.

Every night – The main after-party venue appeared to be Taverna 37, which is a terrace bar in the Arion Resort Hotel (part of the same complex as the Astir Palace). This was also the main broker hang-out and frequently occupied by the likes of Richard Fulford-Smith of Affinity and Andy Case of Clarksons. Indeed, at one session, I reckoned 40% of the people on the terrace were from one or the other shop.

Posidonia: It’s not all sunbathing and drinking!