Let’s Hope Amazon Don’t Take Too Close a Look at Shipping

It is worth taking the time to read this Bloomberg article on Amazon, and then think what would be the impact if Amazon turned its attention to the shipping leg of the logistics chain.

VV Market Report and Country Report

VesseslValue has redesigned its august_market_report. The latest one is for the month of August 2016, and contains commentary on values.

The country report looks how_many_vessels_at_demolition_value and the spread across the sectors and regions.

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

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

Olympics vs Fleets

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.

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