With Posidonia 2018 recently behind us, one feels encouraged seeing the shipping market getting back to the basics and thinking of measured growth and sustainable earnings. The days of speculative orders and fast and easy vessel flipping seem to be long gone. Fundamentals seem to be taking precedent in the minds of market participants.
Still, many unanswered questions linger over the market:
Where and how will shipping finance be available to shipowners in the coming years: shipping banks have been losing their appetite for asset-backed financing (ship mortgages) and their focus has been shifting to corporate loans and to shipowners with critical mass. While the traditional pillar of shipping finance seems to be getting less relevant, private equity funds and institutional investors mostly came, saw and left (OK, they invested in newbuilts and took some serious losses along the way, but mostly left); private equity funds, by their nature, were rather opportunistic short-term financiers to the shipping industry, but it was a fantastic daydream while it lasted. Credit funds and alternative funds, with their high cost of capital, are even more of an opportunistic financier to the industry and cannot remotely be considered sustainable sources of capital. Leasing, mostly from China, and mostly in the form of financial leases (read lending), has been very active in the past years, but many wonder about the limitations, and possibly, the risks of such financial structuring. Lastly, could the capital markets possibly be the manna for the shipping industry?
Capital is still tight for the shipping industry; despite the pockets of availability, finding competitively priced capital is a crucial quest. And, for this capital-intensive industry, the answer can only be that flexible shipowners (flexible to financial market developments) will crowd out the less prepared.
And, as if figuring out shipping finance was not enough of a riddle, now the industry has to ponder the options and make decisions about the impact on impending emission regulations; there are many permutations of possible courses of action, especially for the Greek market where a great deal of the vessels are employed in the spot market: would charterers accept to pay for the full cost of highly priced low sulphur fuel (LSHF) or opt to charter scrubber-fitted vessels? And, what if there are not many of them in the market? And, what if refineries cannot produce enough quantities of low sulphur fuel, at least temporarily?
To further complicate matters, technology keeps evolving and bringing the world closer; Amazon is a clear example of ambitious plans of making shipping a tighter part of supply chain management, and surely other charterers will follow course in the dry bulk and tanker markets. Tighter control of costs, higher efficiencies, stricter control of procedures, documentation, authentication and payments are slowly becoming the new standard of expectations; automation, digitalization, blockchain, and, why not crypto-currencies and bitcoin, are part of today’s trading vocabulary. All these novelties will not necessarily change the nature of shipping, but again, could one just ignore them?
And, to complicate matters even further, has anyone talked about political risks in a new world where an errant tweet can shift markets and set national direction in a matter of minutes?
These developments bring to mind the last sentence of The Great Gatsby – just like boats, fighting their way against the current, shipping only comes back to its historic origin, the starting point, the market fundamentals. Many changes are expected to affect the market, boats against the current, but the fundamental nature of the shipping business remains the same, transporting cargo efficiently, safely and in accordance with the expectations of the time.
Last year’s inaugural conference “The Way Forward” touched the periphery of the market; this year, we build upon the great success of the previous organization, and we set for not only sailing to broader horizons but also diving deeper to analyze the topics that really matter to the shipping industry: shipping finance and strategic sources of capital, emissions, disruptive technologies, and world trade
