Presentation on theme: "The New Dynamic Face of Greek Shipping"— Presentation transcript:
1 The New Dynamic Face of Greek Shipping Market OverviewMany Faces, Many FuturesThe New Dynamic Face of Greek Shipping4th Hydra Shipping Conference15th September 2012Dr Martin Stopford,President, Clarkson Research, LondonMartin Stopford, 8th August 20121
2 How do you play this hand? Market OverviewDevelopments in the Shipping Cycle & the Impact on Revenues & Asset ValuesThe Drivers of ChangeHow do you play this hand?The 7 Faces of ShippingDynamics of GlobalizationGreek Shipping EvolutionSix ChallengesConclusionsMartin Stopford 15th September 2009Martin Stopford, 8th August 201222
3 1. The Seven Faces of Shipping 3. PUBLICCOMPANY2. PRIVATECOMPANY4. PRIVATEPARTNERSHIPKG etc5. SHIPOPERATOR1. Shipowner7. LEASINGCOMPANY6. MANAGEMENT COMPANY
4 We must build a dynamic world economy 2. The Dynamics of TradeWe must build a dynamic world economyBefore the 2nd World War the world the world (and shipping) was dominated by European EmpiresIn 1944 at the Bretton Woods conference in USA set the scene to change the systemThe aim was to “globalize” of the world economyBut 1957 turned out to be an economic crossroads.The end of the imperial era which had lasted for a century and the beginning of what we now refer to as “Globalization”.After a century of neo-colonial stability the world was starting to move towards a new global economy. Over the next fifty years five fundamental developments worked together to create a global economic system which produced 50 years of uninterrupted economic growth and by 2005 world GDP had expanded to almost eight times its 1950 level (Figure 1).US Treasury Secretary Henry Morgenthau at Bretton Woods in 19444
5 1944 Global Free Trade Policy Introduction to Shipping1944 Global Free Trade PolicyMEETING AT BRETTON WOODS IN USA“The objective, gentlemen, is to create a dynamic world economy”At Bretton Woods in 1944 US Treasury Secretary Henry Morgenthau outlined the objective of creating "a dynamic world economy ".The method was to establish a new, liberalized trade regimeTo assist in achieving this aim the World Bank, the IMF and GATT were founded.Global free trade policy was the first.The plan to replace the imperial world with a new system of free trade was laid out at the Bretton Woods conference in 1944.Henry Morgenthau the US Treasury Secretary outlined the objective of creating "a dynamic world economy".The World Bank; the International Monetary Fund; and GATT were founded.Delegates at the Bretton WoodsConference in 194411/04/20172nd April 20085Martin Stopford April5
6 The Result – A “Flood” of Trade 1950-2011 Index 1950=1002012Sea trade16 times as big as in 1950Sea trade grew at 4.3% per annum2012World GDP 8 times as big as in 1950For all these reasons the 50 years since the Hong Kong shipowners set up their association were very prosperous.World GDP grew at 8 timeBut world sea trade grew even faster, increasing to 13 times its 1950 level by 2005.In the process almost every aspect of the shipping business changed.World GDPGrew at average of 3.6% per annum
7 The Shipbuilding Cycle Shipyards expand to replace the ships built in the 1970s boom2Million DwtDeliveries m dwt in 2012FORECASTDeliveries 61 m dwt in 19761Last phase of 1970s scrapping!
8 6 billion Non-OECD population want to consume at OECD levels Globalization Part 1OECD’s 1.3 billionpopulation6 billion Non-OECD population want to consume at OECD levels
9 Sea Transport was mechanized:- A new Shipping Model developed in the 1950sBulkLiquidsManufacturesRefrigeratedContainerShippingUnitized cargoesHomogeneous cargoesBulk carrier, tankerSpecialised shipSpecialisedSpecialized cargoesUnit LoadContainer shipAirFreightUrgent cargoAir freighterThe mechanization of sea transport lies at the heart of globalisation – adding value takes place by inter-segment competition
10 Business Model Maturing LowHigh3. SpecialisedTransportVolume tonnes per yearValue $ per tonneFigure 3 The Potential Cargo Matrix (PCM)2. AirFreight4. Bulk1. LinerABCLow returns, chasing sizeHigh investment requirementFinance problemsIncreased energy costsComplexities of globalization
11 3. Greek Owners' Evolution Globalization provided a massive opportunity for independentsControl of the fleet moved from imperial owners to independentsGreece led the wayBuilt as Bellucia, 1937 renamed Leonidas M. Leonidas M SS was a Greek Cargo Steamer of 4,573 tons built in On the 19th July 1942 when on route from RIO DE JANEIRO for SYDNEY (N.S.) carrying a cargo of 6,700 tons of iron ore she was torpedoed by U-332 and sunk and finally sunk by gunfire see wreck
12 Greek Owned Fleet & Globalization Million GRTShows Gross tonnage and growth rateGreek owners used charter back $ loans to build the fleet in the 19602000s5% pa1990s7% pa1970s7% pa1980s-1.4% pa1960s6% paSource: orderbook by month.xls deliveries & OB tab1950s18% pa
13 Greek Finance1949 to 2012Greece’s share of the fleet grew from 3% in 1949 to 18% in 2008% World FleetSteady at 15-17%5% cut back during 1970s/80s recessionRapid growth based on time charters & Euro$ loansEquity MarketsBond MarketsEuro$ market starts 1958Source: orderbook by month.xls deliveries & OB tabCharter backed finance
14 Greek Owned Fleet - Top 10 Owners in 1969 In 1969 the ten biggest international Greek companies owned 502 ships, accounting for 28% of Greek owned GRT
15 Greek Owned Fleet - Top 10 Owners in 2012 In 2012 the ten biggest international Greek companies owned 672 (much bigger) ships, accounting for 29% of Greek owned GRT.
16 546 Greek companies owning ships over 5000 dwt Greek Owned Fleet 2012546 Greek companies owning ships over 5000 dwtNumber of ships ownedTop 10 own 672 shipsThe core are the medium sized companies with 3-15 shipsSmallMedium1st MayBig OwnersTop 10 Owners
17 Greek Owned Fleet: Ship Value Greek companies owned ships worth $70.6 billion$14.8 billion owned by listed companiesMedium companies have assets worth $32 billion (funding requirement of, say, $20 billion??)Small(5% value)Medium(45% value)Big Owners(27% value)Top 10 Owners(23% value)Values at 1st May 2012 (over 5000 dwt)
18 Greek Owned Fleet By Type Tankers 37%Broad portfolio, 80% tankers and bulkersContainers only 10% which is low for the third biggest world fleet segment (5,100 ships worth $100 billion).Bulkers 42%Other 20%
19 How do you play this hand? Market OverviewDevelopments in the Shipping Cycle & the Impact on Revenues & Asset ValuesFuture ChallengesHow do you play this hand?Over-capacityEnergy costsRegulatory focusGlobalization part 2IT & Comms revolutionContainer modelMartin Stopford 15th September 2009Martin Stopford, 8th August 20121919
20 Challenge 1: Shipping Over-Capacity Market OverviewChallenge 1: Shipping Over-CapacityWorld Cargo FleetSurplus shipping capacity (% right axis)From 2009 world fleet surges ahead of demandDemand for sea transport runs ahead of supplySee data in Market Data /SupplyDamand Updated July 2012Martin Stopford, 8th August 201220
21 Challenge 2: Energy Costs THE SHIP USED TO COST MUCH MORE THAN BUNKERS BUT. TODAY BUNKERS COST MORE THAN THE SHIP.2005Ship costs 3x fuel2012Ship costs half fuelSource: bunker data/bunker analysis model.xlsBased on Aframax tanker, 1 year TC rate and Rotterdam bunker price
22 Challenge 3: Regulation Requirement that new ships must comply with the EEDI, a clear attempt to drive efficiency improvementsThe focus on air emissions; ballast water; recycling; energy efficiency and the carbon footprint.The dilemma of gas oil versus scrubbers and the uncertainty over of which ballast water system.Many shipyards, after a decade when they were able to sell standard ships, are struggling to respond.
23 Eco-Ship Design – Complex Shows the effect on fuel cost (green lines) & ship cost (yellow line) of changing speed in 1 knot increments on 5000 mile voyageEEDIShipping lanesBack haulLNGscrubbersbest speed at $1500/tonne bunkersNUCLEARwindNo ballastFuel CellsCOATINGSlogisticsbest speed at $200/tonne bunkers80%savingHull formEngineeringSpeed of ship (knots)Note 1: Just difficult decisions
24 Challenge 4: Globalization Part 2 Non OECDOver the last 50 years the OECD countries dominated growthAsia started to grow in 1970s & China in the 1990s.Non OECD trade overtook OECD in 2006The next phase of globalization will see more countries; more pressure on resources; and more geo-political tension (piracy a sign)Fleet OwnershipOECD
25 Challenge 5: IT & Comms Gordon Moore Invented “Moore’s Law” A vast majority of Internet data and voice traffic is transmitted through undersea cables spread across oceans. This Google Maps gives the physical routes of these submarine cables.Fibre optic cable network
26 Challenge 6: Container Business Model The container business will be at the heart of changeBillion tonsWill the exponential trend of 8.8% trend continue?“Over the centuries technical developments in liner shipping has been not so much a continuous process as an occasional leap forward precipitated by a compelling call for change.In between there have been long periods of conservatism".Ronnie Swayne, Chairman OCL 1973This chart shows container cargo growing to 1.5 billion tonnes today. In 2009 the trade had its first serious “wobble”.(Ships cargo cargo ships edited by Henri Kummerman, page 113).
27 “fuel costs and environmental regulations are the Wild Cards” 7. ConclusionsLousy hand so aim 1 is to surviveMajor revolution in fuel costs, technology, software and systemsChallenging regulatory focus which the industry is still struggling withGlobalization “Part 2” will change the pattern of trade & it’s geopoliticsIT Revolution will create “soft” opportunitiesThe container business is due for a “great leap forward”“fuel costs and environmental regulations are the Wild Cards”
28 Amarillo Slim’s Advice “Play the players, not the cards.Watch them from the minute you sit down.Play fast in a slow game , slow in a fast game.Never get out when you are winning.Look for the sucker and, if you don’t see one , get up and leave because the sucker is you”Amarillo Slim’s Advice
29 Oceanic Steam Navigation Company Ltd The company is better known as White Star Line which owned the Titanic100 years ago the Chairman was Thomas Bruce IsmayIn the film Titanic he is the arrogant man who ordered the Captain of the Titanic to go imprudently fastHe looks bad, but he had a problem the film did not tell you about, which you will understand.Chairman Bruce IsmayChairman 1912
30 7 year average earnings (in arrears) Oceanic Steam Navigation Company Ltd7 year average earnings (in arrears)Titanic loss 2012Collapse of earnings 1900 to 2010Cut throat competition between Cunard and White StarUpdated chapter 2 Final.xlsBruce Ismay, Chairman