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Thursday, 04 August 16
BREXIT: IMPLICATIONS FOR GLOBAL SHIPPING AND SEA TRADE - EVERSHEDS
 The buzzword for the post-Brexit landscape both in Europe and further afield is ‘uncertainty’. No-one really knows the long term effect that Brexit will have on local and global economies. However, as the dust settles following the referendum, market experts, industry analysts and businesses are assessing the position with cooler heads and so, whilst certainty may be a little way off, more concrete predictions and assertions of intent are beginning to emerge. This is evident daily in commentary and news from the shipping and sea trade sector.
Global impact
The international shipping market is fuelled by trade, which in turn depends on the health of the global economy. The Brexit vote landed at a time when the shipping market, particularly in certain sectors like bulk freight, was already extremely challenging. The factors which have contributed to dry bulk freight rates heading towards all-time lows in Q1 2016 reflect long term issues which would have persisted whatever the referendum result. These factors include oversupply of ships and the effect on global trade of the rebalancing of the Chinese economy following the boom of the last decade.
Sea trade in and out of the UK accounts for only a very small fraction of global shipping activity and therefore an isolated post-Brexit slowdown in the UK economy may be unlikely to impact dramatically on global freight volumes. This is reflected in some of the bullish reaction we have seen from industry players in recent weeks. Euronav’s chief executive was quoted in Lloyd’s List as saying, on a conference call for analysts: “It should be largely speaking something of a non-event in terms of impact on global trade for crude oil.” For companies with income denominated in US Dollars, which will be the case for many international shipping companies, it could be temporarily beneficial, particularly if costs are in euros and sterling. Others comment that potential constraints in available finance, arising from the Brexit vote, may contribute to a longer term upturn in the market, in terms of helping address the current oversupply of vessels.
However, not all commentators are as optimistic. Whilst there seems generally to be agreement that the Brexit vote alone will not be hugely impactful on world trade, the consequences could be amplified when combined with other matters currently playing themselves out on the world stage. Tradewinds reported this week that Wells Fargo analyst Michael Webber, who covers shipping stocks for the bank, said that the combination of the rise of Donald Trump as the Republican nominee to the White House, the Brexit vote, uncertainty around Italy’s banks and the coup attempt in Turkey could create “meaningful tail risk” for crude demand expectations in the second half of the year. If this prediction is accurate, it is likely to impact on demand for tanker shipping services and therefore freight rates.
The shipping industry, particularly the dry bulk and container sectors, is facing other macro threats to its existence in the longer term, which are completely unrelated to the Brexit vote. The rise of the digital economy and more widespread use of technology in logistics (for example drone deliveries) and the consumer sector (for example 3D printing) may impact on the longterm need for the same volume of goods to be carried by sea.
UK impact
UK trade will clearly be impacted by the Brexit vote. We saw an immediate effect on currency and share prices, although there are signs that the market is settling down after the initial post-vote furore. In terms of longer term impact, there are some matters which are already tolerably clear, for example that any changes to the cost of trade with the EU are likely to affect freight volumes at British ports. However, the precise nature and extent of the effect on UK trade will depend entirely on the form of relationship which is ultimately agreed both with the EU and with other trading partners. With the new British Prime Minister, Theresa May, looking to defer triggering Article 50 until 2017, that form of relationship remains pretty ‘uncertain’.
There are wider potential outcomes for shipping in the UK beyond the direct effect on trade volumes. In terms of the UK offshore industry, for example, Tradewinds reported recently that “when news of the UK’s decision to exit the EU hit the offshore sector, most analysts agreed that the longer-term damage for the sector would be from a possible slowdown in the world’s economy. However, some warned the immediate and near-term effect would be that oil companies would obviously put the brakes on much-needed investment in the UK. The UK continental shelf (UKCS) is already suffering from record low investment — at one-eighth the value of the annual average over the past five years — and the nation’s oil-and-gas sector is on course to have lost up to 140,000 jobs by the end of this year.”
There is also the UK’s position as a leading provider of maritime professional services to consider. The marine insurance industry is pushing hard to maintain the passporting rights currently enjoyed between EU member states, although whether this will be possible without full access to the single market (and the associated EU requirements for free movement of workers) is set to be the key topic in negotiations.
In terms of other professional services, such as legal and shipbroking services, there is some speculation that UK’s so called “stability premium” may have been affected by the vote. However, the UK’s long maritime history, the reputation of its courts (which rely on an extremely well established body of specialist case law) and institutions and the number of highly qualified individuals resident in the UK working in the sector should help ameliorate any effect on this premium at least whilst Brexit is negotiated. However, even if the premium remains intact the professional services sector may be rightly concerned about how services are dealt with in negotiating future trade deals. Such agreements traditionally focus on trade in goods and therefore may not be as advantageous to the services sector.
Conclusion
The global shipping market is experiencing challenging times, mainly due to factors which were set in train long before the brexit vote. However, the shipping industry is used to market cycles and draws resilience from the fact that global trade cannot function without international shipping. Regional issues like the Brexit vote certainly have the power to impact the market, but if ultimately they are not significant enough to affect global supply and demand for physical goods and commodities, they are unlikely to prove more than a drop in the ocean in terms of their individual impact on the global shipping market.
The impact of the vote is bound to be felt more locally, in the UK and European shipping industry. Particular markets, such as the UK offshore market and the UK marine professional services market, will be watching the negotiations unfold very carefully in order to evaluate both the issues and also the opportunities that brexit creates for them depending on the future structure of relations both between the UK and the EU and the UK and the rest of the world.
Source: Eversheds International | Hellenic Shipping News
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Thursday, 15 September 16
INDONESIA MAY FACE A COAL CRISIS BY 2035!
COALspot.com: Indonesia is the world’s fourth-largest coal producer and the world’s largest thermal coal exporter may face a coal crisi ...
Thursday, 15 September 16
CAPESIZE: LAST WEEK ENDED ON A VERY STRONG NOTE MAINLY DRIVEN BY A ACTIVE BRAZIL MARKET - FEARNLYS
Supramax
With holidays in the eastern hemisphere beginning this week, the sentiment and activity level has been decreasing.
In the Pacific, ...
Wednesday, 14 September 16
THE DRY BULK MARKET REACHED LEVELS LAST SEEN BACK IN 2015 - INTERMODAL
In an earlier column we commented that we are undergoing “shipping’s new (ab)normal” with constrained financing, shift in demand ...
Wednesday, 14 September 16
THE PORT OF NEWCASTLE SHIPPED 12.48 MMT OF COAL IN AUGUST; AVERAGE SELLING PRICE WAS $AU 83.33
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $AU $1,040.4 ...
Tuesday, 13 September 16
CAPESIZE: BIG STRENGTH SEEN IN THE MARKET THIS WEEK - ALLIED
Capesize - Big strength seen in the market this week, with an upbeat in sentiment amongst owners helping pull up rates fairly quickly and many hold ...
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- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Petrochimia International Co. Ltd.- Taiwan
- Rashtriya Ispat Nigam Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Sical Logistics Limited - India
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Singapore Mercantile Exchange
- Central Electricity Authority - India
- Thiess Contractors Indonesia
- Formosa Plastics Group - Taiwan
- Borneo Indobara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Jindal Steel & Power Ltd - India
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Semirara Mining Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Attock Cement Pakistan Limited
- Georgia Ports Authority, United States
- Karaikal Port Pvt Ltd - India
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- Independent Power Producers Association of India
- Edison Trading Spa - Italy
- Alfred C Toepfer International GmbH - Germany
- Kepco SPC Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Port Waratah Coal Services - Australia
- South Luzon Thermal Energy Corporation
- Kalimantan Lumbung Energi - Indonesia
- SMC Global Power, Philippines
- Agrawal Coal Company - India
- VISA Power Limited - India
- International Coal Ventures Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Jaiprakash Power Ventures ltd
- Uttam Galva Steels Limited - India
- Binh Thuan Hamico - Vietnam
- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
- Antam Resourcindo - Indonesia
- Petron Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- New Zealand Coal & Carbon
- Ceylon Electricity Board - Sri Lanka
- Ministry of Finance - Indonesia
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- CNBM International Corporation - China
- Cigading International Bulk Terminal - Indonesia
- Vedanta Resources Plc - India
- India Bulls Power Limited - India
- Coalindo Energy - Indonesia
- Indika Energy - Indonesia
- Ambuja Cements Ltd - India
- Economic Council, Georgia
- Indian Oil Corporation Limited
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- Medco Energi Mining Internasional
- Eastern Coal Council - USA
- IHS Mccloskey Coal Group - USA
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- PTC India Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asmin Koalindo Tuhup - Indonesia
- Mercator Lines Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Indo Tambangraya Megah - Indonesia
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Australian Commodity Traders Exchange
- Ministry of Transport, Egypt
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- Orica Australia Pty. Ltd.
- Grasim Industreis Ltd - India
- Sree Jayajothi Cements Limited - India
- Directorate Of Revenue Intelligence - India
- Aboitiz Power Corporation - Philippines
- Anglo American - United Kingdom
- Straits Asia Resources Limited - Singapore
- Tamil Nadu electricity Board
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Power Finance Corporation Ltd., India
- Krishnapatnam Port Company Ltd. - India
- Malabar Cements Ltd - India
- Aditya Birla Group - India
- Gujarat Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Vizag Seaport Private Limited - India
- Planning Commission, India
- Energy Development Corp, Philippines
- Merrill Lynch Commodities Europe
- Standard Chartered Bank - UAE
- Goldman Sachs - Singapore
- Energy Link Ltd, New Zealand
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Coastal Gujarat Power Limited - India
- Orica Mining Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Global Business Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Kapuas Tunggal Persada - Indonesia
- LBH Netherlands Bv - Netherlands
- CIMB Investment Bank - Malaysia
- Neyveli Lignite Corporation Ltd, - India
- Billiton Holdings Pty Ltd - Australia
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Eastern Energy - Thailand
- Sojitz Corporation - Japan
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- GMR Energy Limited - India
- Dalmia Cement Bharat India
- Gujarat Mineral Development Corp Ltd - India
- Manunggal Multi Energi - Indonesia
- The University of Queensland
- Maharashtra Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Sarangani Energy Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- MS Steel International - UAE
- Coal and Oil Company - UAE
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- Larsen & Toubro Limited - India
- Bukit Makmur.PT - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Kobexindo Tractors - Indoneisa
- Central Java Power - Indonesia
- Globalindo Alam Lestari - Indonesia
- Meralco Power Generation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Bharathi Cement Corporation - India
- The Treasury - Australian Government
- Global Coal Blending Company Limited - Australia
- Australian Coal Association
- Xindia Steels Limited - India
- McConnell Dowell - Australia
- ICICI Bank Limited - India
- Mjunction Services Limited - India
- White Energy Company Limited
- Latin American Coal - Colombia
- Bukit Baiduri Energy - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sinarmas Energy and Mining - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Bhatia International Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Trasteel International SA, Italy
- Tata Chemicals Ltd - India
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Offshore Bulk Terminal Pte Ltd, Singapore
- GVK Power & Infra Limited - India
- Star Paper Mills Limited - India
- Kideco Jaya Agung - Indonesia
- Indonesian Coal Mining Association
- Karbindo Abesyapradhi - Indoneisa
- TeaM Sual Corporation - Philippines
- Kartika Selabumi Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bhoruka Overseas - Indonesia
- Cement Manufacturers Association - India
- Siam City Cement - Thailand
- Ind-Barath Power Infra Limited - India
- Parry Sugars Refinery, India
- Indogreen Group - Indonesia
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- Gujarat Sidhee Cement - India
- Mintek Dendrill Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ASAPP Information Group - India
- AsiaOL BioFuels Corp., Philippines
- Bhushan Steel Limited - India
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- Salva Resources Pvt Ltd - India
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- The State Trading Corporation of India Ltd
- Commonwealth Bank - Australia
- Leighton Contractors Pty Ltd - Australia
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Baramulti Group, Indonesia
- Mercuria Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Siam City Cement PLC, Thailand
- Iligan Light & Power Inc, Philippines
- Interocean Group of Companies - India
- Banpu Public Company Limited - Thailand
- PNOC Exploration Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Carbofer General Trading SA - India
- Indian Energy Exchange, India
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