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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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Monday, 12 September 16
THE CAPE MARKET HAS GAINS ON WEEK; THE CAPE INDEX SETTLING AT 1566 POINTS ON FRIDAY
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week. The BD ...
Friday, 09 September 16
U.S. WEEKLY COAL OUTPUT DECLINED SLIGHTLY TO 16.1 MMST, EIA SAYS
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16.1 million short ton ...
Friday, 09 September 16
CAPESIZE: THE SENTIMENT IS SOLID, SAYS FEARNLEYS
Supramax
A quiet start with Labour Day celebrations in the United States leading to very little being reported from the Atlantic basin. Supramaxe ...
Thursday, 08 September 16
U.S. COAL EXPORTS IN JUNE 2016 UP 29% COMPARED TO MAY 2016, SAYS EIA
U.S. coal production in August was 71 million short tons (MMst), which is 6 MMst (9%) higher than in the previous month and 12 MMst (14%) lower tha ...
Wednesday, 07 September 16
WEEKLY MARKET (TANKER) REPORT - INTERMODAL
What goes around comes around! The Shipping industry is infamous for its seasonality and cyclicality and the tanker sector is no exception to these ...
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- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Therma Luzon, Inc, Philippines
- Petron Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Billiton Holdings Pty Ltd - Australia
- Thai Mozambique Logistica
- Central Electricity Authority - India
- McConnell Dowell - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Georgia Ports Authority, United States
- Rio Tinto Coal - Australia
- Coastal Gujarat Power Limited - India
- Bukit Baiduri Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Marubeni Corporation - India
- Gujarat Mineral Development Corp Ltd - India
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- Vedanta Resources Plc - India
- Electricity Generating Authority of Thailand
- Merrill Lynch Commodities Europe
- Sree Jayajothi Cements Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Sojitz Corporation - Japan
- Bulk Trading Sa - Switzerland
- Coal and Oil Company - UAE
- Indian Energy Exchange, India
- Thiess Contractors Indonesia
- Intertek Mineral Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Globalindo Alam Lestari - Indonesia
- Medco Energi Mining Internasional
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Mjunction Services Limited - India
- Kartika Selabumi Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Australian Commodity Traders Exchange
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kaltim Prima Coal - Indonesia
- Goldman Sachs - Singapore
- Miang Besar Coal Terminal - Indonesia
- Energy Development Corp, Philippines
- Malabar Cements Ltd - India
- Chettinad Cement Corporation Ltd - India
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- New Zealand Coal & Carbon
- PetroVietnam Power Coal Import and Supply Company
- International Coal Ventures Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- OPG Power Generation Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Energy Link Ltd, New Zealand
- London Commodity Brokers - England
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Samtan Co., Ltd - South Korea
- Global Business Power Corporation, Philippines
- Tata Chemicals Ltd - India
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- Essar Steel Hazira Ltd - India
- Aditya Birla Group - India
- VISA Power Limited - India
- SMG Consultants - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Bhushan Steel Limited - India
- MS Steel International - UAE
- Sakthi Sugars Limited - India
- CNBM International Corporation - China
- Posco Energy - South Korea
- GAC Shipping (India) Pvt Ltd
- Wood Mackenzie - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- The University of Queensland
- Renaissance Capital - South Africa
- Tamil Nadu electricity Board
- GN Power Mariveles Coal Plant, Philippines
- Kobexindo Tractors - Indoneisa
- Parliament of New Zealand
- Economic Council, Georgia
- Kumho Petrochemical, South Korea
- The State Trading Corporation of India Ltd
- Banpu Public Company Limited - Thailand
- White Energy Company Limited
- Straits Asia Resources Limited - Singapore
- Carbofer General Trading SA - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asmin Koalindo Tuhup - Indonesia
- ICICI Bank Limited - India
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Pendopo Energi Batubara - Indonesia
- Aboitiz Power Corporation - Philippines
- The Treasury - Australian Government
- Directorate General of MIneral and Coal - Indonesia
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- Larsen & Toubro Limited - India
- Attock Cement Pakistan Limited
- Parry Sugars Refinery, India
- Ambuja Cements Ltd - India
- Gujarat Sidhee Cement - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Jaiprakash Power Ventures ltd
- Karbindo Abesyapradhi - Indoneisa
- San Jose City I Power Corp, Philippines
- Australian Coal Association
- Commonwealth Bank - Australia
- Kideco Jaya Agung - Indonesia
- Electricity Authority, New Zealand
- CIMB Investment Bank - Malaysia
- Gujarat Electricity Regulatory Commission - India
- PNOC Exploration Corporation - Philippines
- GMR Energy Limited - India
- Meenaskhi Energy Private Limited - India
- Singapore Mercantile Exchange
- Indo Tambangraya Megah - Indonesia
- Bukit Makmur.PT - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Sarangani Energy Corporation, Philippines
- Wilmar Investment Holdings
- Toyota Tsusho Corporation, Japan
- Ind-Barath Power Infra Limited - India
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- Kepco SPC Power Corporation, Philippines
- Anglo American - United Kingdom
- SN Aboitiz Power Inc, Philippines
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Sindya Power Generating Company Private Ltd
- Bangladesh Power Developement Board
- Indonesian Coal Mining Association
- Sical Logistics Limited - India
- Bharathi Cement Corporation - India
- Central Java Power - Indonesia
- Videocon Industries ltd - India
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- Mercuria Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Edison Trading Spa - Italy
- Sinarmas Energy and Mining - Indonesia
- Independent Power Producers Association of India
- Kapuas Tunggal Persada - Indonesia
- Salva Resources Pvt Ltd - India
- Borneo Indobara - Indonesia
- Planning Commission, India
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- Xindia Steels Limited - India
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- Makarim & Taira - Indonesia
- Heidelberg Cement - Germany
- Riau Bara Harum - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Ministry of Mines - Canada
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- Power Finance Corporation Ltd., India
- ASAPP Information Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- Siam City Cement PLC, Thailand
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- Neyveli Lignite Corporation Ltd, - India
- Deloitte Consulting - India
- Indogreen Group - Indonesia
- Grasim Industreis Ltd - India
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- Bhoruka Overseas - Indonesia
- Rashtriya Ispat Nigam Limited - India
- PTC India Limited - India
- Holcim Trading Pte Ltd - Singapore
- Global Green Power PLC Corporation, Philippines
- Minerals Council of Australia
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