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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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Tuesday, 06 September 16
INDO GOVT. SETS SEPTEMBER COAL REFERENCE PRICE AT US$ 63.93 PER TON; JUMP 20.17% YTD
COALspot.com: The Indonesia coal benchmark price hits to its highest level since April 2015. The government declared benchmark prices f ...
Tuesday, 06 September 16
CAPESIZE: THE PACIFIC BASIN WAS THE MAIN REGION KEEPING UP WITH THE POSITIVE SUPPORT - ALLIED
Capesize
Despite some mixed feelings being seen early on in the week, we managed to see a positive week-on-week close on Friday with some positiv ...
Monday, 05 September 16
INDIA BECAME ADARO'S SECOND LARGEST MARKET IN 1H' 16
COALspot.com: The Wara Balangan blend product has been well received by customers in China and India - AI
In the second quarter of 2 ...
Monday, 05 September 16
POOR FREIGHT RATES DESPITE STRONG DEMAND GROWTH FROM CHINA - BIMCO
Demand
The dry bulk commodity imports into and exports out of China we have seen in the first half of 2016 are very positive – and nothing ...
Monday, 05 September 16
FREIGHT RATE FROM INDONESIA TO INDIA IS EXPECTED TO BE FLAT TO SOFT THIS WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
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- Kalimantan Lumbung Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- Wood Mackenzie - Singapore
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement - Thailand
- Ceylon Electricity Board - Sri Lanka
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Kepco SPC Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Pendopo Energi Batubara - Indonesia
- Ministry of Transport, Egypt
- Globalindo Alam Lestari - Indonesia
- The State Trading Corporation of India Ltd
- Indogreen Group - Indonesia
- VISA Power Limited - India
- Tata Chemicals Ltd - India
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Siam City Cement PLC, Thailand
- Jindal Steel & Power Ltd - India
- Australian Coal Association
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Metalloyd Limited - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Planning Commission, India
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
- Makarim & Taira - Indonesia
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- Maheswari Brothers Coal Limited - India
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- New Zealand Coal & Carbon
- Neyveli Lignite Corporation Ltd, - India
- Sree Jayajothi Cements Limited - India
- Indonesian Coal Mining Association
- South Luzon Thermal Energy Corporation
- London Commodity Brokers - England
- SMG Consultants - Indonesia
- Ind-Barath Power Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- Australian Commodity Traders Exchange
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- Aditya Birla Group - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Economic Council, Georgia
- Semirara Mining Corp, Philippines
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- Romanian Commodities Exchange
- Power Finance Corporation Ltd., India
- Ambuja Cements Ltd - India
- Edison Trading Spa - Italy
- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Mjunction Services Limited - India
- Anglo American - United Kingdom
- Jaiprakash Power Ventures ltd
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- The Treasury - Australian Government
- Ministry of Mines - Canada
- Holcim Trading Pte Ltd - Singapore
- Sinarmas Energy and Mining - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Renaissance Capital - South Africa
- Central Electricity Authority - India
- PowerSource Philippines DevCo
- Orica Australia Pty. Ltd.
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Electricity Authority, New Zealand
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Directorate Of Revenue Intelligence - India
- Independent Power Producers Association of India
- Mercuria Energy - Indonesia
- IEA Clean Coal Centre - UK
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Salva Resources Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Marubeni Corporation - India
- Madhucon Powers Ltd - India
- Interocean Group of Companies - India
- SMC Global Power, Philippines
- GMR Energy Limited - India
- Energy Link Ltd, New Zealand
- AsiaOL BioFuels Corp., Philippines
- Kumho Petrochemical, South Korea
- Xindia Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Parry Sugars Refinery, India
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Eastern Coal Council - USA
- Alfred C Toepfer International GmbH - Germany
- Kartika Selabumi Mining - Indonesia
- Chamber of Mines of South Africa
- Carbofer General Trading SA - India
- European Bulk Services B.V. - Netherlands
- Vijayanagar Sugar Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Lanco Infratech Ltd - India
- Sakthi Sugars Limited - India
- Bhatia International Limited - India
- Bhoruka Overseas - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Latin American Coal - Colombia
- Posco Energy - South Korea
- Essar Steel Hazira Ltd - India
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Manunggal Multi Energi - Indonesia
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- White Energy Company Limited
- Energy Development Corp, Philippines
- Singapore Mercantile Exchange
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- San Jose City I Power Corp, Philippines
- Mintek Dendrill Indonesia
- ICICI Bank Limited - India
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- GAC Shipping (India) Pvt Ltd
- The University of Queensland
- Intertek Mineral Services - Indonesia
- Bukit Baiduri Energy - Indonesia
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- Wilmar Investment Holdings
- CIMB Investment Bank - Malaysia
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Karaikal Port Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kideco Jaya Agung - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Indika Energy - Indonesia
- GVK Power & Infra Limited - India
- Ministry of Finance - Indonesia
- Coal and Oil Company - UAE
- Timah Investasi Mineral - Indoneisa
- Kobexindo Tractors - Indoneisa
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Baramulti Group, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Deloitte Consulting - India
- PTC India Limited - India
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Aboitiz Power Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
- Videocon Industries ltd - India
- Medco Energi Mining Internasional
- Bukit Asam (Persero) Tbk - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Larsen & Toubro Limited - India
- Star Paper Mills Limited - India
- Eastern Energy - Thailand
- Minerals Council of Australia
- Grasim Industreis Ltd - India
- Formosa Plastics Group - Taiwan
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