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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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Friday, 02 September 16
EIA FORECASTS U.S. COAL EXPORTS TO DECLINE BY 19 MMST IN 2016 TO 55 MMST
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16.3 million sho ...
Thursday, 01 September 16
SUPRAMAX GETTING LEVELS OF MID/HIGHER 7K DELIVERY SINGAPORE FOR TRIPS TO CHINA AND AROUND 9K FOR DIRECTION INDIA - FEARNLEYS
Supramax
This week started slower with London on bank holiday Monday. The south east Asian market seems to have been taking a breather with chart ...
Thursday, 01 September 16
AUSTRALIA'S NEWCASTLE PORT SHIPPED 2.33 PERCENT MORE COAL IN JULY
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port has shipped $AU 1.10 bill ...
Wednesday, 31 August 16
THE DRY BULK MARKET MANAGED TO FIND FURTHER SUPPORT DURING THE LAST DAYS OF THE SUMMER SEASON - INTERMODAL
The Dry Bulk market managed to find further support during the last days of the summer season, with the BDI climbing above 700 last Friday, reachin ...
Tuesday, 30 August 16
THE SUDDEN SURGE IN IRON ORE TRADE HAS CREPT UP ON THE MARKET THIS PAST WEEK - GEORGE LAZARIDIS
The sudden surge in Iron ore trade has crept up on the market this past week bringing about a change in the prospects for Capes. Continued increase ...
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- London Commodity Brokers - England
- Bangladesh Power Developement Board
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
- White Energy Company Limited
- GN Power Mariveles Coal Plant, Philippines
- Oldendorff Carriers - Singapore
- Energy Development Corp, Philippines
- Economic Council, Georgia
- Gujarat Electricity Regulatory Commission - India
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Ministry of Transport, Egypt
- Karbindo Abesyapradhi - Indoneisa
- Mjunction Services Limited - India
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- Offshore Bulk Terminal Pte Ltd, Singapore
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- Edison Trading Spa - Italy
- Electricity Authority, New Zealand
- Jaiprakash Power Ventures ltd
- Renaissance Capital - South Africa
- Ministry of Mines - Canada
- MS Steel International - UAE
- PetroVietnam Power Coal Import and Supply Company
- Independent Power Producers Association of India
- Neyveli Lignite Corporation Ltd, - India
- Trasteel International SA, Italy
- Ministry of Finance - Indonesia
- Barasentosa Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Star Paper Mills Limited - India
- Kapuas Tunggal Persada - Indonesia
- Metalloyd Limited - United Kingdom
- Iligan Light & Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Wood Mackenzie - Singapore
- Holcim Trading Pte Ltd - Singapore
- Commonwealth Bank - Australia
- Meenaskhi Energy Private Limited - India
- Siam City Cement - Thailand
- Bayan Resources Tbk. - Indonesia
- Energy Link Ltd, New Zealand
- Riau Bara Harum - Indonesia
- Port Waratah Coal Services - Australia
- Heidelberg Cement - Germany
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Vijayanagar Sugar Pvt Ltd - India
- Chamber of Mines of South Africa
- Global Green Power PLC Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- PTC India Limited - India
- GVK Power & Infra Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- CNBM International Corporation - China
- Jorong Barutama Greston.PT - Indonesia
- Kaltim Prima Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- ASAPP Information Group - India
- Standard Chartered Bank - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
- The Treasury - Australian Government
- Siam City Cement PLC, Thailand
- Toyota Tsusho Corporation, Japan
- Asmin Koalindo Tuhup - Indonesia
- Georgia Ports Authority, United States
- OPG Power Generation Pvt Ltd - India
- Petron Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Bahari Cakrawala Sebuku - Indonesia
- Goldman Sachs - Singapore
- Binh Thuan Hamico - Vietnam
- Marubeni Corporation - India
- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- SN Aboitiz Power Inc, Philippines
- Eastern Energy - Thailand
- Krishnapatnam Port Company Ltd. - India
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Sree Jayajothi Cements Limited - India
- Sarangani Energy Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bharathi Cement Corporation - India
- Posco Energy - South Korea
- Cigading International Bulk Terminal - Indonesia
- Merrill Lynch Commodities Europe
- Kohat Cement Company Ltd. - Pakistan
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- Xindia Steels Limited - India
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- PNOC Exploration Corporation - Philippines
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- CIMB Investment Bank - Malaysia
- Thiess Contractors Indonesia
- Kideco Jaya Agung - Indonesia
- Maheswari Brothers Coal Limited - India
- Kartika Selabumi Mining - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Altura Mining Limited, Indonesia
- Vizag Seaport Private Limited - India
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Australian Coal Association
- Bhatia International Limited - India
- Price Waterhouse Coopers - Russia
- Anglo American - United Kingdom
- Indian Energy Exchange, India
- Grasim Industreis Ltd - India
- Mercator Lines Limited - India
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Attock Cement Pakistan Limited
- Kobexindo Tractors - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Borneo Indobara - Indonesia
- McConnell Dowell - Australia
- Carbofer General Trading SA - India
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Sical Logistics Limited - India
- Makarim & Taira - Indonesia
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- Coastal Gujarat Power Limited - India
- Wilmar Investment Holdings
- Africa Commodities Group - South Africa
- Rashtriya Ispat Nigam Limited - India
- Indo Tambangraya Megah - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Eastern Coal Council - USA
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- Antam Resourcindo - Indonesia
- Leighton Contractors Pty Ltd - Australia
- SMG Consultants - Indonesia
- Simpson Spence & Young - Indonesia
- Manunggal Multi Energi - Indonesia
- Malabar Cements Ltd - India
- Rio Tinto Coal - Australia
- Ind-Barath Power Infra Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Deloitte Consulting - India
- Mintek Dendrill Indonesia
- European Bulk Services B.V. - Netherlands
- Agrawal Coal Company - India
- Minerals Council of Australia
- Gujarat Mineral Development Corp Ltd - India
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Kepco SPC Power Corporation, Philippines
- Tamil Nadu electricity Board
- Bhushan Steel Limited - India
- Orica Australia Pty. Ltd.
- Kalimantan Lumbung Energi - Indonesia
- PowerSource Philippines DevCo
- Power Finance Corporation Ltd., India
- Parry Sugars Refinery, India
- Singapore Mercantile Exchange
- Alfred C Toepfer International GmbH - Germany
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Banpu Public Company Limited - Thailand
- Timah Investasi Mineral - Indoneisa
- Semirara Mining Corp, Philippines
- Global Business Power Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- AsiaOL BioFuels Corp., Philippines
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Aditya Birla Group - India
- Pendopo Energi Batubara - Indonesia
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Mining Services - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thai Mozambique Logistica
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Sakthi Sugars Limited - India
- India Bulls Power Limited - India
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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