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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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Wednesday, 24 August 16
DRY BULK VESSELS FACE CONTINUED DISTRESS - CLEAR ASSET
Dry bulk vessels have faced extreme distress in recent years. With a combination of factors including newer vessels being ordered with up to 5-year ...
Tuesday, 23 August 16
4200 GAR COAL INDEX CLIMB 15.96% YEAR TO DATE - CS COAL INDEX
COALspot.com: Average 4200 GAR coal index of Indonesian origin rose 1.65 % week over week to averaging $31.46 per ton this past week, shows CS (i) ...
Tuesday, 23 August 16
KOMIPO TO IMPORT 250K OF 5,700 KCAL/KG NAR COAL FOR Q4' 16
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for total 250,000 Metric Tons of Bituminous Coal for ...
Monday, 22 August 16
INDONESIA'S CS 5000 GAR THERMAL COAL INDEX, ROSE TO A 57-WEEKS HIGH TO TOP $43.47 A TON
COALspot.com: Indonesia’s CS 5000 GAR thermal coal index, rose to a 57-weeks high to top $US43. 47 a ton in the latest week, extending a 18-w ...
Monday, 22 August 16
THE FREIGHT MARKET WAS STEADY THIS PAST WEEK; CAPE INDEX DECLINE 5.38%
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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- Salva Resources Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Central Electricity Authority - India
- Parliament of New Zealand
- Kapuas Tunggal Persada - Indonesia
- Kaltim Prima Coal - Indonesia
- Therma Luzon, Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Ministry of Transport, Egypt
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- MS Steel International - UAE
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- Indonesian Coal Mining Association
- Malabar Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Medco Energi Mining Internasional
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining Corp, Philippines
- Port Waratah Coal Services - Australia
- The University of Queensland
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Global Coal Blending Company Limited - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Energy Development Corp, Philippines
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Electricity Authority, New Zealand
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Australian Coal Association
- Coal and Oil Company - UAE
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Commonwealth Bank - Australia
- Goldman Sachs - Singapore
- International Coal Ventures Pvt Ltd - India
- Ministry of Mines - Canada
- Wood Mackenzie - Singapore
- Directorate Of Revenue Intelligence - India
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- Rashtriya Ispat Nigam Limited - India
- GMR Energy Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Thai Mozambique Logistica
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Central Java Power - Indonesia
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- Riau Bara Harum - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bhushan Steel Limited - India
- Minerals Council of Australia
- Eastern Coal Council - USA
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Mercator Lines Limited - India
- Semirara Mining and Power Corporation, Philippines
- Mjunction Services Limited - India
- Pendopo Energi Batubara - Indonesia
- New Zealand Coal & Carbon
- Vedanta Resources Plc - India
- Grasim Industreis Ltd - India
- Siam City Cement - Thailand
- Samtan Co., Ltd - South Korea
- Mercuria Energy - Indonesia
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Thiess Contractors Indonesia
- Uttam Galva Steels Limited - India
- Sree Jayajothi Cements Limited - India
- Sojitz Corporation - Japan
- Essar Steel Hazira Ltd - India
- Meralco Power Generation, Philippines
- Bulk Trading Sa - Switzerland
- Orica Mining Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- Maheswari Brothers Coal Limited - India
- Anglo American - United Kingdom
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Bahari Cakrawala Sebuku - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Global Business Power Corporation, Philippines
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- PNOC Exploration Corporation - Philippines
- GAC Shipping (India) Pvt Ltd
- Romanian Commodities Exchange
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Kepco SPC Power Corporation, Philippines
- India Bulls Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Videocon Industries ltd - India
- Bharathi Cement Corporation - India
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Rio Tinto Coal - Australia
- London Commodity Brokers - England
- SMC Global Power, Philippines
- PTC India Limited - India
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- Sical Logistics Limited - India
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Lanco Infratech Ltd - India
- Siam City Cement PLC, Thailand
- Cement Manufacturers Association - India
- Banpu Public Company Limited - Thailand
- VISA Power Limited - India
- Manunggal Multi Energi - Indonesia
- The State Trading Corporation of India Ltd
- Africa Commodities Group - South Africa
- White Energy Company Limited
- Baramulti Group, Indonesia
- Star Paper Mills Limited - India
- Tamil Nadu electricity Board
- Independent Power Producers Association of India
- CIMB Investment Bank - Malaysia
- Coalindo Energy - Indonesia
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Economic Council, Georgia
- Bukit Asam (Persero) Tbk - Indonesia
- ICICI Bank Limited - India
- Agrawal Coal Company - India
- Madhucon Powers Ltd - India
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Alfred C Toepfer International GmbH - Germany
- Orica Australia Pty. Ltd.
- ASAPP Information Group - India
- Global Green Power PLC Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Holcim Trading Pte Ltd - Singapore
- Borneo Indobara - Indonesia
- Power Finance Corporation Ltd., India
- Barasentosa Lestari - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Standard Chartered Bank - UAE
- CNBM International Corporation - China
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- PetroVietnam Power Coal Import and Supply Company
- Petrochimia International Co. Ltd.- Taiwan
- Latin American Coal - Colombia
- Merrill Lynch Commodities Europe
- Ceylon Electricity Board - Sri Lanka
- Wilmar Investment Holdings
- Vijayanagar Sugar Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Formosa Plastics Group - Taiwan
- Trasteel International SA, Italy
- Bayan Resources Tbk. - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kohat Cement Company Ltd. - Pakistan
- Sarangani Energy Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Sindya Power Generating Company Private Ltd
- Aboitiz Power Corporation - Philippines
- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Maharashtra Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Jindal Steel & Power Ltd - India
- Edison Trading Spa - Italy
- South Luzon Thermal Energy Corporation
- Savvy Resources Ltd - HongKong
- The Treasury - Australian Government
- Metalloyd Limited - United Kingdom
- Indian Oil Corporation Limited
- Simpson Spence & Young - Indonesia
- Price Waterhouse Coopers - Russia
- Timah Investasi Mineral - Indoneisa
- Indika Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Energy Link Ltd, New Zealand
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
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