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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, 15 August 16
THE SPOT FREIGHT MARKET STRENGTHEN OVER THIS WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose as Cape and Panamax segments ending in a positive no ...
Friday, 12 August 16
U.S. WEEKLY COAL OUTPUT ENDING AUGUST 6 FELL SLIGHTLY
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 15.9 million short ton ...
Thursday, 11 August 16
CAPESIZE THE PACIFIC SIDE IS LOOKING MORE POSITIVE, DRIVEN BY AUSTRALIAN IRON ORE - FEARNLEYS
Supramax
Rates continue to be under pressure with index ending up with 639 points and average TC value at USD6,680, said Fearnleys. Fearnleys A/S ...
Thursday, 11 August 16
EIA ESTIMATES THE DELIVERED COAL PRICE TO U.S. ELECTRIC UTILITIES IN 2017 AVERAGED $2.24/MMBTU; $0.05/MMBTU HIGHER THAN 2016 ESTIMATES
Coal Supply
U.S. coal production in July was 65 million short tons (MMst), an 8 MMst (14%) increase from the previous month but 11 MMst (15%) low ...
Wednesday, 10 August 16
THE DRY BULK MARKET KEPT SOFTENING LAST WEEK; WE CAN SEE MUCH HEALTHIER NUMBERS STARTING SEPTEMBER
The Dry Bulk market kept softening last week as we have now started going through the traditionally quieter days of the summer season peak period, ...
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- Heidelberg Cement - Germany
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- Straits Asia Resources Limited - Singapore
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- Energy Development Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Directorate General of MIneral and Coal - Indonesia
- Riau Bara Harum - Indonesia
- Barasentosa Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Mercator Lines Limited - India
- South Luzon Thermal Energy Corporation
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Australian Coal Association
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- Global Green Power PLC Corporation, Philippines
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- Indika Energy - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Indian Oil Corporation Limited
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- GVK Power & Infra Limited - India
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- McConnell Dowell - Australia
- Chamber of Mines of South Africa
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- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Grasim Industreis Ltd - India
- Bukit Makmur.PT - Indonesia
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Interocean Group of Companies - India
- Asmin Koalindo Tuhup - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Bharathi Cement Corporation - India
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- Energy Link Ltd, New Zealand
- Central Electricity Authority - India
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- Globalindo Alam Lestari - Indonesia
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- Binh Thuan Hamico - Vietnam
- Singapore Mercantile Exchange
- Ministry of Mines - Canada
- Indian Energy Exchange, India
- Agrawal Coal Company - India
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- Samtan Co., Ltd - South Korea
- Anglo American - United Kingdom
- Commonwealth Bank - Australia
- Global Business Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- Videocon Industries ltd - India
- Mercuria Energy - Indonesia
- OPG Power Generation Pvt Ltd - India
- Ind-Barath Power Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Trasteel International SA, Italy
- GMR Energy Limited - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Ministry of Transport, Egypt
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- Timah Investasi Mineral - Indoneisa
- Price Waterhouse Coopers - Russia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parry Sugars Refinery, India
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Planning Commission, India
- Indonesian Coal Mining Association
- VISA Power Limited - India
- Orica Australia Pty. Ltd.
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Edison Trading Spa - Italy
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Directorate Of Revenue Intelligence - India
- Jorong Barutama Greston.PT - Indonesia
- Carbofer General Trading SA - India
- Formosa Plastics Group - Taiwan
- Offshore Bulk Terminal Pte Ltd, Singapore
- ICICI Bank Limited - India
- Rio Tinto Coal - Australia
- Central Java Power - Indonesia
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- Wilmar Investment Holdings
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- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- PTC India Limited - India
- Bhushan Steel Limited - India
- Mjunction Services Limited - India
- Cigading International Bulk Terminal - Indonesia
- Sical Logistics Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Meralco Power Generation, Philippines
- Kaltim Prima Coal - Indonesia
- Aboitiz Power Corporation - Philippines
- Kumho Petrochemical, South Korea
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Jindal Steel & Power Ltd - India
- ASAPP Information Group - India
- Marubeni Corporation - India
- Eastern Coal Council - USA
- IEA Clean Coal Centre - UK
- Manunggal Multi Energi - Indonesia
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Wood Mackenzie - Singapore
- New Zealand Coal & Carbon
- India Bulls Power Limited - India
- MS Steel International - UAE
- Sinarmas Energy and Mining - Indonesia
- Economic Council, Georgia
- Bukit Baiduri Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Simpson Spence & Young - Indonesia
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Maheswari Brothers Coal Limited - India
- Bulk Trading Sa - Switzerland
- Sakthi Sugars Limited - India
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Kobexindo Tractors - Indoneisa
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- White Energy Company Limited
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Merrill Lynch Commodities Europe
- Lanco Infratech Ltd - India
- Indo Tambangraya Megah - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- GAC Shipping (India) Pvt Ltd
- European Bulk Services B.V. - Netherlands
- CNBM International Corporation - China
- The University of Queensland
- Iligan Light & Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bangladesh Power Developement Board
- Sarangani Energy Corporation, Philippines
- Posco Energy - South Korea
- Renaissance Capital - South Africa
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Therma Luzon, Inc, Philippines
- Minerals Council of Australia
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Essar Steel Hazira Ltd - India
- Cement Manufacturers Association - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Baramulti Group, Indonesia
- Xindia Steels Limited - India
- Australian Commodity Traders Exchange
- Africa Commodities Group - South Africa
- Medco Energi Mining Internasional
- Thai Mozambique Logistica
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Ambuja Cements Ltd - India
- Indogreen Group - Indonesia
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- Parliament of New Zealand
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- Alfred C Toepfer International GmbH - Germany
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