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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, 05 August 16
CAPESIZE : RATES ARE REMAINING AT DEPRESSING LEVELS DUE TO LACK OF FRESH CARGOES - FEARNLEYS
Supramax
Last week has been one of the slowest for some time with rates under pressure in most areas.
In its latest weekly report, shipbroke ...
Thursday, 04 August 16
INDONESIAN COAL PRICES ARE STARTING TO ZOOM HIGHER; HBA ROSE 10.13% TO US$ 58.37 PER TON
COALspot.com: The Indonesia coal benchmark price hits to its highest level since August 2015.
The Director General of Mineral and Coa ...
Wednesday, 03 August 16
RECAAP INFORMATION SHARING CENTRE ISSUES SPECIAL REPORT ON THE ABDUCTING OF CREW FROM SHIPS IN WATERS OFF EASTERN SABAH AND SOUTHERN PHILIPPINES - THE STANDARD CLUB
KNOWLEDGE TO ELEVATE
In the light of three incidents where the crew of tug boats were abducted in the waters off Eastern Sabah and Southern Ph ...
Wednesday, 03 August 16
SHIPPING MARKET INSIGHT - EVA TZIMA
The Good…
Demand. Amidst all the unprecedented geopolitical turmoil and shifts in the likes of Brexit, the IMF lowered last month its glob ...
Wednesday, 03 August 16
SHIP TRADING AND ORDERING CLOSE TO A STALEMATE AS SUMMER LULL KICKS IN
With newbuilding activity already at a near standstill since the start of the year, most of 2016’s trading activity in shipping was evident i ...
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- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Bukit Makmur.PT - Indonesia
- Parliament of New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Eastern Coal Council - USA
- The Treasury - Australian Government
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- Aditya Birla Group - India
- Bahari Cakrawala Sebuku - Indonesia
- Tamil Nadu electricity Board
- Latin American Coal - Colombia
- South Luzon Thermal Energy Corporation
- Sindya Power Generating Company Private Ltd
- Timah Investasi Mineral - Indoneisa
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- Gujarat Electricity Regulatory Commission - India
- Bulk Trading Sa - Switzerland
- Sinarmas Energy and Mining - Indonesia
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Global Business Power Corporation, Philippines
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- Georgia Ports Authority, United States
- Kapuas Tunggal Persada - Indonesia
- Aboitiz Power Corporation - Philippines
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- Tata Chemicals Ltd - India
- India Bulls Power Limited - India
- Oldendorff Carriers - Singapore
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Vijayanagar Sugar Pvt Ltd - India
- MS Steel International - UAE
- LBH Netherlands Bv - Netherlands
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Australian Commodity Traders Exchange
- Global Green Power PLC Corporation, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Carbofer General Trading SA - India
- Ceylon Electricity Board - Sri Lanka
- Medco Energi Mining Internasional
- Energy Link Ltd, New Zealand
- Karaikal Port Pvt Ltd - India
- Sakthi Sugars Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jaiprakash Power Ventures ltd
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Kepco SPC Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Leighton Contractors Pty Ltd - Australia
- TeaM Sual Corporation - Philippines
- Gujarat Sidhee Cement - India
- Indonesian Coal Mining Association
- Siam City Cement - Thailand
- Price Waterhouse Coopers - Russia
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- GVK Power & Infra Limited - India
- SMG Consultants - Indonesia
- GAC Shipping (India) Pvt Ltd
- Sree Jayajothi Cements Limited - India
- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- CNBM International Corporation - China
- Therma Luzon, Inc, Philippines
- Ambuja Cements Ltd - India
- Orica Australia Pty. Ltd.
- Cement Manufacturers Association - India
- Maharashtra Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Central Java Power - Indonesia
- Singapore Mercantile Exchange
- Minerals Council of Australia
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Posco Energy - South Korea
- White Energy Company Limited
- McConnell Dowell - Australia
- Indian Oil Corporation Limited
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- Chamber of Mines of South Africa
- Vizag Seaport Private Limited - India
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Deloitte Consulting - India
- Dalmia Cement Bharat India
- Mjunction Services Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kaltim Prima Coal - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Star Paper Mills Limited - India
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Heidelberg Cement - Germany
- Savvy Resources Ltd - HongKong
- Goldman Sachs - Singapore
- Agrawal Coal Company - India
- VISA Power Limited - India
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Mercator Lines Limited - India
- Indika Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Larsen & Toubro Limited - India
- Simpson Spence & Young - Indonesia
- Economic Council, Georgia
- Holcim Trading Pte Ltd - Singapore
- New Zealand Coal & Carbon
- The State Trading Corporation of India Ltd
- Jorong Barutama Greston.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sarangani Energy Corporation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- PTC India Limited - India
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Globalindo Alam Lestari - Indonesia
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
- Trasteel International SA, Italy
- Chettinad Cement Corporation Ltd - India
- Malabar Cements Ltd - India
- Siam City Cement PLC, Thailand
- Thai Mozambique Logistica
- Kartika Selabumi Mining - Indonesia
- IEA Clean Coal Centre - UK
- Iligan Light & Power Inc, Philippines
- Wood Mackenzie - Singapore
- Kobexindo Tractors - Indoneisa
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Petrochimia International Co. Ltd.- Taiwan
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Mines - Canada
- Offshore Bulk Terminal Pte Ltd, Singapore
- Uttam Galva Steels Limited - India
- Essar Steel Hazira Ltd - India
- European Bulk Services B.V. - Netherlands
- Petron Corporation, Philippines
- Meralco Power Generation, Philippines
- International Coal Ventures Pvt Ltd - India
- Planning Commission, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PowerSource Philippines DevCo
- Commonwealth Bank - Australia
- Wilmar Investment Holdings
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- OPG Power Generation Pvt Ltd - India
- Vedanta Resources Plc - India
- Baramulti Group, Indonesia
- Borneo Indobara - Indonesia
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Coalindo Energy - Indonesia
- Coal and Oil Company - UAE
- Rashtriya Ispat Nigam Limited - India
- Bangladesh Power Developement Board
- SN Aboitiz Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Rio Tinto Coal - Australia
- Power Finance Corporation Ltd., India
- Orica Mining Services - Indonesia
- Romanian Commodities Exchange
- Madhucon Powers Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- SMC Global Power, Philippines
- Parry Sugars Refinery, India
- Bayan Resources Tbk. - Indonesia
- The University of Queensland
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Lanco Infratech Ltd - India
- Australian Coal Association
- Interocean Group of Companies - India
- Edison Trading Spa - Italy
- Jindal Steel & Power Ltd - India
- Intertek Mineral Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Antam Resourcindo - Indonesia
- Riau Bara Harum - Indonesia
- CIMB Investment Bank - Malaysia
- Alfred C Toepfer International GmbH - Germany
- Electricity Generating Authority of Thailand
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
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