Your market reports are highly regarded by the shipping community. How do you start building a report and how do you manage the different sources of information and their veracity?
BIMCO Market Analysis holds trustworthiness as a core value. BIMCO analyse the market for the industry, in order to understand it fundamentally. From that we form our unbiased opinion, as we believe it’s what the industry needs. The only agenda we have is to service our members in the best possible way. On the back of more than six years now, I am proud of what we have achieved in BIMCO, but we are now done here, we continuously strive to improve our insights. An integral part of that is to always stay abreast with who provides quality information. We continuously evaluate our sources.
Building a report or a market comment always starts with something going on in global macroeconomic side of things, or a pure shipping event that we would like to know more about because it affects the market – something is going on. We then back up our initial idea with solid data, as we are fundamentalists - passionate about the market, but we do not build a “case” on rumours.
For our quarterly Shipping Market Overview & Outlook we then start our work on the supply side. Getting the data from either of the two major fleet data suppliers, in a raw format. Then we add our market insight and understanding of the dynamics of the order book and of how the data is compiled by the supplier. This brings us to the BIMCO supply forecast where orders that will never be built are removed and orders that will not be delivered as scheduled are postponed. We don’t consider orders not placed in this report. That is left for the 10 year forecast we do in the BIMCO/ICS Manpower Update 2015, which will be released by the end of November 2015.
The African continent continues in the spotlight with shipping lines opening more trade routes. What advice would you give to shipping companies considering this option as part of their business plan?
The African continent provides a wide array of opportunities. This goes for dry bulk, containers and tankers as well as the more specialized parts of shipping. In the maritime industry relationships matter, so if you want to do business in Africa tomorrow you might as well start to work on your relations today. Currently, Africa as such is not a big market if you look beyond some specialized trade and the all-important sweet crude oil exports out of West Africa. But a futurist once told me not to underestimate Africa. Surely I am not doing that, but merely putting things into perspective when I point to the fact that the entire African continent has a GDP of the same size as Italy. We need to be a bit further down the road before Africa as such becomes a driver in the shipping market. Until then, we will monitor the developments closely.
What are the current challenges for shipping lines securing credit to finance vessel acquisitions? Do ship owners have many finance options to choose from?
We have just passed the 7th “anniversary” of the Lehman Brothers crash. That event changed everything, also as regard to ship financing. Before the crisis, it appeared as if banks and other lenders did not put the right price on risk, meaning that you could obtain the same conditions regardless of whether your newbuilding would go directly into a 10-year time charter with an A-rated financially rock solid counterpart or trade fully in the spot market at its mercy. Today, the price-setting of risk has “normalised”. Many of the lenders now have to hold higher reserves if they want to lend out to shipping interests, due to regulation i.e. Basel III as well as a more cautious approach to shipping lending as the bank attach a higher risk to the shipping industry today than it was the case before. This means financing is more expensive and more difficult to get.
In theory, this development has resulted in ship owners seeking financing elsewhere and there are many options to choose from i.e. bond issues, private equity, Export Credit Agencies etc. Bank lending however, remains the preferred option as fewer strings are attached it. While financing surely is more difficult to obtain today, you cannot say those difficulties have resulted in a significantly lower number of newbuilding orders.
What are the key variables affecting shipping freight rates in the current market?
It is the same “2 times 5” fundamental variables that have always affected the freight rates. On the demand side we have: world economy, seaborne trade, average haul, random shocks and transport cost. On the supply side we have: world fleet, fleet productivity, shipbuilding production, scrapping and freight revenue. All in order of importance. Certainly, we have a “new normal” in shipping, but that only means that we have to get used to slower growth rates and adapt to that in our decision making. In terms of the freight rate mechanism, an oversupplied market finds it equilibrium freight rate on the elastic part of the supply curve. An example of this, is the current dry bulk market. Only when all ships are in service and operate at a more normal speed level the supply side becomes in-elastic and freight rates become very sensitive to changes in demand. An example of this is the current crude oil tanker market.
Supported by my good colleagues in BIMCO Education and their eLearning abilities I am fortunate to teach at Danish Shipping Academy. This is where a lot of the new talents in shipping are bred. A key part of our discussions in class focus on understanding the dynamics of the freight market which is influenced by the before mentioned fundamental variables.
LNG is considered by many as the fuel of the future. What are your views on LNG bunkering and do you foresee sustainable growth in this area?
In 1912, M/S Selandia market the beginning of a new era in shipping as it was the first large diesel-powered ship, until then coal-burning steam ships had been used. Nevertheless it took many years for the merchant fleet to become fully diesel-powered. Some of the reasons for that we also see today for one of the fuels of the future: LNG. First and foremost, availability is key. I know that Gibraltar is committed to add LNG bunkering to their already wide pallet of services to the industry, and a global network of LNG bunkering facilities is needed before shipping can fully embrace and enjoy this new fuel option. Beyond the pioneering environment in Scandinavia, I believe we are going to see this develop along the liner trade lanes firstly. Later, tramp shipping will join in, when LNG bunkering becomes more widely available. It is still premature to say, when we will see LNG being offered to the shipping industry as a fuel next to oil bunkers everywhere. That’s why remembering M/S Selandia puts things into perspective – eventually it will happen.
As a shipping centre, what would you highlight about Gibraltar and what would you consider its main benefits?
It’s unique location where the Med meets the Atlantic, in the middle of continents and trading lanes and a shipping centre with more and more services being added as we go along, Gibraltar has the fundamentals in place to become an even more important player in the market in the future.
What attracted you to the shipping industry in the first place?
I love economics and geography and have a general interest in understanding what goes on everywhere in the world. In our industry these are central pillars. Quickly I also realised that our industry attracts all kinds of people, all kinds of backgrounds and we come from all over the world. In common, we have adventurousness. Have spent a decade in shipping, I take pride in being a part of the global family that our industry truly is.
Apart from your role as Analyst, you also teach maritime trainee`s. How important is training and development in this industry?
I would say it’s all-important. For seafarers as well as landlubbers. Knowledge needs to be passed on the next generation of shipping people. BIMCO has a lot of family-owned businesses in our membership and for them passing on a lifetime of experience and know-how onto the sons, daughters, and other relatives or partners etc. is essential.
You can only pass on so many things, BIMCO assists generations with “all the rest”. Be it: technical guidance, contractual knowledge, education or our vast database of information, the BIMCO staff is ready to service members across the shipping industry.
Personally, I really enjoy sharing what I know and how I see things. This goes for my relations with trainees as it goes for CEO’s. Nevertheless, it’s equally important also to be able to listen, as you may well learn something new or get different aspects on the matters at hand. As an analyst your window into the world of seaborne shipping doesn’t necessarily sit next to that of the seafarer, the bank, the ship manager or the ship owner. Sharing our views and the ability to listen to that of others, is key to a better mutual understanding.
Your favourite book:
As a professional it’s Stopford’s Maritime Economics. You take something new with you every time you read it. As a private person – I am a sports fan, crazy about motorsports, football and cycling. Right now I speed-read the memoires of a life on a bicycle, by the former cycling professional with Team Telekom etc. Brian Holm. The book is called “Enjoy the pain” (Originally: Smerten - glæden). Full of humour and insights from an enclosed world. After reading his more recent book this summer, which was focused on his year with ups and downs, as sporting director with HTC Highroad in the year 2011, ending with Mark Cavendish becoming the World Road Cycling Champion and the dissolvent of HTC-H team, I needed more – and I got it.
Your favourite ship:
As a professional it would be the Panamax dry bulk carrier Nord Navigator. She took me on a journey from Hamburg to Sveagruva on Svalbard in November 2014. This was a huge experience and it brought me a richer picture of the entire industry. From discharge to loading, enjoying extraordinary hospitality on board as I got to know the entire crew during their daily work. Admittedly, we did also share a few songs on the karaoke machine. Wonderful people. In many ways this journey also embeds what shipping is all about – relations. Thanks to my former colleagues at D/S Norden for given me this opportunity and making it happen.
As a private person, it would be my kayak, or rather my kayak clubs’. This summer I took my license proving that I had obtained the basics of how to handle such a “ship”. Being on the water as a rookie, you need to be fully focused – psychically as well as mentally. If you’re not, you’ll end up in the lake. During my training I earned the nickname: “pool attendant”, I’ll guess it was due my multiple capsizing. Today I normally stay in the kayak.
Thanks for giving me this interview opportunity.