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Greece Branch Masterclass on Shipping Markets

Posted on Monday, June 19, 2017 and tagged as Greece Branch Masterclass on Shipping Markets, Jagmeet Makkar FICS

 

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The Institute of Chartered Shipbrokers, Greece branch organised a Masterclass on Tuesday 13th June 2017 at the Piraeus Marine Club, in conjunction with the Institute of Chartered Shipbrokers Education & Training Committee (ETC) meeting in Greece.

The topic of the Masterclass was ''Shipping markets: changing dynamics'' and was delivered by Jagmeet Makkar FICS, MSc (Cass), PCBA, FICS, FRINA, FIMarE(I), MCIArb, past chairman of the Institute's Hong Kong Branch, member of the ETC  and director & co-founder, SKILLSPlus Pte. Ltd

A welcome address was made by Natalia Margioli - Komninou FICS, secretary of the Institute of Chartered Shipbrokers Greece  Branch and managing director of the Hellenic Management Centre. She thanked the speaker, the ETC members and the audience for their participation.

The speaker expressed his gratitude for ''the opportunity to address the highly distinguished audience of this Great Nation, Greece, where Shipping is not just business but a Tradition'' and looked forward to learn more through his interaction with the respectable audience.

Jagmeet laid emphasis that we often ignore the subtle yet "future-significant* changes that have the potential to affect the way we do business. These could be, the impact of forthcoming or even "future-possible"* financial and environmental regulations. Some examples could be the commercial impact of recognising the operating leases on the balance sheet and thus increasing the cost of borrowing, compliance with the ballast water treatment system (BWTS), the sulphur cap or even the new regulations concerning hull-biofouling, underwater noise reduction, black carbon emissions etc. He presented a calculation that showed that an additional daily payback required for a 15 year old cape to cater for the BWTS, Special Survey, Intermediate Dry Docking, various routine expenses, loss of hire for repairs etc. to be able to operate for next 5 years, could be as high as $4,000 per day. Assuming the vessel's debt is discharged or written down, this would mean that a daily breakeven for such a vessel could be as high as $10,000 per day. Hence, for a vessel that is more than 15 years old, even if fully compliant, it will be hard to compete with modern vessels when the market is low and the Charterers aim for younger ships. Some of the vessels which do not go in for BWTS, may operate on shorter regional or coastal voyages. However, he expected that some owners will have to make this painful decision of scrapping the ship instead of carrying out BWTS retrofit, incur special survey and dry docking costs, subject of course to market conditions (which we know from history, has a knack of taking everyone by surprise).

Jagmeet then went on to discuss US's increasing inward looking policies, possibility of a soft Brexit (if at all) and the opportunities for China to make its Belt & Road Initiative (BRI) not only a reality but a grant success. The impact for wet and gas sector is expected to be negative due to long distance oil and gas pipes lines running for thousands of miles, positive for short distance dry bulk trade and possibly very encouraging for container industry when the countries which are part of BRI have effective infrastructure and the masses expect a better quality of life. However, this is a bit far in future and it will have to be seen how the impact of competing rail and road transportation of containers plays out.

The multiplier by which global trade increases for every 1% increase in the global GDP has gone below unity due to increasing share of service oriented economy, protectionism etc. This does not bode well for the world trade, majority of which is by sea. Indian economy is expected to provide some support. However the reducing thermal coal import is a matter of concern. Having said that it could be compensated by an increase in Chinese thermal coal imports, since China imports just a small fraction of what it consumes. If the policy changes to shut down some of the domestic mines, it could make a big difference in the shipping demand for coal trade. Finally he touched upon briefly on the technological changes and impressed upon "Think-Economic"* concept.

He concluded that the negatives were slowing demand, protectionism / President Trump's policies as we see them now, GDP versus Global Trade Growth with less than unity multiple, reduction in the growth percentage of Chinese Economy and Geo-political situation with regions of uncertainty and instability, especially Middle East. He strongly asserted that all was not negative and with the order book gradually shedding weight, possibility of increased and rapid scrapping in future (depending upon how many ships cannot complete their intermediate survey before 8th September 2017 and of course the market conditions), demand generated by BRI and the growth in the Indian Economy, there could be light at the end of the tunnel in medium term. Hence this may be an opportune time for those who can invest in modern dry tonnage and sustain negative cash flows for a few months.

The response to his presentation was overwhelming with comments such as "he provided food for thought and made us think about the dynamics that we often tend to ignore".

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After the Seminar, a cocktail reception followed and Members, Students and Members of the Education Committee had the chance to exchange views and ideas on current shipping matters. The International Chairman of the Institute, Michael Taliotis FICS, the Director of the Institute, Julie Lithgow and the Chairman of Education & Training Committee, Susan Oatway FICS honoured the event with their presence.

It was a successful and well attended event which proved once again that Institute members are truly part of an international shipping network.

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