6th Annual Forum Institute of Chartered Shipbrokers Greek Branch

Emerging Markets, Expanding Fleets and Uncertain Finance: Greek Shipping 2011.

With particular success, the 6th Annual Forum of the Institute of Chartered Shipbrokers Greek Branch took place on the 2nd December 2010, with the theme «Emerging Markets, Expanding Fleets and Uncertain Finance: Greek Shipping 2011». The forum was held at the Eugenides Foundation, where many well-established shipping professionals attended – covering all spectrums of the industry.

At this years’ conference the chairman of the ICS Greek Branch, Mr. Nicolas A. Tsavliris Chairman; Mr. Leonidas Demetriades-Eugenides Chairman of Niver Lines Shipping Co and President of the Eugenides Foundation; Mrs. Aggeliki Fragou, CEO of the Navios Maritime Holdings; Mr. Dimitris Vassilacos, Manager of the Shipping Finance Division of National Bank of Greece; Mr. Vassilis Mantzavinos, General Manager Greece of Unicredit Bank AG; Mr. Ted Petropoulos, Head of Petrofin Research PSMI; Mr. Simon Ward, Divisional Director of the HSBC Shipping Services Limited and Mr. Costas Karamanis, Managing Director of the Allied Chartering S.A., relayed their insights and views concerning the subject of the conference. Panel moderator of the conference was Mr. Vasilis Chakos FICS.

Mrs. Natalia Margioli Komninou, Managing Director of the ICS Greek Branch and HMC, opened the conference. After thanking and welcoming the speakers and delegates to the conference she conveyed that “In a period that the Greek shipping over passed many problems during the world economic crisis in 2008, continues her dynamic course and it constitutes “peak of spear” for the growth of our national economy, since it constitutes the most extrovert productive domain”.

The president of the ICS Greek Branch, Mr. Tsavliris summarized his feelings with a few succinct and wise words. “9 Ships, 10 cargoes means a boom. 10 ships, 9 cargoes means bust”. Mr. Tsavliris also stated the following: “Prevails the opinion that the so called shipping industry does not exist substantially as a united entity but recommends a virtual reality - because it is composed from a lot of separate autonomous markets with common denominator: The theorem of Archimedes - that is to say the principle of buoyancy!”

Mr. Leonidas Demetriades Eugenides recognized that shipping is a matter of supply and demand. He said that the shipping community cannot influence demand. The influence is shaped by other factors such as China and Brazil, the debt of USA and the crisis of PIIGS. However, he appeared overall confident that things were looking up on the demand side. On the supply side things were a bit more worrying for him. The number of idle container vessel’s had decreased but there is still an idle capacity of 370,000 teu, which means that there are a lot of available ships. In the bulk market numerous ships are coming in 2011 that represent 51% of the current carrying capacity. Tankers are fairing somewhat better with new vessels only representing about 23% of existing capacity. Nevertheless, Mr. Demetriades Eugenides was hopeful that the banks and the finance sector will support the industry and find a solution for its problems.

Mrs. Fragou viewed the current state of affairs through a phrase stated by Winston Churchill during the 2nd World War, “Enigma wrapped in a riddle shrouded in mystery.” According to her, the enigma was how many ships will come into the market. As far as demand is concerned, Mrs. Fragou was optimistic because although the demand generated by the developed world was below the pre-crisis levels, nevertheless, the demand from the emerging markets now exceeded the pre-crisis level and the dry and wet shipping relied on the emerging markets. Overall, in comparison with the past 50 years Mrs. Fragou believes that we are currently doing OK but with increased volatility. On the supply side, Mrs. Fragou noted that intended deliveries of vessels in 2009 and 2010 were down by 40% and this showed a trend. Credit was restricted and it is likely that it will continue to be restricted and of course some ships will be scrapped. Especially as far as the MR sector is concerned if current trends continue we may continue to experience a negative growth. She explained that Navios had taken measures to brace itself for the future by accessing the finance markets for better debt handling, reducing leverage, raising equity, increasing cash deposits and finding long term employment.

From his side Mr. Dimitrios Vassilakos, looking at the industry from a supporting sector, was of the view that what is being experienced by the shipping industry is not a parenthesis but is a new era. This new era is marked by a shift in the power and wealth from the west to the east. Emerging markets are the major power house now. In his view the west has to avoid protectionist policies, a currency war and colossal bankruptcies due to colossal damages. The west has to rebuild the western banking/financial system and has to rejuvenate its entrepreneurial capitalism. Otherwise he fears we may end up devouring ourselves in a never ending cycle of crisis after crisis.

Mr. Vassilis Mantzavinos asked whether we are approaching the end of the crisis? His answer appeared to be “No”. Mr. Mantzavinos believes that we allowed our consumerism to devour us. We borrowed future money so as to spend it today. In the meantime the east has been working hard and currently China is the number one steel producer. Emerging markets will have the majority of the world’s share of GDP by 2015. We do not know what will happen in the future. So what can Greek shipping do in such a climate, how will it fare? Mr. Mantzavinos is optimistic that it will survive because it is entrepreneurial, independent of government support or sponsorship, insightful, persistent, brave, flexible and lucky. Whatever Greek shipping has achieved it has done so on its own. It is a product of a harsh and ruthless natural selection process. Funding will always be available for sound business plans.

Mr. Ted Petropoulos advised that there was a 3.16% increase in global finance in 2010. Most of this was provided by European Banks who are the biggest players in the market by far. Mr. Petropoulos provided a series of statistics on what the major banks thought about the future of shipping.

About 60% of them foresaw lower freight rates in the dry market but not much lower.
About 45% saw higher freight rates in the tanker market.
About 45% of them saw the same rights in the container market.
About 55% said that scrap rates will be lower for ships and
About 31% saw scrap rates to be about the same as now.
About 71.4% believe that newbuilding deliveries will peak in 2011.
About 41% believe that China will continue growing at 9.6% and
About 35% believe that the growth rate will fall to 6-8%.
About 69% believe that the world economy will grow between 3-4%.

Mr. Petropoulos noted that there is a multiplier for shipping demand of about 1.2-1.6 and so a 4% growth in world demand means about 5.5% growth in shipping demand.

About 59% believes that funding will increase.
About 62% think that interest rates will be the same.
About 48% think that loan defaults will be at the same level.
About 65% think that competition will arise from the Fareast.
About 54% think that funding will increase from the private equity sector.
In conclusion, with time, any problems in funding will be overcome.

Mr. Simon Ward queried whether 2011 will be a year to buy ships? Upon providing a health warning, a disclaimer and upon putting the audience on notice that he was a Ship Sale and Purchase broker, he advised that the answer is “Yes!”. Mr. Ward believes that the situation over the next two years is worrying but people should not read the order books too literally. If the need arises the market will react and deliveries will slow down. Dry vessel prices will go down but not crash. There is funding and money available. Tanker prices are depressed and a lot of tankers are coming in and so prices and values may fall further, especially since it is a charterers market now, but in the long term support will come in and prices and values will rise again. The container market survived by slow steaming and stretching the order book but prices and values are still at risk as there is a lot of latent supply in the system. In conclusion, as prices get cheaper the investment is better. Buy cheap, buy what the charterers want. Shipping is a hard market to enter and exit at a whim. You have to develop and invest in the fleet so that you can ride the waves once the good times come again. In conclusion, 2011 should be a good time to buy.

Mr. Karamanis stated that in Greek shipping, the shipowners today have to be flexible because the various matters run very fast today. “China is giant in all aspects and chinese are today very big in shipping. Consequently we, the Greeks can’t do anything on that. However we can do a lot by changing our way of thinking, our attitude and we have to see with new vision that we are in the shipping and carrying industry and not only in shipowning. China is a very big challenge and it’s up to us to see this negatively without flexibility or positively with a new way of thinking and I’m sure we can do.”

Institute of Chartered Shipbrokers

The Institute of Chartered Shipbrokers is a recognized worldwide professional organization that represents shipbrokers, ship managers and agents, with 25 branches and more than 5.000 individual members all over the world. This year ICS is celebrating its centenary.

During the conference, the panel and all the attendants paid tribute for the unexpected death of the general director of the ICS, Mr. David Alan Phillips, whose contribution was decisive for the growth of the ICS network.
Parallel to the event and in the spirit of Christmas, the ICS welcomed the Christmas Bazaar of the charity “ARGO”, an organization for children with special needs from shipping families, to help strengthen the efforts of the organization.

The 6th Annual Conference of the ICS Greek Branch was held with the kind contribution and support of the following sponsors:

Arrow Shipping Hellas, Atlantic International Trading SA, Capital Shipmanagement Corp., Cass Technava Maritime, Daifas Stavros Marine Enterprises S.A., Dimitrios K Fotinakis Ltd., Dreamtech Software, Eastern Mediterranean Maritime Ltd, European Navigation Inc., Gac Shipping S.A., Horizon Tankers Limited S.A., Marine Plus S.A., National Bank of Greece, Poly Thomas Gunn Navigation Services S.A, Scorinis Law Offices, Skuld Hellas Ltd., Springfield Shipping CO Panama S.A., SSY Athens, Target Marine S.A., Tsavliris Salvage Group, Ursachart S.A., V.Chakos & Co.