Executive in Action: Stephen Fordham, Executive Chairman of Masterbulk
Written by Wendy Laursen
Stephen Fordham, newly appointed Executive Chairman of Masterbulk, is guarded about when he will place the company’s next newbuilding order. “There are just too many ships out on the sea today,” he says. “Everybody is preoccupied with the oversupply of tonnage due to the excess of orders placed between 2003 and 2008 and then again in the mini-recovery of 2010. We are all facing the same challenges. There are just too many deep sea cargo vessels.”
However, Masterbulk, a specialist in unitized cargoes such as pulp, steel and project cargo, has been prudent. Fordham has a strong balance sheet and no vessel order backlog. He is ready to buy when the time is right. “The cost of bunkers is now extremely high and has prompted a real focus on fuel-efficient vessels, which are being marketed heavily. There is a rationale for saying that, if you can order a newbuilding today which will be 20-30 percent more fuel-efficient than the ships that have already been ordered and are currently being delivered, then you should order now and take advantage of the lower capital and operating costs.”
The ability to save several tons of bunker a day is significant. The dilemma is it adds further to the oversupply of vessels and therefore to the low charter rates that are forcing many owners to operate their vessels at a loss.
Fordham has been a member of the board at Masterbulk since 1995, so he has weathered both boom and bust conditions. Following his original profession as a commercial and corporate lawyer for the maritime and offshore sectors, his involvement with the company began when he acted as English law consultant for their move from Norway to Singapore.
From Maritime Attorney to Maritime Executive
As a resident of Singapore for 30 years, Fordham offers companies a way of meeting the requirement that Singaporean companies have at least one board member resident in the country. However, he has never taken a token role just to fulfil this requirement. As a lawyer who found the technical intricacies of English law too dry for his tastes, he has instead been active on the commercial side of law and keenly interested in corporate leadership.
Unusual for a lawyer, he has now made the move away from law to become a full-time business manager. His new role with Masterbulk has meant stepping down from some other boards to prevent potential conflicts of interest, but he still holds several board positions in Singapore and Thailand.
Fordham is fully focused on the vessel oversupply problem in the dry bulk market. Looking out from his top-floor office across the port and city, he sees a worried maritime industry. Shipping companies are going bankrupt. Since the industry contributes approximately seven percent of Singapore’s GDP, it is having an impact.
Focus on Costs
Most of Masterbulk’s vessels are open-hatch gantry crane bulk carriers with rain protection, making the company strategically placed for efficient transfer of pulp and other high-care cargoes. However, Fordham admits that Masterbulk is not immune to general market forces that are sending other companies into Chapter 11. “We have to have a high degree of focus on costs. While we would not compromise on safety, costs must be examined and justified.”
Much of the pulp that Masterbulk ships from Brazil and North America now goes to China. Even without that connection, China’s economy has a significant impact on business generally. Any reduction in GDP in China could be catastrophic for the types of cargoes that the company deals with.
However, with China’s change of leadership, that country is expected to again move into a period of enthusiastic development. Fordham waits for a time when economic recovery is in sight so he can act on his fleet-building plans. “We won’t see any recovery next year, and it will almost certainly not be the first half of 2014. I would say it will be two years at least before there is any substantial recovery in the dry bulk sector.” – MarEx
This is the seventh in a series of “Executive in Action” features. Wendy Laursen also writes the “Tired of Talking Green” feature. She can be reached at firstname.lastname@example.org.