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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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Monday, 29 August 16
THE 5000 GAR THERMAL COAL INDEX HAS STRENGTHENED BY 9.90% SINCE JANUARY
COALspot.com: A rally in thermal coal prices over the past few months, after years of decline, is still continuing upward and it is expected to ral ...
Monday, 29 August 16
THE FREIGHT MARKET WAS STEADY AND FIRM THIS PAST WEEK; BCI ROSE 18.74%
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
Friday, 26 August 16
WEEKLY US COAL OUTPUT UP 0.7% W/W TO 16 MMST: EIA
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 16 million short tons ...
Thursday, 25 August 16
SUPRAMAXES ARE BEING FIXED IN REGION OF $9000
Supramax
Due to Chinese coal imports which continues to source much of the tonnage in SE Asia combined with a good flow of mineral exports ex Aus ...
Wednesday, 24 August 16
MARKET INSIGHT
Brazil and the world bid farewell on Sunday to the first Olympic Games in South America in the midst of a finale meant to be both one last bash and ...
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- Aditya Birla Group - India
- Trasteel International SA, Italy
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Goldman Sachs - Singapore
- Directorate General of MIneral and Coal - Indonesia
- Uttam Galva Steels Limited - India
- Borneo Indobara - Indonesia
- Sakthi Sugars Limited - India
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Metalloyd Limited - United Kingdom
- Global Business Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Krishnapatnam Port Company Ltd. - India
- Larsen & Toubro Limited - India
- OPG Power Generation Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Neyveli Lignite Corporation Ltd, - India
- Kartika Selabumi Mining - Indonesia
- Agrawal Coal Company - India
- Port Waratah Coal Services - Australia
- Antam Resourcindo - Indonesia
- Coalindo Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- Aboitiz Power Corporation - Philippines
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Wilmar Investment Holdings
- Jindal Steel & Power Ltd - India
- Bharathi Cement Corporation - India
- Price Waterhouse Coopers - Russia
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Latin American Coal - Colombia
- ASAPP Information Group - India
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Bhatia International Limited - India
- Bukit Baiduri Energy - Indonesia
- Africa Commodities Group - South Africa
- Ministry of Finance - Indonesia
- Petron Corporation, Philippines
- Australian Coal Association
- Planning Commission, India
- Kaltim Prima Coal - Indonesia
- Riau Bara Harum - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- PetroVietnam Power Coal Import and Supply Company
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Commonwealth Bank - Australia
- Karaikal Port Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Orica Australia Pty. Ltd.
- Marubeni Corporation - India
- Bangladesh Power Developement Board
- IEA Clean Coal Centre - UK
- Dalmia Cement Bharat India
- The University of Queensland
- Standard Chartered Bank - UAE
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Iligan Light & Power Inc, Philippines
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- Formosa Plastics Group - Taiwan
- Siam City Cement PLC, Thailand
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- Parliament of New Zealand
- CIMB Investment Bank - Malaysia
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- Economic Council, Georgia
- Sindya Power Generating Company Private Ltd
- Simpson Spence & Young - Indonesia
- Jaiprakash Power Ventures ltd
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Mineral Development Corp Ltd - India
- Energy Link Ltd, New Zealand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Straits Asia Resources Limited - Singapore
- Indika Energy - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Tamil Nadu electricity Board
- Sree Jayajothi Cements Limited - India
- Alfred C Toepfer International GmbH - Germany
- International Coal Ventures Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indogreen Group - Indonesia
- Malabar Cements Ltd - India
- Meralco Power Generation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- TeaM Sual Corporation - Philippines
- Kalimantan Lumbung Energi - Indonesia
- Edison Trading Spa - Italy
- Binh Thuan Hamico - Vietnam
- Coastal Gujarat Power Limited - India
- Eastern Energy - Thailand
- McConnell Dowell - Australia
- Semirara Mining Corp, Philippines
- Mercuria Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Globalindo Alam Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Essar Steel Hazira Ltd - India
- Mercator Lines Limited - India
- New Zealand Coal & Carbon
- Madhucon Powers Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Tata Chemicals Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- VISA Power Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kumho Petrochemical, South Korea
- Electricity Generating Authority of Thailand
- Sical Logistics Limited - India
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Interocean Group of Companies - India
- Meenaskhi Energy Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- Ministry of Mines - Canada
- Altura Mining Limited, Indonesia
- Carbofer General Trading SA - India
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Star Paper Mills Limited - India
- Eastern Coal Council - USA
- India Bulls Power Limited - India
- European Bulk Services B.V. - Netherlands
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Global Green Power PLC Corporation, Philippines
- Bhushan Steel Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- PNOC Exploration Corporation - Philippines
- PowerSource Philippines DevCo
- Xindia Steels Limited - India
- Baramulti Group, Indonesia
- Electricity Authority, New Zealand
- Pendopo Energi Batubara - Indonesia
- MS Steel International - UAE
- CNBM International Corporation - China
- Deloitte Consulting - India
- Makarim & Taira - Indonesia
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- Indian Oil Corporation Limited
- Savvy Resources Ltd - HongKong
- Parry Sugars Refinery, India
- White Energy Company Limited
- Thai Mozambique Logistica
- Minerals Council of Australia
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- Therma Luzon, Inc, Philippines
- Indian Energy Exchange, India
- Central Java Power - Indonesia
- Coal and Oil Company - UAE
- Siam City Cement - Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kideco Jaya Agung - Indonesia
- Videocon Industries ltd - India
- ICICI Bank Limited - India
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- Kobexindo Tractors - Indoneisa
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Indo Tambangraya Megah - Indonesia
- SN Aboitiz Power Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Posco Energy - South Korea
- Anglo American - United Kingdom
- The Treasury - Australian Government
- Oldendorff Carriers - Singapore
- Ministry of Transport, Egypt
- Intertek Mineral Services - Indonesia
- Romanian Commodities Exchange
- Vedanta Resources Plc - India
- Barasentosa Lestari - Indonesia
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