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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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Wednesday, 24 August 16
DRY BULK VESSELS FACE CONTINUED DISTRESS - CLEAR ASSET
Dry bulk vessels have faced extreme distress in recent years. With a combination of factors including newer vessels being ordered with up to 5-year ...
Tuesday, 23 August 16
4200 GAR COAL INDEX CLIMB 15.96% YEAR TO DATE - CS COAL INDEX
COALspot.com: Average 4200 GAR coal index of Indonesian origin rose 1.65 % week over week to averaging $31.46 per ton this past week, shows CS (i) ...
Tuesday, 23 August 16
KOMIPO TO IMPORT 250K OF 5,700 KCAL/KG NAR COAL FOR Q4' 16
COALspot.com: South Korea state-owned utility Korea Midland Power (KOMIPO) issued a new tender for total 250,000 Metric Tons of Bituminous Coal for ...
Monday, 22 August 16
INDONESIA'S CS 5000 GAR THERMAL COAL INDEX, ROSE TO A 57-WEEKS HIGH TO TOP $43.47 A TON
COALspot.com: Indonesia’s CS 5000 GAR thermal coal index, rose to a 57-weeks high to top $US43. 47 a ton in the latest week, extending a 18-w ...
Monday, 22 August 16
THE FREIGHT MARKET WAS STEADY THIS PAST WEEK; CAPE INDEX DECLINE 5.38%
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose and ending in a positive note this past week except ...
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- Georgia Ports Authority, United States
- Tamil Nadu electricity Board
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Holcim Trading Pte Ltd - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Formosa Plastics Group - Taiwan
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- Semirara Mining and Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Planning Commission, India
- Sical Logistics Limited - India
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- Mercator Lines Limited - India
- Indika Energy - Indonesia
- Orica Mining Services - Indonesia
- Coal and Oil Company - UAE
- Rio Tinto Coal - Australia
- Star Paper Mills Limited - India
- Thiess Contractors Indonesia
- White Energy Company Limited
- Binh Thuan Hamico - Vietnam
- Gujarat Mineral Development Corp Ltd - India
- Cement Manufacturers Association - India
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- Global Business Power Corporation, Philippines
- Mercuria Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Malabar Cements Ltd - India
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Commonwealth Bank - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Latin American Coal - Colombia
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Intertek Mineral Services - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Electricity Authority, New Zealand
- Jindal Steel & Power Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Goldman Sachs - Singapore
- Aditya Birla Group - India
- New Zealand Coal & Carbon
- Minerals Council of Australia
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Gujarat Sidhee Cement - India
- PNOC Exploration Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- ASAPP Information Group - India
- Lanco Infratech Ltd - India
- ICICI Bank Limited - India
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Bukit Baiduri Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Sakthi Sugars Limited - India
- Indogreen Group - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Straits Asia Resources Limited - Singapore
- GAC Shipping (India) Pvt Ltd
- Bhoruka Overseas - Indonesia
- Bhatia International Limited - India
- PTC India Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Bangladesh Power Developement Board
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Altura Mining Limited, Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Cigading International Bulk Terminal - Indonesia
- CNBM International Corporation - China
- Central Java Power - Indonesia
- Siam City Cement - Thailand
- Independent Power Producers Association of India
- Kepco SPC Power Corporation, Philippines
- Port Waratah Coal Services - Australia
- Indian Energy Exchange, India
- Therma Luzon, Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- GMR Energy Limited - India
- Meralco Power Generation, Philippines
- Oldendorff Carriers - Singapore
- SN Aboitiz Power Inc, Philippines
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Eastern Energy - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- SMC Global Power, Philippines
- Bharathi Cement Corporation - India
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Romanian Commodities Exchange
- Price Waterhouse Coopers - Russia
- Makarim & Taira - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Dalmia Cement Bharat India
- Orica Australia Pty. Ltd.
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Coalindo Energy - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Vizag Seaport Private Limited - India
- Ministry of Finance - Indonesia
- London Commodity Brokers - England
- Energy Development Corp, Philippines
- Global Green Power PLC Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Interocean Group of Companies - India
- Petrochimia International Co. Ltd.- Taiwan
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- The State Trading Corporation of India Ltd
- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- Kaltim Prima Coal - Indonesia
- European Bulk Services B.V. - Netherlands
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Rashtriya Ispat Nigam Limited - India
- Merrill Lynch Commodities Europe
- Parry Sugars Refinery, India
- Samtan Co., Ltd - South Korea
- Energy Link Ltd, New Zealand
- Savvy Resources Ltd - HongKong
- LBH Netherlands Bv - Netherlands
- Mjunction Services Limited - India
- Coastal Gujarat Power Limited - India
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Trasteel International SA, Italy
- Essar Steel Hazira Ltd - India
- Timah Investasi Mineral - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Siam City Cement PLC, Thailand
- Standard Chartered Bank - UAE
- Larsen & Toubro Limited - India
- Globalindo Alam Lestari - Indonesia
- Chamber of Mines of South Africa
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Krishnapatnam Port Company Ltd. - India
- Ind-Barath Power Infra Limited - India
- Pendopo Energi Batubara - Indonesia
- Posco Energy - South Korea
- Salva Resources Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Parliament of New Zealand
- McConnell Dowell - Australia
- Bhushan Steel Limited - India
- Toyota Tsusho Corporation, Japan
- Agrawal Coal Company - India
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- IHS Mccloskey Coal Group - USA
- Edison Trading Spa - Italy
- Sojitz Corporation - Japan
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- The Treasury - Australian Government
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kumho Petrochemical, South Korea
- Antam Resourcindo - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Jaiprakash Power Ventures ltd
- Miang Besar Coal Terminal - Indonesia
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- Thai Mozambique Logistica
- Aboitiz Power Corporation - Philippines
- Petron Corporation, Philippines
- Economic Council, Georgia
- Chettinad Cement Corporation Ltd - India
- Eastern Coal Council - USA
- GVK Power & Infra Limited - India
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