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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, 15 August 16
THE SPOT FREIGHT MARKET STRENGTHEN OVER THIS WEEK
COALspot.com: The Baltic Exchange, tracking rates for ships carrying dry bulk commodities rose as Cape and Panamax segments ending in a positive no ...
Friday, 12 August 16
U.S. WEEKLY COAL OUTPUT ENDING AUGUST 6 FELL SLIGHTLY
COALspot.com – U.S., the world’s second largest coal producers have produced approximately totalled an estimated 15.9 million short ton ...
Thursday, 11 August 16
CAPESIZE THE PACIFIC SIDE IS LOOKING MORE POSITIVE, DRIVEN BY AUSTRALIAN IRON ORE - FEARNLEYS
Supramax
Rates continue to be under pressure with index ending up with 639 points and average TC value at USD6,680, said Fearnleys. Fearnleys A/S ...
Thursday, 11 August 16
EIA ESTIMATES THE DELIVERED COAL PRICE TO U.S. ELECTRIC UTILITIES IN 2017 AVERAGED $2.24/MMBTU; $0.05/MMBTU HIGHER THAN 2016 ESTIMATES
Coal Supply
U.S. coal production in July was 65 million short tons (MMst), an 8 MMst (14%) increase from the previous month but 11 MMst (15%) low ...
Wednesday, 10 August 16
THE DRY BULK MARKET KEPT SOFTENING LAST WEEK; WE CAN SEE MUCH HEALTHIER NUMBERS STARTING SEPTEMBER
The Dry Bulk market kept softening last week as we have now started going through the traditionally quieter days of the summer season peak period, ...
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- Deloitte Consulting - India
- Karaikal Port Pvt Ltd - India
- Indian Oil Corporation Limited
- PetroVietnam Power Coal Import and Supply Company
- AsiaOL BioFuels Corp., Philippines
- Meenaskhi Energy Private Limited - India
- Kapuas Tunggal Persada - Indonesia
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- Edison Trading Spa - Italy
- Ceylon Electricity Board - Sri Lanka
- Posco Energy - South Korea
- Standard Chartered Bank - UAE
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Uttam Galva Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Baramulti Group, Indonesia
- Indo Tambangraya Megah - Indonesia
- Singapore Mercantile Exchange
- Sindya Power Generating Company Private Ltd
- Petrochimia International Co. Ltd.- Taiwan
- San Jose City I Power Corp, Philippines
- Trasteel International SA, Italy
- Heidelberg Cement - Germany
- Energy Development Corp, Philippines
- Xindia Steels Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Global Business Power Corporation, Philippines
- SMG Consultants - Indonesia
- OPG Power Generation Pvt Ltd - India
- Videocon Industries ltd - India
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
- IEA Clean Coal Centre - UK
- Sinarmas Energy and Mining - Indonesia
- Indika Energy - Indonesia
- Ind-Barath Power Infra Limited - India
- Agrawal Coal Company - India
- Gujarat Sidhee Cement - India
- Latin American Coal - Colombia
- Gujarat Mineral Development Corp Ltd - India
- Attock Cement Pakistan Limited
- Tamil Nadu electricity Board
- GVK Power & Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Vizag Seaport Private Limited - India
- Rio Tinto Coal - Australia
- Barasentosa Lestari - Indonesia
- Global Green Power PLC Corporation, Philippines
- Kumho Petrochemical, South Korea
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Pendopo Energi Batubara - Indonesia
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Larsen & Toubro Limited - India
- Aboitiz Power Corporation - Philippines
- SMC Global Power, Philippines
- Australian Commodity Traders Exchange
- Jindal Steel & Power Ltd - India
- Bhoruka Overseas - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sical Logistics Limited - India
- Directorate Of Revenue Intelligence - India
- McConnell Dowell - Australia
- IHS Mccloskey Coal Group - USA
- Aditya Birla Group - India
- Binh Thuan Hamico - Vietnam
- Maheswari Brothers Coal Limited - India
- New Zealand Coal & Carbon
- SN Aboitiz Power Inc, Philippines
- Electricity Generating Authority of Thailand
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- ICICI Bank Limited - India
- South Luzon Thermal Energy Corporation
- Thai Mozambique Logistica
- MS Steel International - UAE
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Kaltim Prima Coal - Indonesia
- Petron Corporation, Philippines
- Economic Council, Georgia
- The University of Queensland
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Interocean Group of Companies - India
- Eastern Coal Council - USA
- Energy Link Ltd, New Zealand
- GMR Energy Limited - India
- Sarangani Energy Corporation, Philippines
- Planning Commission, India
- Meralco Power Generation, Philippines
- PNOC Exploration Corporation - Philippines
- Parliament of New Zealand
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Parry Sugars Refinery, India
- Metalloyd Limited - United Kingdom
- Eastern Energy - Thailand
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bayan Resources Tbk. - Indonesia
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Commonwealth Bank - Australia
- Ministry of Mines - Canada
- Sakthi Sugars Limited - India
- Borneo Indobara - Indonesia
- Malabar Cements Ltd - India
- Makarim & Taira - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Mercuria Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- LBH Netherlands Bv - Netherlands
- Romanian Commodities Exchange
- Georgia Ports Authority, United States
- Manunggal Multi Energi - Indonesia
- Renaissance Capital - South Africa
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Coal and Oil Company - UAE
- Salva Resources Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mjunction Services Limited - India
- Globalindo Alam Lestari - Indonesia
- Indian Energy Exchange, India
- Asmin Koalindo Tuhup - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Medco Energi Mining Internasional
- Indogreen Group - Indonesia
- Simpson Spence & Young - Indonesia
- Star Paper Mills Limited - India
- Bulk Trading Sa - Switzerland
- GN Power Mariveles Coal Plant, Philippines
- Thiess Contractors Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Formosa Plastics Group - Taiwan
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Indonesian Coal Mining Association
- Krishnapatnam Port Company Ltd. - India
- Wilmar Investment Holdings
- CNBM International Corporation - China
- Ministry of Transport, Egypt
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Bharathi Cement Corporation - India
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Marubeni Corporation - India
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Alfred C Toepfer International GmbH - Germany
- Gujarat Electricity Regulatory Commission - India
- Billiton Holdings Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- Dalmia Cement Bharat India
- Pipit Mutiara Jaya. PT, Indonesia
- Australian Coal Association
- Toyota Tsusho Corporation, Japan
- Rashtriya Ispat Nigam Limited - India
- Tata Chemicals Ltd - India
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Sojitz Corporation - Japan
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Bhatia International Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Price Waterhouse Coopers - Russia
- Straits Asia Resources Limited - Singapore
- Chettinad Cement Corporation Ltd - India
- Chamber of Mines of South Africa
- Orica Australia Pty. Ltd.
- Power Finance Corporation Ltd., India
- Grasim Industreis Ltd - India
- India Bulls Power Limited - India
- Therma Luzon, Inc, Philippines
- Jaiprakash Power Ventures ltd
- Antam Resourcindo - Indonesia
- Kideco Jaya Agung - Indonesia
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- ASAPP Information Group - India
- The State Trading Corporation of India Ltd
- Siam City Cement - Thailand
- Holcim Trading Pte Ltd - Singapore
- Lanco Infratech Ltd - India
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