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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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Friday, 05 August 16
CAPESIZE : RATES ARE REMAINING AT DEPRESSING LEVELS DUE TO LACK OF FRESH CARGOES - FEARNLEYS
Supramax
Last week has been one of the slowest for some time with rates under pressure in most areas.
In its latest weekly report, shipbroke ...
Thursday, 04 August 16
INDONESIAN COAL PRICES ARE STARTING TO ZOOM HIGHER; HBA ROSE 10.13% TO US$ 58.37 PER TON
COALspot.com: The Indonesia coal benchmark price hits to its highest level since August 2015.
The Director General of Mineral and Coa ...
Wednesday, 03 August 16
RECAAP INFORMATION SHARING CENTRE ISSUES SPECIAL REPORT ON THE ABDUCTING OF CREW FROM SHIPS IN WATERS OFF EASTERN SABAH AND SOUTHERN PHILIPPINES - THE STANDARD CLUB
KNOWLEDGE TO ELEVATE
In the light of three incidents where the crew of tug boats were abducted in the waters off Eastern Sabah and Southern Ph ...
Wednesday, 03 August 16
SHIPPING MARKET INSIGHT - EVA TZIMA
The Good…
Demand. Amidst all the unprecedented geopolitical turmoil and shifts in the likes of Brexit, the IMF lowered last month its glob ...
Wednesday, 03 August 16
SHIP TRADING AND ORDERING CLOSE TO A STALEMATE AS SUMMER LULL KICKS IN
With newbuilding activity already at a near standstill since the start of the year, most of 2016’s trading activity in shipping was evident i ...
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- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Bhushan Steel Limited - India
- San Jose City I Power Corp, Philippines
- Port Waratah Coal Services - Australia
- Energy Development Corp, Philippines
- Central Java Power - Indonesia
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- Jindal Steel & Power Ltd - India
- Ministry of Mines - Canada
- Oldendorff Carriers - Singapore
- Bharathi Cement Corporation - India
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- Indo Tambangraya Megah - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Goldman Sachs - Singapore
- Attock Cement Pakistan Limited
- PetroVietnam Power Coal Import and Supply Company
- Cement Manufacturers Association - India
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Edison Trading Spa - Italy
- GAC Shipping (India) Pvt Ltd
- Indonesian Coal Mining Association
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kepco SPC Power Corporation, Philippines
- MS Steel International - UAE
- Economic Council, Georgia
- Renaissance Capital - South Africa
- Krishnapatnam Port Company Ltd. - India
- India Bulls Power Limited - India
- Eastern Coal Council - USA
- Australian Coal Association
- Essar Steel Hazira Ltd - India
- Medco Energi Mining Internasional
- Karaikal Port Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Maheswari Brothers Coal Limited - India
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Siam City Cement PLC, Thailand
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Globalindo Alam Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Makarim & Taira - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Xindia Steels Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Banpu Public Company Limited - Thailand
- Kalimantan Lumbung Energi - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- International Coal Ventures Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Siam City Cement - Thailand
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Commonwealth Bank - Australia
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Asam (Persero) Tbk - Indonesia
- Chettinad Cement Corporation Ltd - India
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Orica Australia Pty. Ltd.
- Kapuas Tunggal Persada - Indonesia
- Timah Investasi Mineral - Indoneisa
- Grasim Industreis Ltd - India
- Power Finance Corporation Ltd., India
- McConnell Dowell - Australia
- CIMB Investment Bank - Malaysia
- Simpson Spence & Young - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Sojitz Corporation - Japan
- Ceylon Electricity Board - Sri Lanka
- LBH Netherlands Bv - Netherlands
- Bangladesh Power Developement Board
- Carbofer General Trading SA - India
- ASAPP Information Group - India
- Marubeni Corporation - India
- Therma Luzon, Inc, Philippines
- The State Trading Corporation of India Ltd
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Indian Oil Corporation Limited
- Chamber of Mines of South Africa
- European Bulk Services B.V. - Netherlands
- Eastern Energy - Thailand
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Mjunction Services Limited - India
- Intertek Mineral Services - Indonesia
- Aditya Birla Group - India
- Energy Link Ltd, New Zealand
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Billiton Holdings Pty Ltd - Australia
- Deloitte Consulting - India
- IHS Mccloskey Coal Group - USA
- Thiess Contractors Indonesia
- Posco Energy - South Korea
- Kumho Petrochemical, South Korea
- GMR Energy Limited - India
- Alfred C Toepfer International GmbH - Germany
- Central Electricity Authority - India
- Kideco Jaya Agung - Indonesia
- Minerals Council of Australia
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Bhatia International Limited - India
- Mercator Lines Limited - India
- Malabar Cements Ltd - India
- Leighton Contractors Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Sindya Power Generating Company Private Ltd
- Bulk Trading Sa - Switzerland
- Merrill Lynch Commodities Europe
- Sical Logistics Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Indika Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- Gujarat Electricity Regulatory Commission - India
- Rashtriya Ispat Nigam Limited - India
- Coastal Gujarat Power Limited - India
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Agrawal Coal Company - India
- PNOC Exploration Corporation - Philippines
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Parliament of New Zealand
- White Energy Company Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- ICICI Bank Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Barasentosa Lestari - Indonesia
- Romanian Commodities Exchange
- Neyveli Lignite Corporation Ltd, - India
- SMC Global Power, Philippines
- Electricity Generating Authority of Thailand
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Directorate Of Revenue Intelligence - India
- Planning Commission, India
- Jaiprakash Power Ventures ltd
- Ministry of Transport, Egypt
- South Luzon Thermal Energy Corporation
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- Standard Chartered Bank - UAE
- Dalmia Cement Bharat India
- Straits Asia Resources Limited - Singapore
- Petron Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Riau Bara Harum - Indonesia
- Star Paper Mills Limited - India
- Videocon Industries ltd - India
- Meenaskhi Energy Private Limited - India
- Rio Tinto Coal - Australia
- The University of Queensland
- Asia Pacific Energy Resources Ventures Inc, Philippines
- London Commodity Brokers - England
- Australian Commodity Traders Exchange
- Antam Resourcindo - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Vizag Seaport Private Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- Tamil Nadu electricity Board
- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
- Tata Chemicals Ltd - India
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- PowerSource Philippines DevCo
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Wood Mackenzie - Singapore
- GVK Power & Infra Limited - India
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
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