- Message from the Baltic Exchange Chairman, Denis Petropoulos
These are extraordinary times, but the world’s ships need to keep moving. Thanks to the continued efforts of all, both at sea and ashore, this industry continues to transport the world’s commodities and goods and underpin everyone’s lives. Baltic members play a significant role in this.
The Baltic Exchange is taking precautionary steps in London and Singapore to ensure a normal service and support our members. Our daily benchmark services continue to remain unaffected and published as normal throughout the working week. The impact of disruptive events such as this are well rehearsed and planned for. The Baltic’s risk mitigation measures are detailed in our Guide to Market Benchmarks which includes a business continuity and disaster recovery plan.
But the Baltic is not just about assessments: it is a community which meets and networks regularly as well as supports many charities. The Baltic Exchange’s own calendar is of course heavily affected.
The well supported annual Lord Mayor’s Big Curry is the most recent event to have been cancelled. This is a big blow to fund raising for the Her Majesty’s forces veterans selected for the three year 2019-2021 Pain Management Programme. There are 18 veterans midway through the programme and a further cohort have just begun treatment.. I’m pleased to see that various sponsors including the Baltic Exchange have decided to maintain their contribution for year 2019-2020. On behalf of the LMBC committee we are asking ticket purchasers to make their purchase to the 2020 Lunch a donation. This means that the costs incurred so far are defrayed, but more importantly, helps fund veterans through the 2020-2021 programme.
The Baltic Exchange was also forced to cancel the annual Baltic Irish Night only two days ahead of the date. With so many signed up it was a decision taken with heavy heart, but in hindsight a correct one. I would like to personally thank the members of the organising committee for their hard work and as always, for giving up their free time. It’s just a shame that we couldn’t thank them in the usual way on the rousing night!
The reactivated Baltic Wine Tasting scheduled for 2 April has also been postponed, but at least the bottles can remain laid down and will maybe improve with age.
The Chairman’s Cocktail Party on 13 May remains on the calendar, but we will be heeding Government advice particularly with Ministers, MP’s and Mayoral invitees. We will be making further announcements in the coming weeks.
Posidonia is of course shipping’s jewel in the crown event. This has already been rescheduled to October, which affects many of our members globally.
These are indeed testing times, particularly so for an industry that traditionally networks and requires frequent travel, but shipping is and will always be needed to keep the world moving. Despite a disruptive working environment for all of our members, the Baltic Exchange will continue providing the indices and assessments which so many depend on.
I wish you all the best in these troubled times.
- Baltic Exchange authorised as Benchmark Administrator in the EU
The Baltic Exchange’s subsidiary, Baltic Exchange Information Services Ltd (BEISL), has been authorised by the UK’s Financial Conduct Authority (FCA) as a benchmark administrator under EU Benchmark Regulation. This means that the Baltic Exchange’s daily dry bulk, tanker and gas freight indices are regulated by an EU National Competent Authority.
“We are very pleased to have received authorisation from the FCA,” commented Baltic Exchange Chief Executive Mark Jackson. “This status ensures that financial institutions, including freight derivative traders using European clearing houses, will be able to continue using Baltic Exchange data for settlement purposes. Users of our index administration services can be assured of our strong governance, robust benchmark design, transparent methodologies and clear accountability. Our high standards of design and governance uphold confidence in the global shipping freight benchmarks that we produce.”
Having come into effect on 1 January 2020 for EU administrators, EU Benchmarks Regulation requires administrators of a range of benchmarks to put in place appropriate governance arrangements, to have effective controls to ensure the integrity of input data and to maintain adequate records. BEISL engages an accounting firm to conduct an annual review of its compliance while panellists are subject to regular audits.
To achieve its authorisation as a benchmark administrator with the FCA, BEISL has strengthened its governance arrangements, adding an independent BEISL Oversight Function.
There are now three bodies responsible for the oversight of the Baltic’s benchmarks: BEISL Board of Directors which has overall responsibility for the administration of the benchmarks; Baltic Index Council which brings together market expertise to ensure that the BEISL benchmarks reflect the economic reality of the shipping markets measured; and BEISL Oversight Function whose main role is to ensure regulatory adherence in all areas of benchmark related activities.
Full details of these bodies can be viewed at www.balticexchange.com/about-us/beisl/
For further details please contact:
T: +44 (0)20 3326 8460
- What does being an authorised benchmark administrator mean?
Baltic Exchange Chief Executive, Mark Jackson writes:
I am pleased to announce that Baltic Exchange Information Services Ltd (BEISL), the Baltic Exchange subsidiary responsible for our wide range of freight market information, is now authorised by the UK’s Financial Conduct Authority (FCA) as a benchmark administrator under EU Benchmark Regulation. This makes the Baltic Exchange the first benchmark administrator specialising in the maritime freight markets to be authorised in the EU.
Whilst the substance of our index administration service has not changed, we have added an extra body to our oversight arrangements. The BEISL Oversight Function oversees the work of the BEISL Board and Baltic Index Council, which have been in place since 2015. It is comprised of voting members who are independent of the benchmark production process, and who have powers to ensure BEISL’s compliance with the EU Benchmark Regulation.
The authorisation of BEISL as a benchmark administrator is an important milestone as it ensures that European clearing houses and financial institutions can continue to use Baltic Exchange data for settlement of financial instruments such as freight forward agreements.
But does the fact that the UK is set to leave the EU make a difference? The short answer is no. The FCA is still an active member of the European Securities and Markets Authority (ESMA) and works closely with regulatory authorities in the EU. Wherever the UK and the EU end up, our financial markets and regulators will remain closely linked. The FCA is introducing the UK Benchmarks Register. This new Register will replace the ESMA Register for UK supervised users, and UK and third-country based benchmark administrators that want their benchmarks to be used in the UK. We foresee that in a post-Brexit world BEISL will eventually be authorised in the UK and recognised as a third-country benchmark administrator in the EU.
It is important to not lose sight of the reason that such stringent legislation covers benchmark providers such as the Baltic Exchange. The LIBOR scandal rocked financial markets and shocked the general public. Since then, huge efforts have been made by regulators around the world to ensure that transparency and robust standards underpin any benchmark used to support financial instruments traded and cleared on any trading venue and clearing house. Freight derivatives, settled against the Baltic Exchange’s benchmarks, fall into this category.
Over the past few years, the Baltic Exchange has worked hard to ensure that its methodologies and governance processes meet the more stringent legislative requirements. Our original Manual for Panellists which set out how we report our market was updated and replaced by the Guide to Market Benchmarks in 2015. Whilst the fundamental philosophy which underpins the Baltic’s indices remains unchanged – assessments by independent shipbrokers reporting on visible routes – we have rewritten our rule book to ensure that we fit with the language of regulatory compliance.
The freight markets rely on the Baltic Exchange benchmarks to function smoothly. We are committed to providing the markets with independent indices and assessments which are well designed, trustworthy and are backed up with robust governance processes. Our high standards uphold confidence in the shipping markets.
- AM Nomikos win 2019 David Bradley Cup
We are delighted to announce that after strong performances in the Golf and Sailing rounds, shipowners AM Nomikos have been crowned winners of the David Bradley Cup for the 2019 season. They will be awarded the trophy at this year’s Chairman’s Cocktail Party on 13 May.
Swire Navigation followed in second place, with HFW in third. The annual competition counts a company’s best result from the Baltic; Golf (Company Cup), Sailing (Seaview weekend), Tennis (Fehr Cup) and Quiz night, with one score discarded.
Pictures from 2019 can be found here
- The Chairman’s Cocktail Party
One of the standout events of the Baltic calendar, the Chairman’s Cocktail Party, will take place this year on Wednesday 13 May.
Attended by 600 guests, this historic event was originally held on the floor of the old Baltic Exchange and celebrated the end of a Baltic Chairman’s two-year tenure. Now held at Christ Church Spitalfields in London, it brings Baltic Members and invited guests from across the globe together for a unique annual networking and social event.
Tickets are available here.
We anticipate this to be a sell-out event. Therefore we suggest securing your tickets early to avoid disappointment.
Pictures from last year’s event are available to view here.
- Member Update: 18 March
The following company has applied for Corporate Membership:
Company Individual Anglo American Shipping Pte Ltd (Singapore branch)
Mr A Clark Mr M Dawson Mr P Lye Miss A Kang Ms Y Zhang Global Marketing Systems DMCC
Mr F Aimilios Mr E Chatzigiannis Mr N Cheng Mr S Elango Dr A Sharma Mr E Sproviero
The following individuals have applied for membership of an existing Member Company:
Individual Company Mr S J Garnaas AS Klaveness Chartering
Mr C-M Graf Mr M Jorgensen Mr A Karnawat Mr E-O Torodd Mr J Collins BACA
Ms D Flierl Mr L Vallet Ms C Ng Eastport Chartering Pte Ltd Mr S Day Maven Brokers Pte Ltd
Mr M Hagen Mr A Salvatore Mr G Guo Shangdong Shipping (Hong Kong) Holdings
Any comments should be passed to either Jackie Harrison or Karen Karanicholas by 24 March 2020 – email: firstname.lastname@example.org
- Barry J Spiller
Members will learn with deep regret of the death of Barry J Spiller on 27 February 2020 after suffering a long period of dementia. He leaves behind his wife Sheila and son, Ian.
Mr Spiller was first elected in 1954 and in 1970 represented Anderson Hughes & Co Ltd until he retired in 1991. He was also Managing Director of Anderson Hughes.
His funeral will be held on 31 March 2020 at 1100, Tunbridge Wells Crematorium Chapel. Donations would be welcomed to Dementia UK.
If anyone wishes to enquire further, please call Jackie Harrison on +44 20 7369 1633.
- ‘No return to normal’
The call for an immediate multi-million pound government support package for shipping from the UK Chamber of Shipping earlier this week spoke volumes of the crisis facing the industry.
Chief executive Bob Sanguinetti asked the UK shipping minister Kelly Tolhurst for urgent funds to ensure that the shipping industry can continue to bring in food, goods and medicines into the UK as the Covid-19 crisis takes hold.
Mr Sanguinetti described the current situation as a “monumental crisis”. While shipowners are adapting as much as they can to meet the Covid-19 challenges, changes will need to be made to infrastructure, employment and processes on ships and in ports which will only be possible with support from government, he added.
The UK is not alone in needing financial and political support for its shipping sector. Shipowners around the world are dealing daily with extraordinary upheaval, requiring them to be agile in their responses while still carrying the burden of operational overheads that need to be paid.
The requested UK emergency shipping fund would include cover for “dramatic” loss of business; support with seafarers’ salaries; grants to assist with the additional costs of virus provisions; grants to deal increased costs such as overtime, agency fees and any other cost associated with providing sufficient crew; delays on VAT payments; and use of credit notes for future travel in lieu of refunding deposits.
To say that the industry is in a state of flux is an understatement: the latest data for Tradeshift, a provider of supply chain payments, reports that global business-to-business transactions dropped by 62% last week. Tradeshift, whose platform handles trade transactions between over 1.5 million businesses in 190 countries, found cross border transactions between businesses fell by 58% week-on-week last week, while domestic transactions dropped 66% during the same period.
The scale of the slowdown is having a significant impact on liquidity, with an increasing number of large organisations saying they are looking at ways to build or maintain cash reserves, says Tradeshift.
Chief executive Christian Lanng said that every conversation he is having with businesses right now centres on cash flow. “Companies are looking at how they can keep cash on their books to see them through the current period. But they’re also acutely aware that suppliers are facing the same liquidity challenges. If cash dries up across the supply chain, we could see a lot of smaller businesses start to fold. It’s a balancing act. Get it wrong and the whole house of cards could come down.”
Unsurprisingly, consultant BSI’s Supply Chain Risk Insights 2020 Report released this week ranked coronavirus as the number one trend dominating the global supply chain this year, followed by ‘Shifting supply chains in Asia’, ‘Human trafficking and the exploitation of migrants’, ‘Political protests and global ideological shifts’, and ‘Impact of climate change on business continuity’, with ‘Global risk of terrorism and tensions in the Middle East’ bringing up the rear.
“The coronavirus disease 2019 (Covid-19) outbreak has highlighted the fragility of global supply chains, underscoring how the failure of one link in the chain has the potential to cause extensive disruptions throughout,” noted the report. “At a minimum, the downtime and slowed restart of Chinese manufacturing will have lasting ripple effects for global industry and shipping throughout 2020.
“In addition, the spread of Covid-19 outside of China will likely lead to complex and varied
responses by individual governments to contain the virus, further disrupting supply chains globally and requiring businesses to adopt adaptive business continuity measures.”
On its second major supply chain risk, ‘Shifting supply chains in Asia’, BSI notes that as the US and China engaged in their ongoing trade dispute, other countries throughout the region such as Vietnam, Myanmar, Cambodia, Malaysia, Thailand, and Bangladesh all worked to create a more attractive business environment.
“Now, as companies are concerned over their supply chains in Asia amid the coronavirus outbreak and pursue other opportunities, industries must consider the corporate social responsibility risks still rife in China and throughout the region, including the presence of child labour, forced labour, and poor working conditions.”
Covid-19 and, to a lesser degree, the other supply chain risks noted in the BSI report promise to radically change the shape of trade and therefore the shipping industry with immediate effect.
Speaking to CNBC, Alex Capri, visiting senior fellow at the National University of Singapore Business School, said he did not expect things to ever return to normal as we’ve previously known them.
“Some major changes are underway right now,” he said, which will lead to “massive” restructuring of supply chains.
Localisation of supply chains was already in play as a response to the ongoing trade wars, but there is an expectation that this phenomenon will now accelerate. Mr Capri also expects automation of processes to ramp up because, as he puts it, robots are less vulnerable to the pandemics that affect human labour and capital – exposing the inherent vulnerabilities in today’s trade and supply chains.