Newsletter No.5 2019

Coinciding with IP Week, the Tanker Freight Derivatives Forum is the world’s largest FFA gathering for the tanker market. 

Hosted annually by the Baltic Exchange and FFA Brokers Association, the Forum features freight market insight and discussions.

The event is free to attend for freight and derivative traders and those interested in trading exposure to tanker rates.

Tonight the Baltic ICS lecture series returns to Greece, with a special edition aboard the Hellas Liberty.

For the third lecture we welcome Director of Ursa Shipbrokers, Simon Ward, as guest speaker, who will lead the conversation on economic cycles & shipping. He will look at freight market cycles; how trends in cargo flows have changed and the impact on vessel supply side as a result of the evolution of the shipowner; and the ever-changing ROI horizons for their investors.

The session will also include a Vasilopita cutting to celebrate the New Year.

The event is free to Baltic and ICS member companies, but those interested must register by email to membership@ics.org.uk (reference: BXICS203)

View the flyer here.

About ICS Baltic Lectures
Intended to support and develop brokers and operations professionals, the Baltic ICS lecture series looks to examine topical issues facing those working in chartering and operations roles, offering advice on best practice in critical situations and insight into the changing patterns affecting the shipping sector.

On the occasion of Chinese New Year, the Chinese Shipping Association of London is hosting a gathering next Thursday, 31 January at the Baltic Exchange.

The evening will start in the members bar with a dry bulk market overview by Troy Yu Lewis (Research Analyst, Howe Robinson), followed by food and drinks. CSAL committee members will be in attendance to discuss ideas about planning a larger event for London International Shipping Week (September 2019). Please come by for a long overdue catch up!

Time: 18.00
Address: 38 St Mary Axe EC3A 8BH
Free Chinese buffet. Drinks available for purchase behind the bar.

Open to all members and friends of CSAL.

Click here to RSVP.

When it comes to shipping and offshore financing, credit appetite from traditional banks has assuredly decreased. But while the attractiveness of the sector has diminished, regulation has also had an important role to play.

“I think the fact that there is reduced credit appetite from the traditional banks, at least, for the shipping and offshore sectors is well-documented and everybody has been talking about it,” said Elias Sakellis, chief investment officer at Borealis Maritime, on a panel looking at debt and lease finance sources for shipping at the 10^th Anniversary Marine Money London Forum in the UK in January.

Similar sentiment was felt by the panel’s Paul Taylor, Societe Generale Corporate & Investment Banking’s global head of shipping and offshore.

“Credit appetite among banks is probably not at an all-time high, and you can’t really blame our banks for not having unlimited capital for the sector because if you look at the history since the turn of the century, not many banks have made huge profits in this sector,” he said, discussing discipline and responsibility. “So stability of earnings would be nice to see across the sector for our banks to allocate the capital that we need to actually grow our businesses, and there’s very few banks today that are looking to grow their lending book. So credit appetite is one challenge we have at the moment.”

There seems to be space for everybody, now and taking it forwards

Regulatory pressure

The other challenge, according to Mr Taylor, is regulation.

“With Basel IV coming on, our pricing model in the traditional banks is going to get stretched, and we’re going to have to pass some of that price across to our clients in order to make a return on capital because ultimately, making a return on capital is why we are in business. That will be hard to do. I still think there is room at the top tier, the top end of the sector, for traditional banks, for lending banks, to make very good profitability, but we have to be sure of what our business model is. It has to be sustainable. We have to do more than just lend at cheap margins to actually have a role going forwards, and that is going to be a real challenge for many banks in this market.”

Following his own comment about lowered credit appetite, Mr Sakellis said: “I do think that if you look at … the top tier of owners globally, you would not notice it, and therefore there’s definitely an opportunity opening up in the market for small to medium-sized owners, who at the same time, however, are tremendous commercial and technical managers of their vessels, of all of their fleets. By and large, they’re very, very focused. They do only one thing and they do it very, very well, and the only thing that they lack is balance sheet size and strength, and that is something that alternative financing platforms … can probably take a view on and underwrite credit in that perspective.

“If you look away from the type of borrower, the other way to think about this opportunity in this market is to think about the type of projects. The other way that alternative financing can clear all in this industry is to fill the gap in terms of, obviously, stretching leverage and replacing part of the equity. The second one is financing assets which, for a variety of ways, are not easy for banks to finance — be it because of segment, size, age, etc., etc. — and then the third one is potentially — it’s not always the case, but potentially — is to underwrite risk when time is very valuable. So if it’s a special situation, if time is short, if you need an underwriting decision really quickly, then again, that’s an opportunity.”

Looking ahead

Mr Taylor felt that discipline, responsibility, sustainability and profit are all important for banks today and new challenges for the future are the environment and responsibility.

“There’s IMO 2020 clearly coming up, and we as banks have a real risk-management responsibility here, not just partnering our clients but actually looking at it from a risk-management perspective and being comfortable that they’re approaching it in the right way so that we all succeed from IMO 2020. But beyond that, in relation to the climate issues, I can see, going forwards, banks [having] to pay much more attention to climate-related issues, relating to our clients, relating to the ships that we finance, looking at the emissions and being far more aware and responsible of the assets which we’re financing, and that’s going to be a big issue over the next few years.”

Though Friday Wang, head of the Greek/UK team in the shipping leasing department at CMB Financial Leasing, said that his organisation’s perspective is that leasing houses will see more challenge in the future, panel moderator Dora Mace-Kokota, Stephenson Harwood Partner, mentioned “the mutual reliance of the different sources on each other”.

“I think what we’re all hearing this afternoon is that there seems to be space for everybody, now and taking it forwards,” she said.

“I think as ABM AMRO, we actually welcome the alternative capital providers,” said Andre Lockhorst, executive director/head of transportation for north Europe and the Middle East at the bank. “I think if you look at the shipping world, there’s really a need for financing for all clients or shipping companies around there.”

The message seems to be that there are opportunities for all to get involved in the ship financing sphere, as long as regulatory hurdles can be overcome and CSR goalposts can be hit.

The Baltic Exchange will hold its next Ship Finance Executive on May 13 and 14 in London in the UK. More information can be found here.

The following individuals have applied for membership of an existing member company:

Any comments should be passed to Karen Karanicholas by 6 February 2019.

Tickets can now be purchased for the annual Baltic Exchange Golf Society (BEGS) dinner on Thursday 7 March. This black-tie event is open to all and provides an informal and enjoyable opportunity to network with different brokers and principles. 

As usual, the event will be held at the Honourable Artillery Company (HAC) in Moorgate, with tickets costing £85 per head. 

To purchase tickets, contact Duncan Brown:

E-mail: info@balticgolf.co.uk

Tel 0207 337 7063 / Mob 07831 428 046

Or James Pendered:

E-mail: jpendered@balticexchange.com

Tel  0207 369 1672 / Mob 07802 965552

There will also be a wine list circulated in advance to will allow tables to reserve the bottles they want ahead of time. 

Pictures from last years event can be viewed here.

The next Baltic Exchange quiz night takes place on 7 February at Balls Brothers Adams Court.

The event is capped at 80 people and regularly sells out so we recommend attendees book early. 

Tickets are priced at £15 per person, 6 people per team.

For more information or to book your tickets, click here.

Following sailing, golf and tennis stages, the David Bradley Cup is still wide open ahead of next Thursday’s final pub quiz stage. Out of the 16 teams entered into the competition, Howe Robinson, HFW, the Baltic Exchange and Clarksons are just behind the current leaders EA Gibson.

The winner will be awarded the trophy at the Chairman’s Cocktail Party in May.

The Baltic’s annual Irish Night will be held at The Brewery, Chiswell Street on Thursday 14 March. 

The Baltic Irish Society, Irish night, is one of the most popular events of the Baltic’s social calendar. Held each March on the evening of the closest Thursday to St Patricks Day, it is regularly attended by over 500 people.

The format will be as in previous years, including the traditional sing-along.

Tickets are now available, costing £95 each and can be bought by contacting Colm Nolan by either the email or telephone details given below:

E: colm_nolan@balticexchange.com 
M: 07713316417

Please note that the Baltic have negotiated a new wine list with the Brewery, which includes alternative wines at a reduced rate from last year.

Ticket payment should be made to:

NatWest Bank
Sort code 50 00 00
Account number 15427080
Account: Baltic Exchange Irish Society

For those paying directly to the bank, please also email Simon O’Sullivan with payment details.

Baltic Irish Society needs you!

Members under 40 with Irish connections and an interest in having a more active role in the Baltic Irish Society are invited to contact Colm Nolan.

The Young Baltic Association (YBA) invites industry colleagues under 35 to its first-ever event held in Geneva at Le Soleil Rouge.

Join us from 6pm for cocktails and nibbles.

To find out more and to register your interest in attending, click here.

For a tough, exhilarating and empowering corporate event, Seafarers UK is recruiting teams of four to seven walkers, plus a support driver per team, for the charity’s 2019 fundraising event in July.

Teams need a good base level of fitness and a commitment to training, including steep hill hiking, to prepare for the two 10-14 hour back-to-back days. To contribute towards vital funding to support seafarers, each team pledges to raise a minimum of £4,000.

Each team member receives a T-shirt, medal and great support for their preparation and fundraising, both in the build-up to the event and during the exciting weekend. 

For more information please contact Marie Robson, email events@seafarers.uk, tel 020 7932 5960, mobile 07795 065441.

www.seafarers.uk/event/the-24-peaks-challenge/