Different agendas ‘can influence success or failure’ (Tradewinds 01 November 2013)

Different agendas ‘can influence success or failure’ (Tradewinds 01 November 2013)

Tradewinds 01 November 2013 BY GILLIAN WHITTAKER ATHENS

Analyst Riaz Khan revealed to Greek shipping executives the day-to-day mind-boggling complexities facing shipowners and how two people can interpret the same situation very differently — glass half full, glass half empty

Politicians playing at being economists, banks helping themselves to avoid capital losses and charterers feeling there is no irony in re-negotiating or walking away from long-term deals — they have all come under the stern judgement of a leading analyst.

These are just a few of the day-to-day, mind-boggling complexities facing a shipowner, and which affect the bottom line, Tavlon Consultancy analyst Riaz Khan told an audience of Greek shipping executives.

He believes that, within the shipping industry, some owners have problems, but will survive. For others, what has been happening in the global economy in the past five years has been catastrophic.

“The list of companies that have gone under is quite awesome,” Khan said.

Under the titillating title “50 Shades of Grey”, Khan looked at the factors influencing market recovery or otherwise.

“As we all know, banks are holding back distressed assets, so do I dare mention zombie shipping companies being propped up by some banks that have zombie divisions, which were previously called work-out departments?” he queried.

World trade in 2012 stood at $71 trillion, with the West contributing 47% and the East 38%. It was projected that the contribution from the East would increase to 41% by 2015, but Khan points out that a 3% growth was equal to $7 trillion.

The expected volume of trade for 2013 is 3.89 billion tonnes, up 7% on last year — although Khan produced some startling figures, which indicate that trade volume may not keep pace with net fleet growth.

In 2010, 13.3 ships were delivered for every one scrapped. By 2012, the ratio had reduced dramatically to 2.9 delivered for every one torched. However, the forecast for this year is three delivered for every one demolished, creeping up to 4.5 vessels delivered for each one broken up in 2015.

Putting the medium-range (MR) tanker sector under the microscope, Khan notes that 321 vessels were on order at the end of September, representing 63% of the overall orderbook. Furthermore, only 12% are 15 years or older, meaning that scrapping will have to come from younger vessels.

“Each player has an agenda and views on the market, resulting in the negative imbalance we currently have between demand and supply in many of the sectors,” Khan said.

While the former DVB Bank head of research stresses that he was not picking on his previous vocation, he says that “one cannot help taking a jab at the persona of some bankers in the capital markets”.

Khan says he tried his best to put a positive spin on his analysis.

“But being a realist and having been around for a while, I think it is worth looking at the expression ‘Is the glass half full or half empty?’ The tendency seems to be for two people to interpret the same situation… apparently in different ways,” he concluded.