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Your brief for the week ahead
w/c Mon 16th July 2018

1. Container ports face the danger of over-capacity.

A report to be published this week by Boston Consulting Group looking at Middle East container port strategies for future growth suggests there’s a real danger of stakeholders focusing on building more capacity rather than on developing hinterland connections. State authorities should continue to create a favourable business environment for ports and promote industrial development. According to BCG, annual growth of capacity in the Middle east rose by 7%, whereas container throughput only grew by 4%. The result has been severe overcapacity, such that some ports are working at only 66% capacity. This puts downward pressure on handling rates. And there’s no sign that investment in additional capacity is slowing. 

Read more on Lloyd’s List.

Djibouti defends legality of trade zone after DP World threat
Tanger Med posts higher volumes fr first half of year 
DP World quashes rumors of Djibouti settlement

2. Shipping stocks subdued as trade war between US and China looms

Some brokers make a living analysing every tiny movement in shipping stocks. I used to study the markets week by week. I quickly discovered that shipping stocks, like all stocks, are influenced by sentiment more than hard facts. This week Arctic Securities have been focusing on the Capesize sector. They tell us that bad weather and infrastructure problems have kept demand low, however Vale in Brazil says it will ramp up exports, there will be strong steel production and consumption, attractive margins on steel, and there are positive developments in the global economy. The second half of the year looks good for Capesize shipping. And while a full trade war between the US and China won’t have much impact on dry bulk shipping, it will have an impact on sentiment. Analysts are very bullish for the second six months, but in my experience analysts are paid to talk up the market.

 

Read more on Lloyd’s List.
Tidewater agrees $1,25bn merger with GulfMark
Our current advice to anyone looking for insight – read the Lloyd’s List Quarterly Outlook.

3. SMM showcases a refocusing of technologies 

We are all aware of the SMM exhibition coming up in Hamburg in September. Like many of you, I’ve attended most of these shows; SMM has become a global technology event, unlike Sea Japan, KorMarine and Marintec, which are still regional shows. It’s my strong belief that shipping is going through a technological revolution – we won’t realise this until we can look back and see how much has changed. Among the many companies I have written about in this context is MAN Energy Solutions. The company used to be known as MAN Diesel & Turbo, but ‘Diesel’ is a dirty word now, and the corporate marketing has led the change. We are all aware of Kongsberg’s acquisition of Rolls-Royce Marine, Wärtsilä’s taking on Transas, and ABB. These companies are behaving as integrators, pulling together technology expertise to offer not just products, not just services, but an entire ‘eco system’ for shipping. This is much more than consolidation, it’s a refocusing of technology, commercial operations, people skills to create a vessel operations centre of excellence.

 

Read more on Lloyd’s List.
OSM plans online management procurement platform

4. Tough times ahead for scrubber manufacturers 

I am in email conversation with a Master’s degree student at Erasmus University in Rotterdam. He contacted me after reading a report I wrote for Lloyd’s List on the KNect365 Future Fuels conference. He’s writing his thesis on whether the use of low sulphur fuels – that is, not HFO + scrubbers or LNG – will increase the cost of major commodities. I sent him my notes from the conference, and he asked me to put him into contact with a couple of the speakers. But I can’t do that because of GDPR, so I’ve asked the speakers to contact him, if they are willing.

This comes as a new study by analysts at Macquarie reveals the industry believes IMO 2020 will significantly increase the cost of bunker fuels. They do not believe there is capacity enough at the world’s shipyards to handle newbuilding orders and fit both ballast water treatment systems and scrubbers. Currently fewer than 500 vessels have scrubbers fitted, and at best only 1,200 scrubbers will be fitted by January 1st 2020. But they include some big names. If there is little demand for heavy fuel oil, refiners will treat it further to raise its value, and owners with scrubbers will be stuck. 

 

Read more on Lloyd’s List.
Jefferies predicts higher sipping costs for miners
Wärtsilä nets $198m scrubber retrofit order

5. Insurers forecast World Cup winner 

Lloyd’s correctly predicted France would win the FIFA World Cup before a ball was kicked, their PR agency says. The prediction was based on an economic model assessing the insurable value of the squads competing in the tournament. It correctly predicted Germany would win in 2014. The insurable value of the French squad was £1,430 million. The insurable value seems to be the most reliable predictive tool, even given all the upsets in the tournament. I hate to quibble but Lloyd’s says the metric was reliable throughout the tournament, correctly predicting the winners in 64% of the 64 games played. Bear in mind that tossing a coin gives you a 50% chance of a correct prediction. I’m not sure 14% is enough of an advantage to say insurable value is the most reliable tool. If that’s how they judge ship insurance risk, I’d prefer something better.

Click here to check out the Quarterly Outlook: Insurance. marine insurance - Marine insurance premium may grow in parallel with trade growth. But trade wars, eurozone issues and Brexit could derail the rosy scenario.

6. Michael Faulkner, Editor, Insurance Day walks away with (Re) Insurance and Risk Features Journalist of the Year 

Willis Towers Watson, a leading global advisory, broking and solutions company, announced the winners of its 13th annual Media Awards last night, at a ceremony held in London. The awards celebrate excellence in business journalism in the areas of (Re)Insurance and risk, human resources and benefits, pensions and institutional investment. The awards programme consists of eight topic-specific journalism categories judged by expert panels, which include senior industry figures and leading journalists. In addition, four publication of the year titles were voted for by the industry. Nicolas Aubert, Head of Willis Towers Watson, Great Britain, said: “The standard of the award submissions this year was outstanding and we are delighted to recognise these journalists for their high-quality work. We appreciate the important role the media plays in providing analysis and commentary on the issues that matter and so it is a pleasure to recognise excellence in this field.”

Read more from our award winning Insurance Day editor here.

 

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