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It can't be Christmas every day
A survey of the Greek shipping sector By Robert McDonald August 2006 -- Sea freight rates reached record highs between the third quarters of 2003 and 2005 leaving Greek ship owners either sitting on mountains of cash or heavily investing in greening their fleets. Some are said to be holding hundreds of millions of euros -- industry gossip says one has EUR 2.5 billion parked in time deposits -- waiting for ship prices to come down while others are already heavily committed to new building programmes. Figures published this March showed that the Greek owners, who already command the largest fleet in the world - 3,397 vessels of 190 mn dwt -- had a further 364 ships on order. Since the beginning of the decade the average age of the fleet has fallen by over six years and is fast approaching the world average. Earnings from shipping, which stood at EUR 13.9 billion in 2005, have outstripped those from tourism for the past three years to become the largest source of invisibles in the balance of payments. The major factor driving rates has been the high demand for oil and raw materials from China where the economy grew at an annual average rate of 9.5% over the past five years and rose to 10.2% in first quarter this year. But Chinese demand has begun to wane and freight rates to ease. Globally, wet trade rates came off some 30% last year from their historic 2004 highs, while dry rates fell by between 25% - 40% depending upon whether a vessel was on time charter or in the spot market. Such was the demand during the boom that there were reports of rates trebling for some sizes of dry cargo vessels. Almost anything in the water commanded a premium and a number of newbuildings were sold while they were still on the slipway. The problem is that, when rates rise, fully-amortised, older vessels become cash cows and ships that might otherwise be sent for scrapping continue to trade. The result has been over-supply and a downturn in rates. Owners who bought while prices were at the peak find themselves trading into a softening market and wondering how they will meet their debt repayments. Ship owners and operators are frantically trying to fathom the future. One school believes that freight rates have considerably further to fall - perhaps as much as another 40% -- though even this would leave them at levels above historical averages. Another believes that they will come off by only 10 - 15% before starting to firm again. Despite the beneficially-owned fleet being the largest in the world, the Greek flag flies only on around a third of the vessels. Owners say that the flag rules make it uncompetitive. They would like to see changes that would allow them to place more of their ships on the Hellenic Registry because this would allow them to groom more Greek officers, not only to crew their vessels but later to man the maritime cluster ashore. Some say that without changes to flag rules soon, Greece could lose its focus as a maritime centre as more and more business slips away to centres in the Far East. There is also a concern among Greek owners about a growing trend to substitute the multilateral legislative regime, which, historically, governed international shipping, with unilateral national or regional laws. The US government and the European Commission have played a leading role in this fragmentation over recent years. Greek owners argue that shipping needs a global regulatory system. Captains need to be able to concentrate on operational and safety matters and not on becoming bureaucrats constantly having to cope with a multitude of different rule books. In this they are supported by the UN's London-based International Maritime Organisation (IMO). "As an international industry, however, shipping should be regulated by uniform, global standards, which should be developed and adopted only through and by IMO," says IMO secretary general Efthimios Mitropoulos. "Ships are not elastic objects whose design, construction and equipment can be adjusted to satisfy the requirements of the national legislation of the country of their next port of call, or those of the legislation adopted collectively by countries of a certain region whose ports a ship will visit or through the waters of which ships will pass in pursuit of their peaceful mission." The London-based Greek Shipping Co-operation Committee has joined forces with four major shipping industry organizations to challenge in the UK Administrative Court recent EU 'criminalisation' directives that provide for prison terms for crew and shipowners who are deemed responsible for oil spills. These and many other issues regarding the regulatory regime, ship-financing and markets are discussed in detail in "It can't be Christmas every day," Business File Special Survey No. 60 published June 5. The special 98-page issue includes company profiles in the tankers, bulkers, containers and gas carrier sectors that are based on extended interviews with leading figures in the industry such as Nikos Tsakos CEO of Tsakos Energy Navigation (TEN), and Costis Constantkopoulos, CEO of Costamare Shipping. There are also profiles of the new kids on the block such as 28-year-old Harry Vafias, CEO of StealthGas and 33-year-old Evangelos Pistiolis, CEO of Top Tankers, both of whom have built fleets of 27 vessels (respectively in small gas carriers and medium to large oil tankers) over the past couple of years by making use of listings on American stock exchanges. The survey also includes an exclusive interview with Mitropoulos of the IMO and, to round things off, there is an extended chapter on the liberalisation of the Greek ferry industry.
For further information on subscriptions and/or individual copies of Business File, which is published by Athens-based Kerkyra Publications Ltd., please contact INVgr. "It can't be Christmas every day" is available from Kerkyra Publications. Subscribers to INVgr's electronic business information service are entitled to a discount of 20% on the cover price or 20% on the first year's subscription rate. Source: Kerkyra Publications Ltd. Useful links:
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