shipping

By Charles Okeahalam of AGH Capital

Tom Hank’s portrayal of Captain Richard Phillips’ encounter with the pirate Abduwali Muse aboard the MV Maersk Alabama has focused public attention on an issue threatening an industry that, according to the International Maritime Organization (IMO), handles more than 90 per cent of global trade. 

Here’s a partial, potentially misleading, but nonetheless fascinating glimpse of on-the-ground activity – or, in this case, on-the-water – in the big emerging economies.

New figures from Drewry Maritime Research show that container shipping at the four Bric countries – Brazil, Russia, India and China – grew at an impressive clip of 7.1 per cent year on year in the first half of 2013. They also show that it’s pretty much all about China. 

Fernando Núñez Fábrega, Panama’s foreign minister, is on a trip to Britain this week. The point of the visit is to sign his country’s 25th double taxation treaty. But he is likely to find people more interested in his views on Chinese plans to build a rival to Panama’s canal in another Central American nation. So, before he left, beyondbrics asked him what he thought. 

For commodity traders involved in emerging markets – say, buying cotton in Africa and selling it to China – one of the biggest headaches since the financial crisis has been the tightening of trade finance terms by banks.

It has been harder to finance shipments of commodities as btanks, eager to reduce risk, have been reluctant to offer financing over long distances, or where there is a significant lag between the placement of an order by a customer and receipt of the goods.

Enter Maersk Line with a way round the problem. 

China’s biggest shipping company is selling to save face. China Cosco Holdings Co, the financing arm of state-owned China Ocean Shipping Group (the Cosco Group), has announced two asset disposals in as many months as it struggles to prevent its shares being delisted from Shanghai’s A-share market. 

Increasing demand for commodities in the past decade boosted shipping and encouraged shipbuilding. But just as giant bulk carriers take a while to stop, so does building them. Dinesh Sharma, senior consultant at Drewry Maritime Advisors, explains to Jonathan Wheatley, deputy emerging markets editor, what impact overcapacity is having on the industry.

Who’d be a shipbuilder? New figures from Drewry Maritime Research show the bleak prospects facing the industry after a slump in world trade – or, more precisely, a slump in the rest of the world’s trade with China. 

Last month there was bad news for the world economy from the shipping industry. As beyondbrics reported, freight volumes between China and Europe began to fall in July, and were still dropping – at a time of year when they usually start to rise.

Today, the situation is no better, but it seems that shipping companies are learning to cope with the challenge. 

The cost of shipping consumer goods from China to Europe should be peaking around now, as retailers gear up for the busiest period of the shopping calendar.

But not this year. Lloyd’s List reports on Monday that the Shanghai Containerised Freight Index has fallen by more than 5 per cent in the past week, bringing the rate per TEU (twenty-foot equivalent unit) to $1,218, down from $1,934 four months ago. 

With Russian news often dominated by the woes of foreign investors like BP and Telenor, it is always nice to hear a positive story about the country’s investment climate. The announcement that Denmark’s AP Møller-Maersk is finally entering the Russian market fits the bill. 

As sanctions on Iranian oil exports tighten, some relief for Tehran has come from the Indian government, which will support insurance for tankers transporting Iranian crude to Indian refiners.

India follows China and Japan in providing insurance support in response to EU sanctions introduced on 1 July, targeting insurers of ships carrying Iranian oil. But it seems likely to be no more than a stop-gap solution to shortages already hitting India’s refineries, as new sanctions are expected to make the trade increasingly difficult. 

The privatisation of Bulgaria’s rail freight business offers interesting opportunities both for potential investors and the country’s transport sector.

While BDZ Tovarni Prevozi (officially translated as “BDZ Cargo”), the cargo operator of state-owned rail firm BDZ is in seriously need of modernisation and restructuring, Bulgaria’s position on major trade routes between the Middle East and Europe could give it the chance to develop as a significant regional logistics player. 

Last week a delegation from Luka Koper, operators of Slovenia’s Adriatic port, were charming folks in Tokyo and Osaka; this week it’s they’ve been talking the talk in Shanghai (albeit as part of the North Adriatic Ports Association) at Transport Logistics China 2012.

Given that Slovenia’s economy is performing badly (0.2 per cent GDP contraction in the first quarter) and that the country is in the grip of a government austerity programme, can such expensive trips abroad – and from a majority state-controlled company at that – be justified? 

Croatia’s coastline is best know for tourism, which is doing just fine. The Adriatic coastline is also home to the Croatian shipbuilding industry, and the Port of Rijeka. The port has potential, but the shipyards face a rather more uncertain future.

In April, the European Commission urged Croatia to speed up the process of restructuring its five beleaguered shipyards in the run-up to the country’s EU accession in July next year. The choices are pretty tough. 

Much has been made of the recent precipitous fall in shipment to inventory ratios in Asia – a precursor, it is feared, of the kind of recessions last seen following the collapse of Lehman Brothers in 2008-09 and the dotcom bubble burst of 2001, when inventory levels also fell off a cliff.

But Frederic Neumann of HSBC argues in a note on Thursday that the ratios are a coincident rather than leading indicator and that other factors, including advances in supply chain efficiency, are at play. A slowdown is on its way, he says, but on nothing like the scale seen before.