Singapore Shipping Forum 2016

Shipping capacity, technology, commodity prices, particularly oil, China’s Maritime Silk Road and new financial regulations, especially Basel III, are some of the key factors that will impact the maritime industry in the years ahead. This was the conclusion reached at the Singapore Shipping Forum 2016. This event, hosted annually by Moore Stephens, and organized in conjunction with co-sponsor BNP Paribas, was held at the Suntec City Convention & Exhibition Centre on 21 April 2016, in conjunction with the Singapore Maritime Week 2016, an event supported by the Singapore Shipping Association (SSA) and organised by the Maritime and Port Authority of Singapore. The session was well-attended by more than 250 attendees

This year’s forum was opened by Mr. Esben Poulsson, President of the SSA, who in his opening address, highlighted the rapid technological changes that the industry faces. Mr. Poulsson noted that these changes, which include big data, cybersecurity, and the “smart shipping toolbox”, have the potential to reduce costs and improve productivity. However, Mr. Poulsson also cautioned these are merely tools, and that business acumen and commercial judgment must continue to prevail.

Other speakers at this year’s forum include Mr. Robert Stenvik, Chairman and Senior Partner of Via Mar AS, who spoke on the developments in the various shipping markets, and demonstrated how a professional analysis of shipping markets can serve as insurance to achieve the best investment outcomes. Mr. Stenvik provided an analysis of global GDP outlook and noted that China is in a controlled slowdown to more sustainable growth. These developments have important ramifications on China’s export and import requirements, especially in relation to iron, coal, steel and oil, which in turn drives the demand for various types of ships. Using a complex demand and supply analysis, Mr. Stenvik opined that currently, investment opportunities may exist in dry bulk vessels and certain types of containerships, but the valuations of tankers, gas carriers and other types of containerships may be less attractive from an investment perspective.

Offshore asset owners and financiers share responsibility for the current crisis in the offshore oil and gas industry, and must avoid past mistakes in order for the industry to navigate out of the downturn, in the view of Mr. Venkatraman Sheshashayee, Chief Executive Officer of Miclyn Express Offshore. Mr. Sheshashayee cautioned that both financiers and asset owners must understand that offshore is a cyclical business. Sound business plans in the industry must reflect cyclical effects, avoid over-leveraging and speculative asset building, incorporate stress-testing, and plan for worst case scenarios. Mr. Sheshashayee warned that creative financing is not a solution to excessive leverage and will not help financiers to avoid credit issues in the longer term. Reduction of capacity through scrapping of vessels, cancellation of new builds, and industry consolidation will be required to emerge from the downturn. 

Besides oil prices, the other key influence on world trade stems from China. According to Mr. Yaseen Anwar, Senior Advisor of ICBC Singapore, China’s plans to rebuild the “One Belt One Road” (OBOR) will have significant effects on the rest of the world, and represents an excellent remedy to restore trust in the global economy and harness the Asian potential through regional and global integration. Mr. John D’Ancona, Director - Dry Analysts at Clarksons Platou Asia, elaborated on the implications of OBOR. According to Mr. D’Ancona, the OBOR infrastructural investments will create shifts in future trade as the maritime transport requirements of developing countries change to support the construction and operation of the new infrastructure.

Thereafter, Mr. Arnaud Lambotte, CFO of BNP Paribas Singapore, spoke on banking regulatory developments and their impact on ship finance. Specifically, Basel III, a banking regulatory framework that increases equity capital requirements, creates challenges for banks to extend substantial long-term loans, the type of loans required by the capital-intensive shipping industry. Mr. Lambotte went on to highlight how banks can work together with the industry to overcome the regulatory challenges and provide a solution for future ship finance.

The above topics and other shipping issues were examined in more detail by a panel discussion led by Mr. Mick Aw, Senior Partner of Moore Stephens LLP. As part of the introduction to the panel discussion, Mr. Aw highlighted that a successful investment strategy in shipping needs to be predicated on a longer-term, rational analysis that looks beyond current positive or negative sentiments in specific shipping sectors. Drawing inspiration from the Clint Eastwood film, Mr. Aw classified the various shipping sectors into “The Good”, “The Bad”, and “The Ugly”, and noted that in the long and volatile history of the shipping industry, the performance of each shipping sector has always varied significantly from one year to the next, and no sector has remained the best or the worst performer for continuous prolonged periods. According to Mr. Aw, there is always money to be made from business cycles and shipping is no different. 

In addition to the above speakers, other panelists included Mr. Arnold Wu, Co-head, Transportation Sector, Investment Banking Asia-Pacific at BNP Paribas, as well as Mr. Anthony Zolotas, Group CEO of Eurofin Group. The panel discussion was enlivened by real-time audience polling made possible with interactive polling solutions from Complete Corporate Services. Participants were anonymously polled on issues ranging from the state of various shipping sectors, to Singapore’s role in OBOR, and expected future developments in ship finance. Results of the poll indicate that the audience generally expect bulkers to recover in the near term, which supported the views of speakers and panelists.

Click here to view the slides from the Forum.