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The state of play of major shipping markets at the end of 2015

The state of play of major shipping markets at the end of 2015
Capital Link’s annual “Invest in Greece” conference in mid-December provided an overview of the state of play of major shipping markets and what owners expect in 2016.

The shipping panel, moderated by Citi’s shipping banker Christa Volpicelli, covered multiple sectors. Tsakos Energy Navigation’s Nick Tsakos, after lamenting the involvement of Private Equity in shipping, softened his view and agreed with Tassos Aslides, from Euroseas, who said that he welcomed PE investments in existing tonnage and not newbuilds.

Tsakos, presently the chairman of Intertanko, focused on what he called an “anomaly” where “the whole oil service industry is suffering”. After showing a graph of rising tanker hires corresponding to lowered oil prices - with Brent oil at $37 per barrel on the day of the conference - Tsakos said: “…as the oil price drops, so do the shares of tanker stocks.” In looking ahead to 2016, he voiced an anticipation of more of the same, but cautioned that a spike in the oil price, brought about by some exogenous event, could be a negative for the tanker markets.

The containership market also received attention, through the comments of John Coustas, the ceo of Danaos- which owns large vessels up to 13,100 teu, and Euroseas’ Aslides, with feeder vessels up to 2,600 teu. Coustas emphasized to an audience that included mainly “investors” and not shipping people that Danaos “has weathered the storms” because its vessels tend to be fixed for lengthy terms with revenues fixed well in advance.

In response to Volpicelli’s questions about game-changers and potential surprises, Coustas stressed the importance of the consumer economy to the underlying markets for container trade, which should not see major changes in 2016. He did express a concern about mega-containerships which he said “have done damage to the market.” At the opposite end of the market, Aslides said that “we are looking for a better balance next year in the container feeder market” and “we are buyers at these levels in the market”, which Coustas agreed with.

Panelist John Lycouris, from Dorian LPG provided a good synopsis of this small but important slice of the overall market. Picking up on a the broader theme of energy transportation being tarred with the brush of weaker energy commodity prices, he emphasized an over-arching paradigm shift in the price of oil, which impacts propane and butane where pricing is tied to crude.

The sector, which had been a Wall Street darling a few years back, has suffered from a high orderbook. which Lycouris pegged at 43% of the existing fleet. Regarding prospects, the build-up of natural gas liquid (NGL) inventories in the US has been levelling off, but still “there are large excess inventories that can be sold offshore….and more tonnage will be needed to transport them.” He also pointed to El Nino, a weather pattern causing warm temperatures in the U.S. as a temporary dampener for energy consumption.

The panel could not muster any kind words for dry bulk, except to agree unanimously that it was ripe for asset players.