You will hear from Stamatis about:
- Two recent examples of how shipping has needed to adjust to abnormal situations brought about by geopolitics.
- How shipping can successfully use artificial intelligence
- Why he believes dry bulk shipping companies do not need to have a network of offices around the world
Find out what Stamatis has to say on these issues and much more.
Listen to the episode now in the player above or the app of your choice below
Listen to the full conversation now in the player above or the app of your choice below
Episode transcription
Marcus Hand 00:09
Welcome to the Seatrade Maritime Podcast. This is Marcus hand editor of Seatrade Maritime News. Today's the latest episode of our series Chat about Geopolitics and Trade or Chat GPT with guest presenter Punit Oza. Punit is going to be talking to Stamatis Tsantanis, CEO of Seanergy Maritime Holdings Corp. You will hear from Stamatis about two recent examples of how shipping has needed to adjust to abnormal situations brought about by geopolitics. You will also hear about how shipping can use artificial intelligence and find out why Stamatis does not believe that drybulk and tanker shipping companies need to have a network of offices around the world. Now I'd like to hand over to Punit.
Punit Oza 00:58
Thank you so much, Marcus. It is my tremendous pleasure, in fact to invite the second guest in our monthly podcast on Chat about Geopolitics and Trade, Mr. Stamatis Tsantanis. Tsantanis welcome to the podcast, and I would really, really enjoy this podcast, I'm sure because it has been a pleasure not just to know you since the time I've been in shipping, but also, since the time we started together in the Cass Business School, which is now the Bayes Business School. For the listeners who don't know, we are both classmates from London. And it is just a testament to the shipping industry that we are able to collaborate on so many levels now. And Stamatis welcome to the Chat GPT. My Chat GPT, which I call Chat about Geopolitics and Trade. Stamatis is the CEO of Seanergy Maritime Holdings, and also a legendary person in the maritime industry and it's a pleasure to talk to him.
Stamatis Tsantanis 01:56
Thank you Punit. Thank you for having us. Thanks for organising this great concept of podcast. It's really a great pleasure for me to attend.
Punit Oza 02:06
Brilliant. As I was thinking about this idea of this podcast, you were actually one of the first persons I contacted, remember, and you mentioned to me two things. First of all, you said this is something which is very interesting. And secondly, you said you must try and maintain it at bite sized levels. And don't make it long podcasts. So we actually are keeping it to that and keeping it around 20 to 25 minutes at the most. So I think we can start off straight away. And maybe I can ask you, how do you see and what is your view on geopolitics and how it interacts with trade in general, because this is a topic which I think is seldom discussed. But I would love to hear from a shipping CEOs perspective. How do you see geopolitics and trade interacting from your point of view?
Stamatis Tsantanis 02:50
That's a great question. And I'll try to keep this brief and concise. It is obvious that geopolitical turmoil is always a very big issue for shipping because it disrupts the normalised trading routes. So right now, the demand for seaborne transportation services and the supply of ships is usually adjusted on the basis of current pattern, the current trading pattern. So unless something material changes, you know, this pattern is usually not interrupted. However, when you have geopolitics, affecting the current pattern that creates an abnormal situation whereby shipping needs to adjust the demand needs to adjust. And of course, the supply of ships needs to adjust as well. So it's one of the most critical points, I would say, it's one of the most critical demand elements outside of you know, the normal demand for products that we see that affects the shipping all together in a very material manner.
Punit Oza 03:52
Perfect. So obviously, it's a it's an important space. And one of the things which I do tell the students as well, is that this is the space in geopolitics, where economic considerations kind of take a backseat in some cases. So if I actually ask again, with regard to geopolitics, and from your vast experience in the industry, have you seen any examples which you can share with the listeners of the geopolitical impact on trade flows, which has actually either changed the trade flow, maybe even demolished a trade flow or created a new trade flow? That would be a very interesting way for you to say an example of the whole idea of geopolitics and trade.
Stamatis Tsantanis 04:34
Yeah, of course. There are two recent examples, very recent examples both attributable to the invasion of Russia in Ukraine. One has to do with the transportation of oil and ore products, and the other has to do with the transportation of grains. And we start with oil and oil production, how that has affected the training routes. And that has led into this huge rally that we have seen in the rates of the tanker ships. So, first of all, as you know, immediately after the invasion of Russia in Ukraine, the Russian oil became under a certain embargo, sanctions and all these things affecting direct trade. Of course, certain existing things like the pipelines continue to run for a certain period of time. But that automatically led to a massive increase of the ton mile. And the reason is that Russia instead of selling directly to Europe, through pipelines, or to its closest countries, they decided to and of course, it became a matter of need, based on the sanctions, they were loading crude oil on bigger ships, from various Russian areas, either in the Baltic or in the Black Sea. And they were transporting crude oil, instead of the closest countries like Europe, all the way to India and China. As you can imagine, the initial transportation, the initial ton mile effect, doubled or tripled, adjust for the crude oil. Now in India and China, that crude oil that was exported out of Russia got refined into refined products, like gasoline, like diesel, like jet fuel, and that was reimported back to Europe without having the sanctions elements. So the origin of the initial cargo out of Russia, and not only increased it ton-miles, by transportation to India and China by two or three times, but also on the way back from these countries, it went another two or three times as a refined product. So that led into a massive increase of autonomy or demand for oil and ore products just because the war happened. And of course, that led into the market going from anywhere into the single digits of freight rates in tankers, something that isn't 6, 7, 8, $9,000 that were in the first quarter of 2022, to where it went at an average of $70,000 to $150,000 a day, for as you can imagine, that increase in rates made colossal fortunes for the tanker owners that were patient. On top of the ton-miles, the sanction element also created the so called two tier fleet, which means one tear was a tear of ships that operated with the Russian cargoes, both the crude oil and the ore products. And the other one was the one that operated under the sanction element. So the two tier element created the big supply squeezes both in the white fleet put it this way also in the grey fleet and having a massive increase in demand as well as squeeze in the supply through the factors that I just mentioned, automatically created circumstances where the tanker rates went into this historical high levels that we have not really seen since the beginning of the new millennium. Now, let me move into the tribal Kelemen. Of course, as you can understand, immediately after the invasion, all the grain exports out of Ukraine were halted and Ukraine is providing a big amount of grains into Europe into Africa and other countries, while not automatically calculated. They went into a situation where they created a growing corridor in order to feed the countries that were depending on the grain from Ukraine. However, in order to the green corridor to work, there was a massive disruption in the entrance of the Black Sea, whereby approximately 250 Panamax, Kamsarmax and Supramax vessels, drivers, of course, were waiting to either go upwards or downwards northbound or southbound in order to load or transport the grains to the countries needed. That created the big supply squeeze were when you have 250 ships automatically waiting and being held in a congested area like the entrance of the Black Sea. That also created a big supply squeeze for the Supramax and Kamsarmax and that had a cascading effect into dry bulk shipping altogether. However, that has been recently unwound, because, as you know, Russia and Ukraine decided to discontinue the green corridor. So all these 250, 240 ships that were bound the world congested in that area, where automatically released. So when you have the release of so much tonnage back into the open market, automatically the rates from let's say meet five to $8,000 a day has dropped into the single digits. And that has affected the market downwards. So far, we have seen a massive increase in the tanker market from single digits all the way to double height double or triple digits. But 1000s, of course, in respect of Kamsarmax, Supramax, we saw a peak because of the congestion that has been unwound. So all these geopolitical elements, which is the most recent one we have in history, and that has to do with invasion of one country to another, has created big disruptions in the freight trading routes of both tankers and dry, dry bulks.
Punit Oza 10:38
Absolutely, and fascinating examples. And thank you so much. I also feel that this also kind of proves a very strange theory that people have that you know, when things do go wrong, and there are inefficiencies because of any events happening or destruction, in fact, shipping tends to gain, unfortunately, because of those disruptions. And I think a war is exactly in the same space, we are still not looking at the rebuilding space at some point of time, that's going to have a huge geopolitical impact as well, at some point of time. But yeah, I mean, I come to the next aspect, which I think is very interesting, if you remember, and I'm sure you do, both of us sitting in the class in our business school. And Michael Tamaki is showing us a video of the price by Daniel Yergin, the story of the oil and, you know, we probably at least got a glimpse of what commodity can actually do in terms of trade, politics, and economics all put together. But the technology at that point of time was essentially limited in terms of the visibility that it could offer us. Today, there is a lot more technology, there's a lot more research tools, there's a lot more availability of data. How do you see and how do you use these technology spaces, data spaces to manage these geopolitical risks, and maybe to even look at potential opportunities, like you mentioned about a spike in the tanker rates, and probably a drop in the dry bulk rates if the grain has stopped moving? How do you see technology and research helping you as a commercial person and your team in managing these geopolitical risks? That'd be fascinating for our students to know and our listeners to know as well.
Stamatis Tsantanis 12:24
Of course. First of all, Punit, let me start by saying that you very well said that Michael Tamaki was showing us a video through a video machine and a video cassette with I remind you, that doesn't exist anymore. So let us be a little bit mindful about our age here for the younger students. But yeah,
Punit Oza 12:46
I must remind the listeners that it was 1997. So when the video was there, we're not talking about recent times here, we just want to clarify that the Cass Business School does use modern equipment now, they don't use video equipments anymore!
Stamatis Tsantanis 13:04
DVD at best, so the best. So I must say that there's a lot of technology and we in Seanergy group, we are using technology ever since 2015. We have been one of the pioneers in using remote performance monitoring systems for our service centre. So artificial intelligence, which we introduced in 2019 on the vessels. Remote performance monitoring systems, combined with weather routing, of course, makes the fleet more economical and more efficient because it operates the vessel, and also predicts weather routing and currents and everything associated with the operation vessel. So that by itself is very, very fundamental in the operation of vessels and makes it more efficient and more environmentally friendly by reducing the consumption and of course, the emission of co2. At the same time, artificial intelligence helps us predict errors and malfunctions in the engineering on the basis of certain readings, that's helpful as well, especially when you operate a middle aged fleet like we do. Now going forward in respect of all the data that we have been receiving as an office, to be honest, permit all this data is pretty much useless if you don't have the right people analysing it. So the big concept behind data here is not to continue being, you know, retroactive, but to be proactive. So for us the usage of data and the proactiveness, we're using about it, is the fact that when we automatically see or foresee a certain issue about the operation of the vessel or anything associated with its technical capacity. We have to act immediately. So if you use all the data and artificial intelligence as a retroactive thing, like the moon report of the ships, it's pretty much useless in my opinion, I don't see any value. So it's not only about all the set of data that everybody has been receiving, but most importantly, for the right people in the office to be able to analyse that. And here in Seanergy, we have a dedicated team, which stands in cooperation with the technical and Operations Department and that dedicated team deals with data all together. And data is not only about operation and technical management, but also it's about sustainability, we have entered into a world where all these environmental regulations will bring massive changes in shipping, they have already started, and they will continue to bring massive changes in shipping for the next three to five years. And certainly until 2050. So unless an office is fully equipped with the right and dedicated people, to analyse data, and to know how to use all the set of information that we have been receiving daily, then it's pretty much useless. So for us getting the data establishing the department and making sure that we are being proactive in running the vessels, not only for them I meant for the regulations, but also for the economy, economies of scale, efficient running of the vessels, and for being proactive and concerving. So for us, it's a multi faceted approach altogether, that we have been using all this set of data since 2015. So we're already getting into the ninth year of us using all this information.
Punit Oza 16:26
Fantastic. I mean, that's really, really impressive. And I think that's one of the key things that shipping is changing. And I tell this to my students as well that please don't think that you are going to go and become an operations manager or a chartering manager in shipping, which will not be isolated space, it will actually be incorporating so many new functions, so many new ideas that I think we did not have when we joined the industry at that point of time. So they should be ready for a rough ride, but also an interesting ride going forward. And interestingly, I must say that one of the examples that I recently came across was the BRICS countries and the fact that they've invited six more countries to join in, you know, using some of the data available, I could actually map out a very clear picture of what these BRICS countries are actually trading with each other on the travel side. And what the BRICS plus alliance will trade with each other had it been around for a while. And I immediately found that there will be a jump of something like close to 18 million tons of trade, just because of these six new countries coming in between themselves. And that's really where it gets in, this is just dry bulk. There's not even considering the oil, which is a major part of that discussion. So I agree with you that you know, the proactiveness of technology analytics, and the data analysis is something which is crucial for us to take calls. And here I would like to ask somebody, as you mentioned something interesting in a pre discussion with me, that we must look back in history to navigate the future. And I love that sentence. So that comment from you, which I think is deep and also very forward looking at the same time connecting you to the roots that you are actually belonging to. So looking back in history to navigate the future. Can you expand a little bit on that? What is that all about basically?
Stamatis Tsantanis 18:14
Of course, first of all, we like, both you and I, we like to be practical and not to throw open ended statements just to so you feel any sense of wisdom or things like that. So we have always made practical elements since you know, all the students will turn into the future employees executive central for nursing of the future. So we really need to guide them as much as possible with the set of information. We know right now, and of course, because of history. So looking back, the most important thing, in my opinion, is the supply and demand. It's as simple as that. And by high level advice to students is the fact that demand for seaborne transportation of services has always been rising. It's been very few times in the history of the last particularly 530 years, where we saw demand for raw materials and finished products actually go down. So, you know with the exception of the financial crisis or maybe COVID or you know, certain elements of time, demand has always been going up because the world is expanding, GDP is going up. The population is increasing. You need to feed the population you need to create infrastructure. You have more planes, more cars, more everything. So you need energy, you need food, you need infrastructure, so shipping will continue to thrive into the future as far as demand is concerned. So anywhere between 0.5% and 8% 9% You will still have a compounded annual growth in demand for seaborne transportation services. The most important element to what makes or breaks an investment, in my opinion is the supply. So in the history if you go back into the maritime cycles, it was always the supply of ships that has created either the booms or the crisis. So when the markets went, well, everybody's started to rush into ordering ships. And that has created an oversupply cycle. And that has led the market collapse, demand was there, but when you automatically have a big tsunami of ships hitting the water, there is only one way and that way is to go down. So always be disciplined about supply always be disciplined about the way that people are investing. So even in good times where everybody's living in a hype, you have to be very, very well disciplined not to start throwing money around and creating big supply surges, which brings the market down. So it all comes down to demand and supply. What is different now, is the fact that the new environmental regulations will make a big portion of the current vessel supply, pretty much redundant, and I'm not referring to 2023 or 2204 or 2025. But we are seeing that the persistence of the IMO, the European Union. And of course, you know, the whole world is that ships will need to be more economical, less co2 pollutant. So that being said, the effective supply of ships will start to reduce either by the reduction of ships, or the reduction of speeds or a combination of both. So in any case, the supply appears to be disciplined for the foreseeable future. And we hope that it will remain in dispute levels, so the freight rates can recover. And any new investment in shipping will make financial sense, because right now, especially in dry bulk, in our opinion, investing in new vessels does not make financial sense. So you have to have a big and broader investment considerations before anyone considers any such thing. So when we talk about shipping, and you want to talk about the history and the future, it's all about demand and supply. It's as simple as that. So everything else, of course, is associated with that. But the fundamentals of the space is demand for shipping, transportation services, for raw materials, energy, finished products, goods, and of course, the supply of vessels, which in our opinion, is usually the most important factor in making or breaking an investment. Absolutely. No, that's well said. And I think the supply is, is something which is also in the hands of the industry, the demand is usually outside the industry. And obviously, we have limited control over that space. But supply is at least theoretically in our control. And of course, the fragmentation of the industry creates its own challenges. Also, I would like to get your views since you were talking about the environmental regulations. This is a little bit off topic, but it's interesting, do you actually see a kind of a hard cutoff at some point of time where the ships will simply have to kind of correct course, from being the gas guzzlers and then just simply try and stop consuming these heavy, environmentally polluting fuels. Or do you think that there'll be this phase transition, which I am always envisaging, I mean, this is more from a perspective that you see things around you and how the shipowners are reacting to these regulations. I would like your views on that. Yes. Right. Now, in our opinion, there are three big barriers in introducing new fuels into the market. The first one and most important, in our opinion, is the cost of producing the new fuels, and how much actual energy you need to put in order to make green fuel. So, you know, if you require for example, 120% of you know, the finished product, you know, to make green, you know, any green fuel, doesn't make any logical sense, whatsoever, if you pollute more to create, you know, the solution. The second is the financial, which it's still very expensive, and the financial burden, which might be in the region of 15% to 25% of price of a ship, I don't know whether that is an investment that will ever break even in the lifecycle of a vessel, to be honest. Number three, and also very important is the fact that, you know, the people on board the ships, especially when you talk about dry bulk vessels, they don't have the required sophistication to operate volatile fuels. And in my opinion, that creates an additional risk that people have not really thought about it, because we are seeing more and more quality seafarers exiting the space. So the overall level of sophistication of the cruise is dropping. Of course, the ships are becoming more easy to operate and more automated in all respects. But you know, when you introduce new staff that have volatility, like ammonia or other things that can create explosions, we will have to be careful here with about safety of seafarers and people in the ports and in the cities that the vessels are calling. So you know, these three elements in my opinion, are the current barriers. And at the end of the day, the traditional marine fuel of ships is not as bad as people think, especially with newer technology vessels. I mean, the most eco ships of these days can surely have a life cycle of another 15, 20 years without having to be scrapped. So that goes back to my previous point, if an investment is sustainable, which means that the rates are sets for a foreseeable period of time, in order for that investment to make sense, you don't really need to reinvent the wheel, in fuel types that may have bigger risks into the future. So if rates go back to certain levels, that there is a period market in the future, where companies can make an adequate return and pay off for that investment, then you really don't need to reinvent the wheel.
Punit Oza 25:54
Noted. I think it's an interesting point of view. I think your three bullet points are very clear. You've already mentioned what you want the students to kind of focus on, which is great. I wanted to end I think we're running out of time, but I wanted to end with a very simple question with regard to how do you see and this is again, you can give a personal view, not from a corporate perspective, how do you see the move, you know, we are used to a fragmented industry in the travel space, especially now we are actually seeing a multipolar world coming into being we are looking at a multipolar world where the domination of a few countries is now being substituted by a fragmentation where there are multiple players who are starting to play a bigger role in the trade of the commodities globally. And China is actually taking a smaller share, India is moving up and Africa is coming up and America is taking a backseat in some ways. How do you see this multipolar space handling? How do you as a company, which is obviously wanting to go and capture the market? How do you see the strategy going forward? For most shipping companies? Do you see them opening up more offices? Or do you see them approaching more people using technology, for example, like virtual spaces? What is your opinion on managing the multi portal world when it comes to customers? If I can ask you?
Stamatis Tsantanis 27:19
Well, there's absolutely no need to open up offices in various parts of the world, unless you're a logistics company, you are a container company, and that you need to be close, and you control the overall chain of of the product. The trade is so fragmented that no matter how many offices you open, you still will not be able to catch the whole thing. I mean, we are seeing companies opening up offices, where the crew members are, where the commercial centres are, where the technical centres are, and where the commercial centres are. And, you know, usually so, you know, more traditional companies have offices in New York, London, Piraeus, Singapore, China, Japan, and all that. So, in my opinion, this is pretty much unnecessary, there's no need to do all that. As long as you have good executives with appetite to travel the world around and communicate with people globally, with all this technology that we have available, then I don't really see any point I mean, people can operate from various parts of the world. I'm a big believer that the company needs to have a centre base and all people need to be together, instead of virtual or remote offices. We're fully flexible when our staff to work from home when it's needed. But shipping is a collaboration of many different departments, operations, technical, crew, legal, finance, you name it. Now its sustainability, you have so many new departments in certain companies arising. So unless all the people are under the same roof, you cannot operate successfully in a truly international business like shipping, where you have multiple jurisdictions of ships, multiple jurisdictions with the cargo, different shippers, different receivers, different countries, and things changing all the time on board of assets that are worth anywhere between 20 and $200 million running around in all the edges of the world. So that being said, I believe in the concentration of decision making operations. And at the same time, we'll call it travel, education and interaction with all the people because at the end of the day, shipping is a people's business. So yes, it's capital intensive, but its also relationship intensive, if I can say.
Punit Oza 29:36
Absolutely, yes, absolutely. And that well said I think its relationship intensive business as well. That's a good one. And obviously, there is an ulterior motive to ask you that question because a lot of the listeners as you will see, will be students in this case, and I want the students to kind of get a glimpse of what it will be to work with Seanergy, going forward and I am always curious to get into the head of the CEO and understand that so thank you so much for that insight. I think we are out of time now but Stamatis, it is always a super pleasure to talk to you and interact with you. Thank you so much for coming as a guest on our podcast. Thank you so much.
Stamatis Tsantanis 30:14
Thank you. Thank you, Punit. Thank you, Marcus. It's a great pleasure and the habit of supporting the cause and guiding younger people in the future, because I really believe that it's a transformative time for shipping. And the more people get out of the ordinary way of thinking, and the more curious they are about the future, the more quality brains we're going to have in this space in the next 10 20 50 years.
Punit Oza 30:39
Thank you so much.
Marcus Hand 30:43
Thank you Stmatis and Punit, that is all we have time for this week. Thank you for listening to the Seatrade Maritime Podcast.
