Hellenic Shipping News interviews Mr. John Pachoulis, President of Hellenic Shipbrokers Association
Analysts are not feeling comfortable with the market as it is today, expecting a further drop, which will have a drastic affect in prices. Personally, I believe that the market will follow the elevator way with ups and downs and fluctuations depended on
the parameters of the International trade and economy. Owners today, at least the ones having the financial facility, are following the tactic of patience, waiting to see the trends of the market in order to move.As without risk there are no profits, we can say that owners which have already invested at high market should try to minimize their risk expenditure by purchasing vessels at lower prices, lowering the average of the price per unit.
As most of the younger brokers have only experienced the high market, this crisis will give them the chance to also see the other face of the market gaining new experiences and ways of thinking and acting
HSA (Hellenic Shipbrokers Association) recently concluded the shipping conference Pireas 2009, bringing in important delegates of the local, as well as the international shipping community. Which were the main conclusions that came out of this meeting?
Well, our target was not only to discuss about the recent economical crisis but to commit the speakers with their own prediction for the future of the phenomenon. Generally speaking it was commonly admitted that being in the middle of the crisis , no proper predictions could be made, as there are lots of parameters involved. Everyone was expressing the wish that the crisis will be ending by 2010, but again Mr George Gabriel of Golden Union, presented a glass sphere trying on a humoristic ground to give his own future prediction as a future teller.
The speakers expressed a restrained optimism regarding the end of the crisis but again as same is not considered as a “shipping’ crisis but an economical one , the results should come from the banking sector and not of shipping.
In recent quotes you said that the Baltic Index shouldn’t be deemed as that important tool to keep track of freight rates. Why is that?
Baltic Dry Index can be considered as a very important tool in general. My objection was that there are not all the fixtures reported, the majority of which containing the privacy clause, not permitting the parties concerned to publish them. Therefore we can see that in many cases there is not, as it is actually impossible, a full cover of the world’s shipping movements. Anyway it is a very good and a very reliable index covering the majority of the types of dry cargo vessels and routes giving a daily idea of what is going on. Of course there are other reports covering specific types of vessels and others which are involved in the wet market. Personally I believe that all reports have a value in keeping the shipping world aware of the conditions of the freight market.
Do you think that the worst is over for the shipping industry?
Nobody can predict that, simply because we are in the middle of the crisis and actually no signs were given yet which would allow us to see the end of the tunnel. Of course there is optimism but as I mentioned before this crisis cannot be considered as a pure shipping one, therefore we have to see what the economical parameters will bring in future. We have definitely noticed a much better market than the one we have experienced during the 4th quarter of last year, but can we say that this is the end of it?
How has this crisis affected the services sector of the industry, shipbrokers included?
The services have been affected in total as most of them have to do with the income of the vessels. Specifically shipbroking,Β having a direct connection with the freights ““ hires and being commission based, followed the drop of the market and have a definite negative result during the months of crisis.
The largest though affection had to do with the Sale and Purchase market where the prices of the vessels dropped drastically and furthermore no newbuilding contracts have been signed for the last ten months. It is therefore obvious that services having a commission-based relation with the vessels are facing a decline in volume of business and income in comparison with the market during the last 5-6 years. Shipbrokers and owners in general are looking forward to a stabilized market, even at lower rates than the ones experienced, which will allow them to prepare their future plans.
Is it safe to say that current rates at around 3,500 ““ 4,000 points for the dry bulk market are enough to sustain and even yield profits for many ship owners?
Having an experience in the freight market we can definitely see that the levels between 3500 and 4000 points, if are sustained at these levels, are representing the highest level of the last decade (90’s) when only in 1995 we reached the level of 3,700 points. Of course there were different values in currencies, strong USDollar and the expenses were actually at lower levels, but again statistically speaking the levels indicated, with today’sΒ value of vessels, can even bring some profits to the shipowner. It all depends on the price which the owner paid for his asset. If the same vessel was bought during the last two years at the sky high prices then the market overvalue cannot be covered with today’s market levels.
What should be the best tactic for a dry bulk owner today? Maybe hedging his risk by adding more low-valued ships in his fleet?
This is a good question. Analysts are not feeling comfortable with the market as it is today, expecting a further drop, which will have a drastic affect in prices. Personally, I believe that the market will follow the elevator way with ups and downs and fluctuations depended on the parameters of the International trade and economy. Owners today, at least the ones having the financial facility, are following the tactic of patience, waiting to see the trends of the market in order to move. As without risk there are no profits, we can say that owners which have already invested at high market should try to minimize their risk expenditure by purchasing vessels at lower prices, lowering the average of the price per unit.
Do you believe that second hand and newbuilding ship prices have completed their fall and can only go upwards, or is there a chance of further reductions?
As explained, the opinions differ, therefore each one has to follow his feeling and take his risks in this respect. It is also a matter of potential planning which again depends on the decision of the owner regarding his future investments. Financing will play a role in these decisions, as the method and the level of financing are vital for such movements.
What lessons can be learned from this crisis, given that you’ve also been a witness of the previous crises of the 80’s and even earlier?
It is a completely different crisis. Indeed the 1980’s was a pure “shipping’ crisis long enough (about 5 years) to make the owners react on an other way. Expenses and financial facilities were different than the ones we have today, international conventions and laws were more elastic allowing owners to follow the market trends and again there was a great number of vessels laid up , as the specific crisis gave the time to the owners to defend themselves and take measures in order to minimize the losses. In today’s situation not depending on the law of offer and demand but purely to the economical developments worldwide, it was a free fall from a balloon sky high market , reason of which is very well known, to the lowest possible level could be reached during last December. There were completely different ways of financing, globalization in transportation, new regulations and communications improvements which brought the shipping world in an awkward position in less than four months from the highest point.
The lesson that can be learned is that we have to follow the traditional, more conservative way of expanding keeping always an eye to the world economic developments and decisions.
How will the profession of shipbroker be affected in the future from this crisis? Do you think that local offices branching out to other countries will stop this expansion?
Shipbroking being one of the major services to shippingΒ and having a very good number of young, excellent and very well educated brokers, will continue to offer the services no matter the condition of the market. As most of the younger brokers have only experienced the high market, this crisis will give them the chance to also see the other face of the market gaining new experiences and ways of thinking and acting. The local offices with branches to other countries will most probably continue this type of expansion in order to maximize their list of clientele, trying to keep the expenses to logical levels. I don’t believe that the crisis will have an effect in expanding, in the contrary expanding is a tool assisting in surviving.
What about personnel needs? Some argue that many youth will refrain from entering an industry in trouble and will likely follow other professions. Do you think that shipping will be able to attract the necessary human resources to remain on top during the next few years?
I don’t think that the troubled market will have a negative effect to the younger people, as the attendance in the series of seminars of Hellenic Shipbrokers Association is rapidly increasing with lots of students from the Shipping Universities and Colleges showing interest in entering the shipbroking market. I strongly believe that the young generation discovered shipbroking and will serve the worlds’ shipping market on a high level of service as they all have an academic University knowledge getting also the necessary practical experience from the seminars , will create a new generation of highly educated brokers which will continue the good work and fame of the Greek brokers. It is obvious that brokeringΒ suits perfectly the Greek mentality and temper, which together with the tradition will bring the best results in the profession.
Nikos Roussanoglou, Hellenic Shipping News Worldwide