Dagfinn Lunde experiences a resurgent US economy and a downcast shipping mood while attending this year’s CMA.
I have recently returned from the US where I was attending the Capital Link event in New York as well as the Connecticut Maritime Association’s (CMA) annual bash.
The greatest impression I had as I boarded my plane back to Europe from an enjoyable and hospitable week away was one of immense contrast. The contrasting sentiment between a clearly upbeat US economy and a downbeat, frankly dismissive, attitude to shipping.
The mood in America was palpably optimistic; the economy is clearly going places again. I read an interesting poll while out there – some 63% of all US companies surveyed think this year’s prospects are much better than last year. Sentiment is clearly very strong, a massive change from the 12 months since I was last in the US.
The take on shipping however is shocking. At Capital Link and CMA, negativity was everywhere as shipping share prices have tanked 50-70% and the dry bulk market continues to set new records on the wrong side. Private equity is not happy.
Wall Street is looking for exits rather than raising more money for shipping. Put simply, too many people have been burnt.
A common theme I picked up was the perception that public shipping companies are rarely evaluated properly. The feeling is they are undervalued by the public.
A rare bright side looks like investments in gas with the likely exception of LNG. Changing trading patterns are clearly helping LPG.
I moderated a panel of second and third generation shipowners and the sense among the panellists was the public market is not for shipping; most are focused on keeping their business private, some with the help of private equity.
Preparing for the young shipowner panel I got in touch with 16 previous commodores, the hall of fame-type honour bestowed annually by CMA, to get them to ask questions. Their thoughts and opinions proved fascinating. Stelios Haji-Ioannou told me shipping is extremely volatile, very high risk and you have to get the cycle right and that is a risky business model. Eletson’s Gregory Hadjieleftheriadis, meanwhile, said it had taken his company many, many years to build its fleet up to 21 ships and yet this younger generation can come in and order 20 ships at a time, something he said was both amazing and wrong. Another nice nugget of advice from Hadjieleftheriadis was his view that whatever your fleet size you cannot influence a charterer’s pricing.
Low oil prices formed much of the debate at CMA. There’s no doubt that ship speeds are going up, especially on tankers.
Enthusiasm about the tanker industry was very noticeable. It is remarkable how sentiments are shifting – this time last year people were bigging up dry bulk. How much of shipping is sentiment led rather than by supply/demand facts never ceases to amaze – for an outsider it must look ridiculous.
Dagfinn Lunde is Maritime CEO’s regular finance columnist. To access the latest issue of Maritime CEO magazine for free, please click here.