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Oak Maritime: Fear and loathing in shipping

Oak Maritime: Fear and loathing in shipping

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Jack Hsu, managing director of Oak Maritime (Hong Kong), is on typically engaging form when Maritime CEO comes calling, touching upon the evolving, strained relationship between owners and charterers and the benefits of bear markets during an entertaining interview.

Hsu, the third generation at the helm of the famous bulk line, has seen enough cycles in shipping to talk knowingly about the constant tit-for-tat that is the owner/charterer relationship.

“There is never an everlasting time of good health in freight rates for shipping in general. The market is very complex, with lots of moving parts. Shipping in general has always been an industry where these moving parts create a permanent state of dysfunction, fuelled by greed and fear,” Hsu explains.

Owners, however, tend to bet long, he points out, always hoping for a further recovery in asset prices or freight rates.

“What would be a more interesting is if the charterers, who are motivated by – or desire – low freight rates, begin to see a need to hedge their forward risk on freight exposure,” Hsu muses. “Sharp spikes in freight feed the fear factor for charters.”

Hsu says he’s looking forward to seeing some sharp rate spikes destroy charterers’ “complacency” that has developed in the current cycle, hoping that this fear could reverberate into the board rooms, leading to a more sustainable longer term policy change to hedge physically, through time charters or COAs.

Hsu admits the charterer has had it all to easy this decade.

“In this market,” he says, “glutted with an excessive supply-side induced structural illness, the charterer faces minimal risk in managing his freight exposure. The need to create a mutually committed longer-term relationship with the owner – and the trust that strengthens that foundation – has all but disappeared.”

The Oak Maritime Group is one of Asia’s best-known names in shipping The group is represented through its affiliated offices. The principal office, Sincere Navigation Corporation, is a publicly-owned company based in Taiwan. General management is coordinated through Oak Maritime’s office in Hong Kong where Hsu is based. The 20+ fleet is made up of predominantly bulkers with some tankers with an average age of just 7.5 years.

For Hsu and his family run firm it is this multi-generational shipping life that breeds hope in its own way.

“Ironically it may be the current challenges in the market, especially the pipeline of new regulations coming our way, which create high levels of uncertainty, which are the beneficial factors in the market,” he tells Maritime CEO. “Uncertainty,” Hsu says, “creates hesitation, confusion, or perhaps even fear. A bear market caution is fundamentally good, because uncertainties that feed cautiousness could be opportunities for those who have the ability to take action on matters they have already carefully studied.”

Hsu is currently also serving as the deputy chairman of the influential Hong Kong Shipowners Association (HKSOA), likely meaning he will take over from Wah Kwong’s Sabrina Chao as chair of the organisation for a two-year period from this November.

“The HKSOA is working closely with other stakeholders in the maritime cluster, including the Hong Kong government to address the lifeblood of our industry, which is people,” Hsu says. One of the association’s strategies is to promote awareness of shipping to the society at large, with a view to stimulate awareness among Hong Kong’s youth as a potential career direction, ensuring just like at Oak Maritime, there are more generations as keen on shipping as the Hsus.

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2 Comments

  1. Andrew Craig-Bennett
    July 25, 2017 at 4:29 pm

    Another very impressive interview with another of Hong Kong’s “old hands”

    I love the bit about the benefits of uncertainty and how this helps those who have long studied a plan.

  2. Sam Chambers
    Sam Chambers
    July 26, 2017 at 6:06 am

    Another reader getting to that part of the interview told me yesterday it reminded him of Gordon Gecko of Wall Street fame!