Genoa: There are three main factors for the present crisis in some shipping segments according to Premuda’s president, Alcide Ezio Rosina: the emerging role of China in the shipbuilding industry, excess of credit from banks until 2008 and private equity’s liquidity hitting the market in the last few years.
“From financial investors too much money flowed into shipping in a moment when profit margins and returns on investment were already low,” says the the head of the Italy-based shipping company, adding: “The huge amount of money available for shipowners obviously played a large part in the present tonnage oversupply situation.”
Premuda is a very old Italian firm whose origins date back to 1907 when it was founded in Trieste under the name of Navigazione a Vapore (Steamship Navigation) G.L. Premuda and managed by the Tripcovich family. As of today the company is controlled by the Rosina family together with Duferco Italia and Assicurazioni Generali and is active both in the dry and liquid bulk through an owned fleet of 11 bulk carriers and six tankers plus an FPSO controlled and operated in a joint venture with Yinson Heather.
Alcide Ezio Rosina’s son Stefano, ceo of the company, together with the managing director Marco Tassara, have been working for long and seems to be very close now to seal an agreement with the fund Pillarstone Italy (participated by KKR, Unicredit and Intesa SanPaolo) interested at buying banks’ loan exposure worth almost €400m ($443m). Once the deal is closed the company’s business will be re-launched with an injection of fresh new capital.
By and large the seasoned president of Premuda has a negative sentiment on the short to mid term future of liquid and dry bulk shipping.
“2016 will be another very bad year for bulk carrier rates but also for tankers my view is for a likely slowdown in daily rates before the end of the year. Furthermore I’m wondering whether we are going to deal with some structural changes in the dry bulk business in the coming years with a consequent change of the rules of the game.”
Given this scenario Rosina is also pessimistic on the perspectives for small companies in the business. “I’m also wondering if there will be still space for family model shipping companies in the future of the shipping industry. I have been in the business for 62 years now and I have lived through several downturns in my career but this time something different from the past is taking place.”
Rosina’s recipe for bulk carrier charter rates upturn is simple. “The beginning of 2016 has been shocking and shipowners can’t go on losing much money day by day. The only way to exit from the current situation is to take ships out from the market making a massive use of lay-up.”
Very nice article which points out the catastrophic factors who led the market to the current situation but i have an objection regarding the author’s opinion that it might be little room for family owned companies in the sector in the years to come. I believe that nature of shipping maches exactly with family structured companies.
Please let me explain:
given the high volatility and the longevity of the downturn of the shipping market cycle,it becomes obvious that it is not a market for speculators and people who are expecting quick profits as was the case in recent years. It is a long term investment for people who are dedicated and “in love” with shipping. Moreover for a shipping business to remain healthy it requires,instinct,knowledge,flexibility and quick decisions which remain unaffected from market trends,since as it’s widely known the long term winners in this market are those who are going against the market cycle.
To achieve this the structure of a shipping company should be person-centered, with one person or family holding the majority of the shares and not as the structure of many contemporary shipping companies, who are rather bureaucratic and cumbersome organisations and who are constantly trying to present “good numbers” to shareholders.
Sorry for my long message
Gotta love these ex-post facto analyses of an ECON 101-driven industry. Thank you, Mr. Rosina, for your insight that “2016 will be another bad year.” True, prospective, value-added commentary. OH…and “the big will have a stronger likelihood of survival.”
Novel thinking 5-6 years ago….such as financing vessels with a less debt and more equity…OR…knowing China wouldn’t binge on commodities in perpetuity….might have led to a different outcome for several companies in this industry. Sadly, NONE had the vision to manage through an ugly trough. ALWAYS fun rolling the dice with banks $$, eh? Something different this cycle, Mr. Rosina? Absolutely not.