Fifteen years into his career, Charlie Du Cane, commercial director at Mandarin Shipping, has just been provided with valuable advice while chewing over matters ad infinitum during lockdown.
How can shipping be simple? There have never been more complicated times in the world, and by extension in the shipping industry. Technology is changing everything from the bill of lading, the way we handle insurance, crewing and, aided by the climate crisis, will lead to fundamental shifts in ship propulsion in the near future. Black swans seem to swarm overhead like the flying monkeys in the Wizard of Oz, as dam collapse blends into trade war, which merges into global pandemic. This sense of permanent flux is added to by the permanent revolution of who does what in shipping. The emergent superpowers of the Chinese leasing houses have overtaken everyone in ship financing, as the Europeans have largely run for the hills. In my little bit of the business, the Danish dry bulk operators seem to change staff or name so often that sometimes I think they are all on a carousel in the Tivoli Gardens, a constant confusing whirl of brown pointy shoes, and floral lined shirt collars.
But most confusing of all is the information flow. In July 2005, on my first day in the shipping industry, I was told that the average person read more in one day than they had done in a lifetime in 1905. I remember 2005 as an era of blissful simplicity. History had ended, shipping was profitable, and people still read Lloyd’s List. How times have changed. No one is certain of anything anymore, but the flow of analysis, broker reports, bank reports, environmental reports, trade reports, etc flows across the desk of the frazzled shipping exec like a river that has multiple often contradictory currents. Recently in one day I read a broker stating that dry bulk is about to receive a massive shot in the arm from China, and a banker’s analysis that was so dire it actually gave me heart palpitations. The waters have never been muddier in shipping.
So, I was slightly bemused when one respected shipping veteran who I speak to regularly said to me the other day: “Your problem, Charlie, is you over think it. This business is simple.” Surely the opposite is the case? How can anyone with his experience describe the current state shipping finds itself in as simple?
Locked down in London, it has given me time to (over) think about things, and I fell to pondering this idea of simplicity, and I had one of those eureka moments when my own understanding of this business took a step forward. Actually, he was right, when you strip away all the layers, the noise and the occasional downright panic we feel today, simplicity is best, and over thinking always gets people into trouble.
Take for example the eco-ships debacle of 2013. Smart people came up with great predictions as to why these ships were necessary to save the planet (or was it fuel bills?), but they forgot some of the simple fundamentals of shipping: supply goes up, market goes down; if it isn’t a good deal on the day – don’t buy it.
Equally how many people are feeling a bit sheepish about scrubbers these days, especially on secondhand ships? Scrubber mania was interesting, as people thought they could beat heavy handed regulations, and beat the market too. But every decision was made based on not having access to the key metric in all of this: what the spread between low sulphur and high sulphur fuel oil would actually be. As far as I can tell on secondhand vessels most people presumed a spread of $250 lasting for two years. Five months in we are at $50 dollars, and it has already dipped to parity. The lesson? Only act on what you actually know.
The next decade is going to be fascinating in our business, if possibly traumatic, as geopolitical decoupling, technological change, and the imperatives of the green revolution dominate everything. Those that will thrive in this market are those that never forget to just keep it simple.