Are the best days for private shipowners over? That was the motion put forward in an entertaining motion as part of a parliamentary debate at the Sea Asia conference today in Singapore.
Michael Parker, the veteran head of shipping at Citigroup, kicked off proceedings as one of the backers of the motion. He lambasted shipping as a whole for its “absolute destruction of capital” seen over the past few years. He maintained that the industry spends too much of its time thinking with its heart not its head. The banker pointed out how capital is expensive and increasingly heavily regulated.
“Self discipline is needed by all of us,” he said, summing up by suggesting, “Private shipowners will need deeper pockets and a better organization than they have had in the past.”
Supporting Parker, Kenneth Hvid, the president and ceo of Teekay Corporation, argued that increasingly in shipping size matters. “Times are changing and … we need to build scale because if we don’t someone else will,” he said. He also maintained that banks want fewer, larger, public clients. He reckoned private owners tended to be too emotional about their investments.
Quite so, agreed Michael Skov, the CEO of Hafnia Tankers and final backer of the motion. “Shipping has had a tendency of being undisciplined. Sometimes family owned companies use their emotions, which is a problem,” he said. He also backed the size matters argument while adding that being public ensures companies have better governance and transparency.
Fighting the motion were three private owners on the stage. Up first came Filippos Lemos, the president of Greek firm NS Lemos, who said shipping’s recovery is often capped by the “pernicious” effects of capital. Lemos argued that the savviest investors over the last 10 years have been for patient investors, something not well suited to the public companies and public equity which Lemos branded together as OPM or Other People’s Money.
“True responsible accountability comes from those that deploy their own capital,” Lemos claimed. He concluded by saying: “OPM does not care about shipping, it cares about the returns. Short termism is not suited to our industry.”
Randy Chen, vice chairman of family run Taiwan boxline Wan Hai Lines, was up next. He made the case that financial markets and shipping markets are rarely aligned hence the need for private owners in world shipping. Chen spoke of the need for “multi-generational experience” when it comes to investing in the industry. He also observed how, especially in Asia, relationships matter.
The final opponent of the motion was Kenneth Koo, chairman of the 100-year old TCC Group. The Hong Kong owner said that since the global financial crisis shipping had become commoditised following the collapse of barriers to entry.
“Our industry is now obsessed with short term returns and not long term strategising,” he said, adding that private owners tend to fare better in downturns as they are independent, know their limits and are more flexible.
“We know when to stop. We are able to say how much we want to grow and to focus on minimising our gearing and creating a cash balance to tide us through the bad times,” he said.
The debate was opened to the floor with Denis Petropoulos from Braemar – a company that has gone from private to public since it was founded in the 1980s – making the case that size does indeed matter because of the consolidation of shipowners’ customers.
Neverthless, Petropoulos and the backers of the motion were in the end heavily defeated. The 300-odd in the room voted down the motion, with 73% of delegates voting to suggest private owners still have a bright future ahead.
Sea Asia closes tomorrow.