It was a genuinely fast and furious run up to today’s newsletter here at Splash. Next week the site celebrates its first anniversary. Today, I can say that each of the 10 stories in the newsletter could have been a lead story on any other given day. As a shipping journalist the current market conditions – the worst in history at least two prominent owners have said this week – make for a target rich environment.
Such was the strength of today’s story line up that news that the Singapore Exchange was tabling a bid to take over the Baltic Exchange only made it into seventh spot.
With the letter out the way I headed off for my regular 13 km run, concluding my eleventh week of training for the London Marathon.
As mentioned earlier this week, in the run up to the 42 km slog through the British capital on April 24 in aid of Sailors’ Society I’m writing a series of Opinion pieces to drum up support for this great cause.
While running this time round my mind drifted to London. It was five years back that I last did this marathon. It passes through some of the great historic sites of this great city and within a few hundred metres of the venerable Baltic Exchange. News that the 272-year-old institution will look over takeover bids will come as a shock to some, while for others it will be seen as another inevitable passing of the baton by what was once the world’s most important shipping hub.
The Baltic Exchange is by any definition a bit of a strange old beast. It’s no longer an exchange and has very little to do with the Baltic, but there it has stood at the heart of the London shipping scene for since the 18th century.
Beyond its property assets, its value lies in the route assessments and indices published daily against which physical and derivative shipping deals are transacted. In recent years the Baltic has worked hard to transform itself into a digital data provider and has successfully defended the way it collects assessments from brokers against charges it could be subject to LIBOR-style manipulation.
It has in recent years under the stewardship of departing ceo Jeremy Penn finally got its act together when it comes to handling the world’s most important shipping region, Asia. After some half-hearted attempts to expand its product portfolio, it began index publication during the Asian trading day, is working with the Ningbo Shipping Exchange on a dedicated Asia-Europe route assessment and together with Maritime London has embarked on a series of expeditions to China where it identifies new business opportunities.
Several years ago, opposition from brokers and users was instrumental in scuppering plans for a deal to sell the Baltic to the London Metal Exchange. But the LME’s ardour has not apparently cooled and as it too seeks to modernise, it has spent the last few months in negotiations with the Baltic about an agreed bid.
Whether the LME has failed to show enough leg is not clear, but the news that the Baltic is also reportedly in talks with ICE, CME and SGX suggests that what started as a flirtation has turned into a bidding/beauty contest. Conversations with publisher and index provider Platts are thought to have been shelved in favour of a markets operator.
Take a step further back for the bigger picture of this sale and you could detect a bidding war between two other trading hubs for derivatives business. Singapore has been claiming ever more volumes of derivatives trade, putting pressure on Hong Kong, which has in the past tended to be Asia’s top centre for this type of trading. Note here the Hong Kong Exchanges and Clearing bought out LME, the Baltic’s original bidder, in 2012.
The sale of the Baltic suggests the end of an era in shipping and the start of a more commercially-driven phase in which the lucky bidder is able to monopolise the collection, publication and licensing of dry bulk and tanker markets data.
London’s place in the maritime universe is clearly not what it was, emblematic of the shift east in all things shipping seen since the turn of the century. The loss of the Baltic, one of the icons of Maritime London, just at a time when the City has been trying to assert its importance on the global stage would be very damaging, particularly in the wake of Royal Bank of Scotland pulling out of ship finance. It’s still a damn fine city to run in however.
Donations to Sam’s London Marathon run in aid of Sailors’ Society are simple to make, just click here.
It’ll be interesting to see what the broker panel do. Remember they are not paid for submitting their ‘assessments’ to the Baltic currently! They could be having an ‘interesting’ conversation with the new buyer – if it happens…