A very interesting interview was given to nafsgreen.gr by Mr. Filippos Prokopakis, Commercial Manager - Chartering / Sale & Purchase Danaos Shipping Co Ltd, responding to a series of questions.
The interview of Mr. Prokopakis has as follows:
We would like to give us a picture describing container market based on the first messages of 2018. Do you think that growth will come more through second hand vessels?
Following a historical market low after the Hanjin collapse in 2016, the second half of 2017 and months going forward we have been experiencing a sharp rate rise which still of course has a long way to go until "sustainable and healthy charter rates" can be achieved. The forecast and general impression is that the rates are going to continue rising although seasonal volatility should be expected especially in less busy periods such as the summer months and the ones close to the Chinese NY. Supply and demand fundamentals are now looking better with supply now matching demand numbers ,if not lacking so, thus creating a charter demand and therefore resulting into higher charter rates across the board of different vessel sizes. We do expect 2018 but also 2019 vessel employment to be improved, idling to be significantly reduced whilst enjoying healthier and significantly higher charter rates than the ones seen in the spot market during the last 6 years. It is encouraging that NB ordering has been restrained for the time being with most ships being ordered coming into play post 2020 dates however speculative order as well as ordering coming directly from our customers, the liner companies, should only be based on fleet renewal and not growth in order to avoid the mistakes of the past where vessel overcapacity had as a result a market meltdown which created an unhealthy environment for most parties in the container industry. Growth will, for container lessors such as Danaos, derive from a combination of NBs and second hand vessels targeting niche key markets such as either the feeder market which is getting older and is definitely under built and the neo panamax 9-11.000 TEU vessel capacity vessels which will be the work horses of the future. Second hand vessel opportunities are expected to derive mostly from the German market where the financial KG model of ship ownership has failed and most ships are now in the verge of insolvency but also directly from the liner companies themselves which may want to release key medium sized tonnage in return for fresh equity and then charter back the ships at market related numbers for a considerable time which will depend on vessel size and the prevailing market conditions of the time.
What do you think will be the changes that will occur in the years to come in terms of fuel and gas emissions both in the existing fleet and in new built container ships?
Definitely the 2020 regulation change regarding sulphur emissions will change the shipping industry as we know it. As far as NBs are concerned the answer is simple, Owners will either go for LNG fuelled ships especially for ultra large vessel sizes which will be trading at long haul major services bunkering at already known major bunkering ports or will turn to the Scrubber options (Open or Hybrid type) which in NB designs are easy and are relatively cheaper compared to existing ships to install hoping that HSFO will be available for many years to come or even if availability is short lived (2-3 years) the price differential between the prevailing at the time 0.5% sulphur blend versus the price of HSFO would be such that any scrubber investment would be amortized relatively fast. Current projections regarding the amortization period is approximately 2 years always depending on the price differential. As far as the existing fleet is concerned and taking into consideration that Scrubber installation will be limited in numbers (limited number of makers to supply scrubbers within limited amount of time) most Owners will have to adjust to higher low sulphur fuel prices at least for the reasonably short to medium ranged future. It is evident that as long as a substantial price differential is in place existing vessels with scrubber installed will be receiving a premium in the charter market whilst such ships will be chartered out to liner operators who are the fuel payers who will have secured HSFO quantities at considerable discounts thus scrubber installed vessels will be trading in a niche charter market environment receiving premiums as long as this price differential will be substantial.
Which ships are currently considered as "niche" in the containers area and what future do you see in the coming years for this category?
As stated in a previous question I consider 3 different vessel sizes being "Niche" in the years to come for different reasons. As already discussed feeder vessels of sub 3400 TEU capacity are vessels serving in trades with many trading restrictions in terms of length, draft etc unaffected from the cascading effect ultra large ships unavoidably create and therefore the market shall need such ships to continue trading in these areas for many years to come. Taking into consideration that this vessel size segment is under built and the existing tonnage is getting older, many opportunities could arise in such a volatile market for operating lessors. The second vessel size range would be high spec'd 6000 to 8000 TEU vessels which are serving in key areas such as the US, South America and Australia and are predominately owned in numbers by Asian liner operators. Such ships will create sale and charter back opportunities for large Owners such as Danaos and other companies which are well established in the container market and which operators know and trust for them to trade such vessels in key trade services. Thirdly the 11000 TEU vessels will be the new work horses of the future since these vessels will be big enough to create economies of scale and at the same time be flexible enough to be switched around different services and trading patterns. Ultra large vessels in excess of 14000 TEU are being owned predominately from the liner operators themselves and for Owners even if a long charter period could be achieved the potential post charter audience will be limited since these vessels only serve in services where only the very big operators serve.
Do you believe that the transition from the traditional way of shipping finance to financing through funds creates problems in the shipping industry?
Shipping finance today is experiencing a paradox and such is that although there is lots of capital out there to be allocated in shipping same is definitely more expensive than ever. Traditional bank finance which was an institutional long term relationship is now very limited and available to a "handful" of Owners when at the same time funds are willing to provide sufficient funding but are not institutional investors thus demanding high returns, a clear exit strategy and relatively short term investment duration. Chinese Leasing also vastly available to shipping seems to be replacing traditional bank finance in terms of figures however it comes to a substantial higher margin than traditional bank finance with the only upside being that the leasing houses are there to stick to the Owners and subsequent investments for a longer duration. Lack of traditional bank finance is hurting small Owners whose lack of size prevents them from being able to explore the capital markets as well as other options which are available to other bigger Owners and to Owners trading in the public markets such us the NYSE since being public makes a company's reach to debt longer and faster.
What is your opinion about unmanned ships particularly in the container sector?
Definitely something to be discussed in the years to come. Although container ships are the most likely candidates for such ships to commence their existence since container ships trade within specific ports and patterns, it is my belief that the human element is still very necessary and very important in regards to ship operation running under very difficult sea conditions around the world. Especially for us being Greek and having such a long naval history it has been evident through history that ships run well supporting the global economy because ships crews operate ships in efficient ways always having safe operations, clean seas and cargo transfer reliability at heart and mind.