The veru interesting interview with Mr. Tzavelas has as follows:
1. Over the past two years, many companies operating in dry and container field have gone through quite difficult times and many of them have struggled to survive. Now what is the picture and how do banks deal with this issue?
Without a doubt, up until the early stages of the Q1 2017 these two sectors were coming off a very distressed period. This was evident from the loss making hire rates, the historically low prices of second hand vessels as well as the fact that many owners opted for laying up their vessels as a mean to weather the storm. As with every similar case in the past, demolition picked up which coupled with the slowdown in newbuilding orders/deliveries brought the equation to a relative equilibrium. In fact, when discussing about demolition one could easily see 15 year old bulkers and 10 year old containers heading to the scrap yard. Worth mentioning also for the container sector is that the bankruptcy of a single company (i.e. Hanjin) influenced the market as a whole in a very disturbing and financially negative way. In any case, the aforementioned situation together with the clear re-enactment of the major developed and developing countries of the world, with positive GDP rates and hence increased demand for commodities and finished products, have created a more healthy and certainly positively forecasted market.
The Banks that had the stamina and commercial insight to support their clients are able to take advantage now of the healthy markets. On the other hand, at situations where a restructure was not possible, either due to the client’s irreversible position, or the bank’s inability (be that for strategic, commercial or political reasons) to proceed with sustainable restructures for both parties, transfer of assets to existing (as a first option) clients or to third parties (which included heavy wright offs) were an inevitable play on their behalf.
To sum up – and although from the German banks who have some of the highest non performing portfolios in the sector and the impact of massive wright offs or support from their government could affect the system in a greater scale – banks who have managed to restructure their portfolios are now better positioned to finance new deals in anticipation of a further market strengthening.
2. What do you expect from the market for the year 2018? In what way do you propose that shipowners should react to the market fluctuations, given that the recent past has shown us how fragile the balance is?
Judging from the various latest analysis/reports we receive, the prospects for 2018 are very positive compared to the recent past. It is expected that demand for iron ore, coal and grains will stay strong creating a positive dynamic for the dry bulk sector which will be reflected in healthy hire rates and increased demand from prospective buyers of second hand vessels, resulting in increased prices of vessels. Similarly the highest expected GDP rate (about 4% worldwide) for the current year, paves the way for stronger demand of finished products for the benefit of the container sector.
As to your question on what to propose so that shipowners should react to market fluctuation, I would say that this is actually a question for the shipowners. Every company has its different policies when it comes to investing and managing vessels, different market perceptions, but most importantly each one is variably resilient to the market and its fluctuations, which means that everyone has a different capacity to react in the market.
One thing is for sure though, the basic principal of investment applies to this sector as well and it goes by “buy when the market is at its lows”.
One thing I would like to see though from shipowners is a conservative way forward in regards to investing in new buildings, as it seems that inter alia the market’s future cyclicalities will be highly dependent on the 'interventions’ made by shipowners in the supply side of the chain.
3. Is there a shortage of modern hi tech ships for sale today and how does this affect the shipping market?
Yes indeed, generally speaking the high majority of vessels we currently see in the market for sale are of around 10 years old (+/-). This means that modern units are either kept for utilizing the current high rates, or in the expectation of higher values in the future. Another factor is the high book value that many of the modern vessels have and of course there’s always the question from the owner’s side of 'what to substitute the modern vessel with'?
It is a fact that many owners are looking more and more for vessels equiped with features like 'eco main engine', BWTS fitted/ready, scrubber fitted/ready, LNG fueled (to a less extend) and thus their only option is to head to the shipyards for new orders. This has to do with the new rules that are expected to take effect from 2020 onwards and deal with the market of new reduced global sulphur limits and it is expected to increase interest in newbuilding contracts thus raising prices consequently.
4. A very important parameter is the right communication between the broker and the client. In your opinion, what is the meaning of "right"? What are the keys to success for a modern broker house?
A communication between a broker and a client can have various ways to be interpreted. However, I strongly believe that if you are to have chances in this highly competitive market to get the support from
your clients you need to be as 'close' to them as possible. This is of course nothing new and actually every senior broker will start his initiation with a young broker from this point. A close contact and relationship with a client
is a must since your client is not only looking for a 'messanger' to identify and propose vessels for sale (or buyers for his vessels). A broker is basically a consultant on a capital intensive, high risk investment and this
means that the broker needs to firstly identify his client's capacity in terms of current and future status, be ready to adapt to his changing needs, short out in more than one terms possibilities in the market that would interest
the client and also be able to participate in discussions well beyond the standard negotiation talk. This is what actually identifies a modern broker house and I believe this can only be achieved while a broker handles a specific
'manageable number of client list rather than a vast one which is practically impossible to be serviced on a more personal level, rather than a vast circulation one. A flexible small-medium client list ensures that the broker can
easily stay in touch on a weekly basis with his clients and not lose track of them, therefore offering updated full scale services.
I'm of the opinion that in order to be successful these days, in any line of business actually, you need to be able to 'say something' to your clients. How do you do that? First of all by maintaining high standards of ethicality. This is actually
something which you cannot afford to make any discounts on, because it can instantly trigger your clients to flee away and not ever have the chance to make up for it. On top of that, accurate and updated information, coupled
with rational and effective consulting are the keys to maintaining your clients focused on you.
5. Recently, at the 1st Golden Destiny Shipping Forum you talked about the Japanese model where support and partnerships start first and foremost from their local support. Could you please analyse that?
The Japanese model or 'Japan Inc' as the old school players of the industry like to call it, is basically a fully integrated production system within the maritime sector of the Japanese economy. In simple words, a local shipowner
orders a vessel from a local shipyard after he has secured finance from local banks as a result of a long term time charter from a local charterer. All this is being orchestrated and in many cases put together as a whole project
by a local broker/trading house. It is deep within the Japanese people's perception that they need to support each other first and foremost, both as a matter of trust but mainly as a matter of common progress and development, something
which i deeply envy (in the good sense of course). Unfortunately, it seems that despite my younger age, compared to other seniors in the business, I am rather romantic on this issue since, although not every step of the aforesaid
'production chain' can be realised from our local players, the notion of local support within the Greek shipping cluster is not high on everyone's day to day agenda.
*Head of S&P Dept. GOLDEN DESTINY