THE MARITIME CHRONICLES: THE LAST 15 YEARS [7 MINUTE READ]
SOURCE: https://www.pexels.com/photo/fishing-boat-ship-green-2487/
In our exploration of maritime shipping finance...
...we just completed our synopsis of at what happened in the maritime shipping industry from 1950 to 2002. What was particularly important during this period of time was the rise of standardization by means of containerization.
The main phases during this time were:
- Cash (1950-1956)
- Charterback (1956-1970)
- Bubble (1970-1979)
- Distress (1979-1988)
- Convalescence - means recovery (1988-2002)
Now today we are going to look at the period directly following those fifty two years from 1950 to 2002. What has been happening in the new millenium when it comes to maritime ship finance?
Today the shipping market is experiencing a period of extreme growth in many ways.
A lot of the growth is a result of the shipping industry playing “catch-up” with other industries. We are seeing increased sophistication. Globalisation is affecting all industries but recently the impact has been extreme in the shipping industry.
The full standardisation effects of containerisation and the efficiency inherent in enormous new hub-and-spoke systems, as opposed to point-to-point (it is cheaper to ship a container from South Africa to New York than to Ghana), may only be fully felt today and in the next few years.
Whatever the case may be...
...the two main characteristics of the ship finance industry during the period from 2002 to 2007 was the initial explosion in new-building orders and the expansion of the shipping derivative market.
By 2007, orders for new vessels had increased dramatically in a short space of time. Many experts feared a repeat of the shipping recession in the 1980's. The only way out was to find fresh equity on a regular and sustainable basis.
Say hello to derivatives...weapons of mass destruction - used incorrectly
In 2005, the shipping derivative market itself was estimated to have a slightly smaller value than the market for the corresponding assets underlying those derivatives. At that time, the financial industry as a whole was characterized by derivative trading reaching a value of about five times the value of the corresponding assets.
So the maritime shipping industry was lagging behind...
...the overall financial industry. Only two years later, M2M Management, a leader in the use of shipping derivatives, estimated the value to be approaching close to five times the value of the corresponding underlying assets.
References:
Kavussanos, M., and Visvikis, I., 2006, Derivatives and risk management in shipping,
London: Witherbys Publishing.M2M Management 2007a. Interview 2007, in London and by e-mail.
hey, did you make a typo where you said
did you mean decreased?
cause you then said
just thought you might want to fix that
Well spotted. :)
Thank you @spaingaroo. Can't tell you how much I appreciate your constructive feedback. What I appreciate even more is the fact that I can tell you read my post with interest. When I read your comment, I thought, he is right! What was I talking about! But then I read the whole thing in context again and realized it is correct as is, but I could have been clearer.
What I meant was that the expansion in new buildings and the subsequent optimism in the market would result in even more confidence and an explosion in shipbuilding projects. Too many ships and shipbuilding activity, without commensurate equity to fund it, could have resulted in another bubble and subsequent crash, as we saw in the second half of the 20th century.
A potential antidote to that, this time around, would be the mitigating/regulating effect of the shipping derivative market. But that would not be enough. Fresh equity was also needed, otherwise banks would get nervous real quick and make the loan covenant breaching thresholds almost impossible to bear.
When you have a glut of ships, freight rates drop rapidly. So it becomes harder to pay back the bank and your shareholders (in the case of the KG or similar models). That's were a large derivative market may help though and provide the mitigating effect. What a fascinating erratic volatile industry, I love it!!
Let me know if there are specific details you are interested in.
Following you and I hope you have a wonderful day!!
You know your shipping business Cillie. :)
Thanks for those kind words. I shall remember you when I become the next Aristotle Onassis.
thanks for the thorough reply. I see what you were trying to say and thought maybe you had wanted to say something like that, but decided it must be as I said.
But you prove now that you can explain things better, so you'll have to start doing it inside your posts.
:)
you don't have to dumb it down, I think the more you go into things, the more interesting it's going to be
don't worry, we'll still have questions
one of my biggest surprises recently was the realisation that every field of human endeavour is fractal. The more you know, the more you know you don't know, yet.
and the concrete thing that made that thought click was an article half about shipping.
It was really about sand.
But there was a lot about shipping in the article, sand is heavy and hard to ship, and in short supply all over the planet.
fascinating topic if you haven't been exposed to it before
Can you send me the url? Sounds interesting.
I can look, and I will find I think. Probably haven't cleaned my history since, or maybe I have.
I think I started with an article on Mother Jones, so I will look there too.
I can't find in either but maybe a quick google...
This reuters article is not interesting in the same way but gives you an idea, it talks about one little fraction of the thing, sand for fraking wells.
as does this one about the same.
I will look again in another moment, it mentioned the sochi olympics so that might be a way to find it.
this is not it either but it touches on one of the really interesting parts of the thing, sand isn't sand.
especially beach volleyball sand
Thanks so much for your reply @spaingaroo. What is Mother Jones? Sounds cool. And thanks so much for the links you sent me about fracking and frac sand in particular. Keep an eye on my blog, I will be posting a blog about it shortly. Volleyball article also very insightful. The type of sand matters.... I hope you have a WONDERFUL day!
Interesting post. Many years ago (early sixties) I worked for John H. Marsh, he ran a publication called "The Travel and Trade News Pictorial". He was a great proponent of containerisation in those days.
Thank you so much for reading and your comment. Were you writing articles for The Travel and Trade News Pictorial - smart man he must have been Mr. Marsh...
Was it mostly pictures? I would love to check it out if it is still available somewhere, maybe someone scanned it and put it onIine. I sometimes wonder if the maritime industry has retained its sense of awe and mystery that I think was still there back in the sixties.
Have a wonderful day! Following you.
It was a trade magazine mainly, I was their space salesman, selling advertising space in the magazine. I did write one or two minor articles. It was not a pictorial magazine as such and John Marsh and his wife Leona wrote all of the editorial. He was also the author of "Skeleton Coast" author John H. Marsh.
Cool, thanks for commenting. Have a great day!
Have great day too!
Thanks I shall do that sir!
What was Skeleton Coast about sounds really cool and mysterious.
I like to visit the Skeleton Coast some day.
Me too. These stories fascinate me to no end!
It was the true story of a shipwreck on the Namib coast in the South West Africa, now Namibia. The namib is the driest desert in the world. In those days, going back at least 80 years there were no roads and no communication as far as I know, The book is about the huge rescue effort that it took to rescue the survivors. It is now a collector's item and well worth the read, if you can get hold of it.
Image
I need to get my hands on this book. Think I need to ask someone to buy it for me for my birthday.
Interesting story especially how they were able to fix the bomber and get it up again, only to have it crash 43 minutes later, and they swam ashore. WOW! Have you seen the movie Dunkirk. The article really reminds me a lot of that. Thank you so much for this.
I saw another book today that I want. It is about how to train your body like a navy seal. The coffee shop that I work at it is right next to a bookstore and you can walk straight into the bookstore without going through the mall.
I would like to see the movie Dunkirk. Looks great.
Check it out I have watched it twice already. I think it may be my favourite movie of all time.
Sounds great. I lived in Johannesburg in the 70's loved the vibe at the time. I now run an online bookstore on Bid or Buy (Petersbooks) I may even have a copy of Skeleton Coast, difficult to say for sure, I have around 6000 books listed.
Thanks for the comments and upvotes they are really appreciated. Enjoy the weekend.
Thank you so much for your great comments.
You are welcome. What is the URL for your bookstore? I had a feeling you may have lived here in SA at one time. I hope you have a wonderful day!
I still don't understand the maritime industry.
Me neither LOL.
Thanks for your comment. Upvoting and resteeming. Following you.