Basil M Karatzas to speak at the Tugs, Towboats & Barges (TTB) Conference

image descriptionBasil M. Karatzas, Founder and CEO of Karatzas Marine Advisors & Co.

In a tough market, how can inland and coastal operators finance projects such as newbuilds needed when the costs of Sub M compliance make keeping older tonnage on the water increasingly expensive?

Among the speakers at Marine Log’s TTB – Tugs, Towboats & Barges event will be Basil M. Karatzas, founder and CEO of Karatzas Marine Advisors & Co., a shipping finance advisory and ship-brokerage firm based in New York City. His topic: “Finding access to capital for brown water Jones Act operations.”

Karatzas has diverse maritime industry expertise in the fields of shipping finance, port operations, charterers’ and husbandry agency, charter and ship brokerage, and vessel management and operations. In an advisory capacity, he has originated and executed multiple finance-oriented transactions in shipping such as sale & leaseback transactions, private placements for equity, mezz, debt and structured finance.

To be held at the Renaissance Mobile Riverview Plaza in Mobile, Ala., March 24 & 25, TTB will build on our previous TUGS & BARGES events but with expanded waterways industry coverage.

Check out the program and register to attend HERE

We are looking forward to seeing you in Mobile, Ala., at the end of March at the TTB Conference by Marine Log, and discussing not only current (and exciting) developments in the inland tug, towboats and barge in the “brown water” market, but also for coastal shipping, Jones Act ocean-going markets, offshore in the GOM, but also financing ideas and opportunities for making the best under the challenging market conditions!

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NOTICE: THIS BLOG UPDATES INFREQUENTLY; NEW POSTINGS APPEAR ON KARATZAS AUCTIONS – PLEASE FEEL TO FOLLOW US THERE!

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© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

Port of Piraeus as a ‘Shipping Cluster’

A lot has been made of the growth of the Greek merchant fleet in the last couple of years. At a time when freight rates are anemic and shipping finance rather expensive, the world’s fleet growth has slowed down – and thankfully so. However, two merchant fleets stand out, those of Greece and of China – which they have keeping growing faster than the overall market and much faster than any other ‘national’ fleet. Some even would pointedly indicate that the German merchant fleet has shrank materially in the last few years as German banks became more aggressive unfolding ‘KG system’ vessels.

Just because the fleets of Greece (and China) grow, this does not mean that all respective shipowners in these two countries enjoy smooth sailing and are immune to the problems that shadow the international shipping industry, and Greek owners do not lose ships to bank and creditors, too; there are the individual tragedies and vessel arrests and divestments, but as a whole, the Greek fleet keeps growing.

What is that that make Greek shipping so resilient?

Definitely there is no clear and easy answer; more likely, a combination of factors are to be credited for the Greek shipping growth.

In a recent trip to Athens, in a matter of ten days, we have had the opportune chance to attend several corporate receptions and a few conferences and company-hosted seminars and presentations.  For all those events, the venues were filled to capacity, which is indicative of the interest of the shipping professionals longing for such events.  And, then, at all those events, the level of discussion and information provided were just amazing.

Unlike conferences in other locations that adopt a platform of regurgitating corporate press releases or speakers ‘talking their book’ and insisting presenting an artificially rosy picture of the industry, the events and conferences we attended in Greece were information- and data-driven, open to debate after the presentations, and taking a holistic approach to shipping and the need for transport, rather than being narrow-focused. We actually heard questions on the viability of modern ships and whether it’s worth replacing whole fleets on the basis on better fuel or technological options.

We are not jingoistic or nationalistic to the extent of dreaming of perfection in the Greek shipping market. There are less than stellar conferences and, and yes, people in conferences in Greece are known to pat themselves a bit on the back for the historic performance of the Greek shipping.

On the other hand, there have been so many events and presentations and conference, so much market information and intelligence, so much cross-pollination of ideas and suggestions, that a visit to Piraeus is always guaranteed to bring a shipping professional up to speed with the critical topics, hot markets, and prevailing ideas.  From people with an institutional knowledge of the shipping industry, to studied Ph.D.’s and other types of eggheads to the lowly shipbrokers and traders, good quality information on both granular and macro-level is traded in a furious table-tennis fashion. We are talking about ‘primary’ information from actual transactions and deal-making, to technical information on currently discussed regulations to ‘out of the box’ business structures, that is a school on its own.

We tend to travel a lot, and attend, and present, and even host conferences worldwide, and we really enjoy it immensely, and we always get richer from business traveling and conferences; the quality and richness, however, of shipping market information that can be found on Akti Miaouli and Piraeus and wherebeaouts is just unique to Greek shipping.  A trip to Piraeus is always an enjoyable crash course to catch up on business.  From the famous Greek song ‘The Young Men (Children) of Piraeus’ made famous by Melina Merkouri, the lyrics come to mind: ‘However I searched, I haven’t found another harbour, to make me infatuated, as Piraeus’; the lyrics are more about love than shipping, but the simile is right on target.

Once again, it’s hard to pinpoint the resilience, and some may say success, of the Greek shipping to any factor; on the other hand, the quality of the information shipping professionals in Greece got on their hands is just amazing and rejuvenating; and, even in a slow season and a weak market, corporate events and presentations and parties and conferences keep a professional’s calendar booked beyond business hours.

If information is power (and consequently money), our recent experience in Greece may be indicative of the strength and the prospects of this unique market.

Go to Piraeus, young (shipping) man!

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THIS IS THE LAST POSTING ON THIS BLOG; EFFECTIVE IMMEDIATELY, NEW POSTINGS WILL APPEAR ON KARATZAS AUCTIONS – PLEASE FEEL TO FOLLOW US THERE!

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© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

A Shipping Finance Conference in Athens, a Great Success Story!

Profoundly thankful to the speakers, sponsors, participants and attendees for the immensely successful Slide2Open Karatzas Shipping Finance Conference 2019!

Proudly co-organized by Karatzas Marine Advisors & Co.

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

To access the conference website including presentations, proceedings, interviews and panel discussions, please click here!

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

Karatzas Marine Advisors & Co Hosts Shipping Conference in Athens on January 24th, 2019

A high caliber list of shipping and finance decision makers to participate at this topical, agenda-setting Shipping Conference organized by Karatzas Marine Advisors & Co.

We are looking forward to seeing you on January 24th, 2019 in Athens!

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

Publicly-listed Shipping Companies May Deserve Better Valuations

Although capital markets have not been receptive for the shipping industry recently, publicly listed shipping companies still do have an advantage over privately held companies

From the Karatzas Auctions website, where to will be transferring the present blog soon:

Publicly-listed Shipping Companies May Deserve Better Valuations

Please click on the link for our posting

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

2018 was Indeed a Forgettable Year for Shipping. Is There More to It?

So far in 2018, the shipping freight markets have been proven uninspiring; current freight indices produced by the Baltic Exchange, the Shanghai Shipping Exchange and other data providers are comparable to year-old levels, give or take some “normal”volatility; and, it’s well known that shipping is capable of much more than “normal”volatility.

Product tankers specifically, and tankers in general, seem to be the disappointment of the year in terms of freight – but still, as of late, crude tankers have managed a fair recovery on the back of OPEC strong production performance and changing trade patterns for crude oil. The dry bulk market have mostly been having a respectable year with profitable cashflows, with the exception of a recent dive in the capesize freight market. The containership market had been fair in the early part of the year, especially for feeder and feedermax tonnage, although, recently. only trans-Pacific freight rates seem robust as shippers are trying to front-load their cargoes to the USA in expectation of heightened tariffs in the new year.And, the offshore market, after several years of tranquility reflecting an almost dead market, in 2018 has shown signs of hope as offshore drilling projects(very) selectively having been coming back to line.

The following chart from the Baltic Exchange, to which we are a member, depicts the BalticExchange freight indices for the drybulk market (BDI), and separately for the capesize market (BCI), its most important and also most volatile component;  also, the Baltic Exchange freight indices for crude(BDTI) and clean tankers (BCTI) are shown in the same graph. In order to provide more perspective, the graph incorporates both 2017 and 2018 y-t-d, showing that 2018 has been marginally better than the year before, at least for drybulk and tankers, seasonal volatility notwithstanding.

Likewise for the containership market with the Shanghai Containerized Freight Index (SCFI):

All in all, on average, freight rates for most shipping assets were hovering around cash breakeven levels for most of 2018. Operating profits have been uninspiring, mostly, for the profitable sectors, while operating losses were too small to trigger fresh bankruptcies in unprofitable sectors.  Most of the shipping bankruptcies in 2018 were of “legacy assets” emanating – hard to believe – from the go-go days of the last decade. A couple more of shipping bankruptcies in 2018 were triggered from other factors such as accounting fraud– including one in the fishing industry to which we have acted as LiquidationTrustee by order of the High Court of the Republic of the Marshall Islands.

In a post from almost a year ago, we had argued that an uninspiring shipping market in 2018was the best thing the industry could have hoped for. Not that we objected to outsized profits in the shipping industry, or wished ill for those that had a “long position” in shipping. We just thought that there were too many ships on the water for the cargoes available to be shipped, and, also, we did not see a great deal of growth for those cargoes. Our position for a forgettable year, truth be told, also incorporated some wishful thinking, that an uninspiring market would prevent the players in the market from fresh excesses, such as fresh waves of newbuilding vessels, more and cheaper capital in the industry, and so forth. We are pleased that our “prediction” for a forgettable market has been proven true, and we apologize for the betrayed dreams and hopes for a much stronger recovery for the shipping industry in 2018.

A forgettable year in 2018, as a “downer” as it has been for the shipping industry, it also has, at the very least, led to a) the slowest pace of newbuilding orders in almost every asset class, b) a low outstanding orderbook for many types of vessels, and the lowest for some in recent memory, c) few new capital coming to the market to ignite d) speculation and speculative transactions. There seems to be some “normalcy”in the market and a return to the basics, of supply and demand and the following of the trade and cargoes.

As shipping freight markets are concerned, probably 2019 will not be much different than 2018. But again, there are many “drivers” and “catalysts” that can make for an exciting year in shipping in the new year in other areas than shipping.

And, holding our second shipping conference in Athens on January 24th, 2019, we will aim to deliver, once again, profound insight from the Captains of the industry, literally and metaphorically, for the things to come in the near future!

A Wishful Port Called Consolidation

The maritime industry has been facing headwinds for almost a decade now: chronic tonnage oversupply, intermittent demand growth, new trading patterns, heightened level of regulations, new technologies and vessel designs, and more recently, the prospect of a global trade war.  It’s not easy being a shipowner, if ever it was.

Besides the obvious “academic” solutions of self-discipline when it comes to newbuilding appetite and accelerated schedule of ship demolitions, little can be done strategically to alleviate the industry’s woes.

Since the early days of the present decade, the concept of consolidation has been mentioned as a solution with the best hope for mitigating the industry’s problems. Conceptually, fewer and bigger owners could better sustain the weak times of the industry by sharing overhead and expenses across larger fleets, by having higher fleet efficiencies, and by affording more competitive access to capital; a market dominated by fewer owners can also employ strategic efficiencies whereby fewer players would be more disciplined at ordering newbuldings and also providing a united front against the demands of charterers.

Notable names of the shipping and the finance worlds have been advocating for industry consolidation for some time now, most conspicuously then-private-equity-shipping-investor and now Commerce Secretary Wilbur Ross. Proponents of consolidation have drawn their conclusions mostly from other industries than shipping, such as the steel industry in the case of Wilbur Ross; and, there is a strong body of academic research and case studies taught at business schools supporting the case of consolidation. On the surface, consolidation has saved the steel industry from chronic losses (although ironically part of the current trade war discussion is driven by the consolidated state of the steel industry having cost thousands of jobs). Likewise, the airline industry, via consolidation (and also chronic waves of bankruptcies), have reached now a point of high utilization and profitability, as any weary traveler can attest to these days.

No doubt there are economic benefits for the players in a market that has undergone consolidation; on the other hand, we think that certain markets and industries are more prone to consolidation than others, for many reasons.

Let’s follow the empirical approach to see what has happened so far in this maritime field:

Wall Street and institutional investors are big proponents for consolidation in the shipping industry. Image credit: Karatzas Images

In the tanker market, after Frontline’s failed effort to acquire DHT, the got critical mass to defend itself by buying the BW VLCC fleet, catalyzing, in turn, Euronav’s acquisition of Gener8 Maritime (itself the product of merger of General Maritime and Navig8 Crude Tankers). There is little merger activity in the rest of the crude tanker market, with the exception of Teekay folding two “daughter” publicly-listed companies into one, and also  acquiring the Principal Maritime crude tanker fleet. In the product tanker market, Scorpio Tankers acquired Navig8 Product Tankers in 2017, while recently BW took a bow with publicly listed Hafnia Tankers. If there is a lesson to be learned from merger activity in the tanker industry is that these are a handful of transactions among already sizeable players who are publicly listed and/or driven by institutional investors or financially-oriented managers behind them. The typical, average tanker owner has been least affected, or bothered, at least so far. However one slices the tanker market, there are almost 15,000 tankers of all sizes with a few thousand shipowner groups worldwide; if all these tankers and owners were to be consolidated into groups of big companies, investment bankers in shipping would be among the richest people on this planet.

In the dry bulk market, Star Bulk, publicly listed and driven by institutional investors, have been growing the size of their fleet by acquiring Augustea, Songa Bulk, and Ocean Bulk in the past. Golden Ocean acquired the Quintana capesize-focused fleet, and potentially the acquisition of the CarVal Investors dry bulk fleet by Good Bulk can be considered a case of consolidation; there are a few more meaningful transactions with privately held companies (most the Angelicoussis and Zodiac groups) acquiring massively, and surgically, shipping assets in the secondary market.  There is no doubt that there has been much more S&P activity in the dry bulk, but nothing to qualify as consolidation. The dry bulk market is often described as the textbook case of perfect competition, and as such, it makes little sense to buy (and retire) dry bulk shipping companies – the companies have little to offer in excess of  the stripped assets. Again, zooming out on the sector, consolidation so far seems to be with mostly sizeable companies, publicly listed, often driven by institutional investors, and almost always payment taking place – at least partially – in shares. There is still a very ‘long tail’ of small shipowners in the sector. And, there are more than 12,000 dry bulk vessels and several thousand shipowners active in the market; once again, investment bankers in shipping should be voted happiest people on earth if consolidation was ever to take hold in this market segment.

Just like consolidation in shipping, the bigger, the better… or, the sky is the limit! Image credit: Karatzas Images

Onto a shipping sector with a more disciplined structure, the containership liner market, it would appear that consolidation has offered a proven solution to this market over time; from almost thirty liner companies in existence in the early 1990’s, the number now stands at fourteen (14), a clear trend of consolidation over the last two decades. Again, there does  seem to be the same consolidation pattern of this market segment: most of these companies were big companies to begin with, often publicly listed or owned / managed by sophisticated investors in a market segment with relatively high barriers to enter; nothing new here. Looking onto smaller regional market players, the market has been much more fragmented, and allegedly ripe of consolidation. Some of these regional players are publicly listed or some of them run by investors and financiers, but it’s hard to discern a consolidation pattern on the surface. Probably the transactions that stand out in this sector are those of KG owners that are driven by shipping banks to consolidate, most notably MPC Container Ships, the Zeaborn and the Claus-Peter Offen groups that have keep absorbing smaller players such as Cido (containers), E.R. Schiffhart, Rickmers Linie, Ahrenkiel, Conti, etc (some of these transactions involved also MPP vessels).  And, there has been the absorption of many more smaller KG houses and vessels that popped up in the last decade jus because of the exuberance of the KG market in Germany. What all these stories of consolidation have in common, in our opinion, is that most of these target companies had their financial base completely wiped out, the management teams had no ‘skin in the game’ but mostly, German shipping bank have effectively forced ‘shotgun marriages’ (read consolidation) in this market. Otherwise, left to its own devices, it’s questionable how much consolidation would had taken place in this segment.

Despite the obvious benefits in the shipping market by a less fragmented ownership distribution, with fewer and more stable players, it’s still a very long way, in our opinion, for the industry to really get to appreciate consolidation. It’s been vividly implied in the discussion above that each segment in the shipping industry is driven by slightly different factors, but it’s abundantly clear that consolidation so far has been driven by a confluence of financial owners (this includes shipping banks) building up on the critical mass of already sizeable companies and where egos can be forced aside by the prospects of economic benefits and payouts, often in the form of paper (shares).

For the several thousands of shipowners worldwide, especially when they are the founders of shipping companies or have some sort of competitive advantage (captive cargo, access to terminals, etc), consolidation would be a tall order. Consolidation favors bigger players, but still smaller players can be shaping the market for longer than hoped for.

Darwinism in known to work, but it takes a notoriously long time; economies of scale make for more efficient shipping companies, but again, this takes time. In Darwinism, let’s not forget, some species become extinct. Probably for some shipowners, unless extinction becomes their only choice, consolidation will be getting little attention. The financial markets and shipping finance can impose their will on shipping forcefully, but likely consolidation in the shipping industry cannot be material in the near future, at least for commodity shipping.


Article originally appeared in Lloyd’s List on September 7, 2018 under the heading “Consolidation Players Go Hungry“.


© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

Karatzas Marine and Slide2Open to Host 2nd Shipping Finance Conference in Athens on January 24th, 2019

Building upon the successful inaugural conference held in February 2018 at the Intercontinental Hotel in Athens, Greece, Karatzas Marine Advisors & Co and Slide2Open are thrilled to announce that next year’s conference will be held on January 24, 2019. Save the date!

An expanded agenda on shipping finance, new environmental regulations, innovation and disruption, but also analysis of international trade and geo-politics, and an alignment of  speakers and thought leaders of the highest caliber in their fields, are guaranteed to render this conference a “must attend” event.

For more information, please feel free to contact us by email at:   info[at] bmkaratzas[dot]com or at info[at]Slide2open[dot]net or make sure to follow our blog for regular updates, or follow the conference website at Slide2Open Shipping Finance 2019!

© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.

The Maritime Industry Hopes for Silver Lining as Talks of Tariffs Escalate

Talk of possible trade wars has kept executives in a wide range of industries at the edge of their seats; this is even more true for people in the maritime industry, which  afterall is the hauling provider on a global scale. Trade wars imply lower trade volumes, which would be a monumental concern to the shipping industry.

The New York Stock Exchange. Image credit: Karatzas Images

Intuitively, trade wars are bad for the shipping industry; tariffs and higher barriers to trade result in lower trading volumes that lead to lower demand for ships, and that, in turn, results in lower freight rates. However, nothing is as simple anymore in today’s world: higher tariffs can also lead to disruption of established supply chains, which, in the short term at least, can mean longer and less efficient paths between manufacturers and buyers, which could mean a lengthier than normal supply chain.  Talks of dismantling NAFTA, for instance, has led Mexican importers of grains to substitute imports from the U.S. with imports from other countries, primarily from countries in South America. U.S. grains to Mexico are mostly shipped from the ports of Texas and Louisiana to Veracruz in Mexico in a week’s long sailing voyage; however, Mexican imports from South America take twice as long to transport, and, all being equal, this shipping trade has been beneficial for the (international) shipowners.

Trying to assess the impact of possible trade wars on the maritime industry and try to plot an optimal strategy are in the minds of small and large shipowners alike worldwide. If a shipping company, for instance, was planning for an expensive fleet renewal, the potential of trade wars likely to be a cause to chart a new course of action. Who wants to be investing in expensive new ships when the prospects are less than rosy?

There are many permutations of possible scenarios of international trade wars as there are many variables; mostly, however, there are many theories and lines of thinking, as well as egos involved, and also grave political implications to consider, or ignore that could affect potential outcomes. On one extreme, there is the scenario for maximum tariffs on an international scale that could lead to a complete collapse of trade; at least for now, the probability for such a catastrophic scenario seems slim, thankfully. Focusing on the more likely scenario of small to moderate tariffs but where logic and economic sense would still drive decisions for the most part, it seems to be a more probable scenario.

A consideration to ponder is that the U.S. strategy so far seems targeted on imposing tariffs mostly on finished-products imported to the country, and such tariffs seem to be encompassing many industries and also being most disruptive to the supply chains; for example imports from China often have been sub-assembled in other countries and the supply chain in these countries is impacted too. China, Canada and Mexico so far seem to apply a more surgical approach by placing tariffs on mostly raw materials and commodities that concentrated political impact and relatively small collateral damage to the supply chain.

International trade bridging the seas… Image credit: Karatzas Images

Under a probable scenario of moderate tariffs and under the current modus operandi, different segments of the shipping industry will experience a varying degree of disruption.  The containership industry likely to experience a direct negative impact as import containers are mostly filled with consumer and other end products. Head-haul trade routes from China, whether to the West Coast or via the Panama Canal to the East Coast of the U.S. seem to stand at bull’s eye, but the impact  will percolate to other trade to Europe and other smaller traders localized trades. Earlier in the summer, there has been a noticeable increase of input volumes in U.S. ports and strong export data have been reported out of China; this positive impact has mostly been attributed to seasonality, as some of the peak season volumes were moved forward to dodge the first round of tariffs imposed in early July. The heightened trade due to timing considerations is expected to taper off and eventually volumes to tick downwards. Liner containership companies with their modern, huge boxships, especially those with focus on the China to North America trade, stand to be impacted most.  Localized containership markets that feed on the main trading routes had been the bright spot of the long-challenged containership market in the last couple of years, but now there are signs that smaller feeder containerships are getting off-hire at an alarmingly high rate.  It seems that pro-actively charterers opt to stop renewing charters in anticipation of reduced need for trade.

One of the great surprises in the energy world in the last decade has been the success of the shale oil production in the U.S. that potentially can make the country a net exporter for oil. Energy seemed to be getting a free pass from tariffs, but with escalating threats, now it seems to be fair game as well.  China and Far East are the biggest consumers of oil these days, and slowly the success of the shale oil in the U.S. was forming into a new trade of exporting crude oil from Corpus Christi in Texas to China via supertankers (VLCCs); this potentially could had been a game-changer trade for the crude oil tanker market given the large ton-mile numbers involved and also given the overall disruption in the trading patterns for VLCCs. This trade now seems in jeopardy, although just earlier in the week it was announced that Trafigura was still considering building a deep sea oil export terminal in Texas; but again, just this week, Chinese stated-controlled Unipec was suspending oil imports from the U.S., rattling the crude tanker market. To the extent that long term contracts will be honored or competitive pricing for U.S. shale oil can be obtained, there is a scenario of petroleum product tankers benefiting from the trade as well, whereby refineries will be focusing more on export trades. The U.S. natural gas LNG trade could also be adversely impacted by tariffs, and this is most unfortunate as the LNG tanker market desperate needs some hope in chronically oversupplied market; in addition, U.S. LNG export infrastructure is still being built up, and talks of tariffs possibly will stall some of these much-hoped-for projects.

The dry bulk market seems to be least impacted from talks of tariffs as the trade concerns mostly commodities and raw material used in the first steps of industrial production. For now, these trades seem safe, and, in the case of the grain trade to Mexico mentioned earlier, and grain trade worldwide, this would be a downright positive development for the shipping industry. Tariffs on Chinese steel will eventually catch up with China’s imports of coal and ores from Australia and Brazil and could negatively affect big-sized dry bulk vessels (capesize and Newcastlemax vessels).

The shipping industry is impacted by a wide range of factors, and the impact of tariffs is not isolated or easily quantifiable, and definitely at this stage, still much is unknown on how tariffs will be applied in terms of products, levels, reciprocity or exemptions, etc; on the other hand, no doubt some shipowners will find talk of trade wars a convenient excuse to blame for the industry’s and even their own companies’ structural problems.

Shipowners internationally have maintained a sanguine approach to talks of tariffs and trade wars. To a certain extent, this is understandable as the shipping industry has proven to do better at times of conflict, high uncertainty and interrupted trading patterns. On the other hand, continuous talk of trade wars can sap investment and trade sentiment, and trading volumes, that cannot be good for shipping. Or, anyone else.


© 2013 – present Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

IMPORTANT DISCLAIMER:  Access to this blog signifies the reader’s irrevocable acceptance of this disclaimer. No part of this blog can be reproduced by any means and under any circumstances, whatsoever, in whole or in part, without proper attribution or the consent of the copyright and trademark holders of this website. Whilst every effort has been made to ensure that information here within has been received from sources believed to be reliable and such information is believed to be accurate at the time of publishing, no warranties or assurances whatsoever are made in reference to accuracy or completeness of said information, and no liability whatsoever will be accepted for taking or failing to take any action upon any information contained in any part of this website.  Thank you for the consideration.