The Shipping Professional Network London (SPNL) members’ enjoyed a sociable evening of topical presentations and networking drinks on the 22nd of July, courtesy of sponsors, Clyde & Co. The compelling topic of the night was the significant impact of oil prices on the shipping market, told from three diverse viewpoints; including a representative of ship owners, as well as a representative from one of the leading banks in the maritime industry. By Jeanius Consulting
SPNL chair, Claudio Chiste (shipping & marine finance Investec), welcomed members of SPNL – London’s platform for young shipping professionals from all aspects of the industry and announced that The SPNL – Moore Stephens Confidence Index Survey would be launched in the coming days, with the findings to be presented at London International Shipping Week (LISW) in September. In recent years, the Moore Stephens confidence index has become regarded as an industry benchmark of investor sentiment in the broader shipping market. The SPNL – Moore Stephens Confidence Index is the only such confidence index aimed at the next generation.
Opening the evening was chair of the panel, Stuart McAlpine, (partner at Clyde and Co) – who has 25 years of experience in the energy and shipping industry. Stuart warmly welcomed members and introduced the other speakers for the evening; Adam Byrne, (Managing Director of ING Bank) and Caleb Raywood, (General Counsel, Sea Trucks Group.)
Stuart started his presentation by saying how the changing oil prices over the last few years, and the previous significant impact of the drop in prices, has led to very interesting situations for oil and gas companies around the world.
Stuart explained, “If you go back to 2010-2011, America had taken technology and developed it, such that they made the extraction of oil and gas economically feasible – one of the reasons we are in the situation we are in today. The innovation that the Americans have shown over the course of the last ten years or so, puts them as one of the world’s top oil producing countries – with an estimated 9 million barrels of oil a day coming out of the United States.”
Explaining about the effect on supply and demand, Stuart continued, “Global crude supply is continuing to significantly outpace demand; and the key question is, will the market balance just through the rise or cut in demand? The UK is a fairly mature, privatised energy sector but, without any doubt, the collapse in prices has impacted in crude conditions in the European shipping market. In Asia, weak oil prices are boosting Asian shipping but there is significant pressure on the oil and gas sector – they have to cut the costs to reflect the fact that the oil price is lower, so the investment opportunities are far fewer.”
Caleb then addressed the position ship-owners are finding themselves in and their reactions towards to the oil price. “In terms of the governments and oil majors’ reaction to oil price, we see less projects being awarded and budgets being cut. As we don’t know what’s going to happen next, we see projects being delayed. You need strong cash flow and have proven that your timing is good; you’re going to be potentially quite aggressive over the next few months because you know that there it is likely there are other companies out there who have not got that strong cash flow projection. You may be able to pick some attractive assets at reasonable value, or even businesses. With so many contractors looking for work, projects are being delayed because oil companies see they can get more favourable contracts. There may well be consolidations in the industry with smaller players – very interesting times ahead as always.”
Adam followed on from Caleb, speaking from a lenders perspective, explaining the risk of lending and the effect on financing opportunities. “This is a highly volatile industry – we see a lot of risk. We are trying to reduce the risk we take by not taking the higher margin type positions that are available. We are very much focusing on the leading names locally; that’s very much our strategy. In the tanker market rates are high – oil prices are clearly a factor in this, but not the only one. Shipping is more complex than what is simply going on with the oil price. We cannot deny these are difficult times, we also can’t forget that it wasn’t that long ago the tanker owners were also facing difficult times. What’s key is how we structure our finance. What’s most important is who we do business with.”
Adam brought the presentations to a close by explaining how the bank predicts the markets to safely lend money; ensuring the upmost protection throughout the duration of loans by managing and allowing for the unexpected to happen – accepting markets can be strong, but can also weaken.
At the end of the presentations, Acting SPNL Company Secretary, Lisa Howie (who works as a lawyer with Ince & Co) thanked the speakers & host on behalf of the SPNL, and looked forward to welcoming members to the upcoming AGM and annual summer drinks party on the 6th of August”
The panel then invited members to ask questions, before moving on to the drinks reception where members enjoyed networking well into the evening.