Greek shipping- pampered, or saviour?

"Shipping is not part of the problem. We are part of the solution"- John Lyras, ex-chairman, Union of Greek Shipowners.

Over the last few months, Greek shipping has come under an intense spotlight since it enjoys a special status within the presently tumultuous Greek economy; its detractors say that shipowners in that country should no longer enjoy the tax free status- granted for foreign income to local shipowners- when Greece is on the verge of economic collapse, needing tens of billions of Euros in aid to stay afloat. Greek shipping, they claim, should pay the same rates as their compatriots in other industry.

However, this will be easier said than done; the main reason being that many analysts predict that Greek shipowners will move elsewhere in Europe or even as far away as Dubai if they are exposed to high taxes. In the process, they say, thousands of Greek citizens will lose their jobs- the National Confederation of Hellenic Commerce says that redundancies may be as high as 60,000. This prediction may well have some merit in it, given that many countries in Europe subsidise shipping, often charging extremely low rates to encourage the essential activity. And, like India, quite a few European countries use the mechanism of tonnage tax to reduce taxation on shipping. 

These include the UK, Germany, Belgium, Cyprus, Denmark, Finland, France, Ireland, Italy, Malta, the Netherlands, Norway, Poland, Spain and Sweden, says PricewaterhouseCoopers. In Germany, even individual investors benefit when they buy mutual funds that invest in shipping; direct subsidies to shipping add up to almost €58 million in that country. 

Transport services allowed for 7.3% of the Greek GDP in 2011. Greek shipowners moved almost 175 billion tax free US dollars into their country in the first decade of this century, says Greek bank data quoted by the Union of Greek Shipowners. Professor Vassilis Fouskas, who is writing a book on the Greek crisis, says that shipping in Greece is an offshore business and Greek shippers will go abroad if the tax burden on them increases. “Greek businessmen can register in Dubai,” he said, adding that many jobs in Greece would be lost if this happens. 

Greece owns the largest fleet in the world, according to United Nations Conference on Trade and Development figures, allowing for 16% of global tonnage. The world's biggest maritime trade fair -Posidonia- held at Athens in June this year saw its organisers claiming that the Greek crisis had not affected Greek shipping. Nevertheless, the then Prime Minister Panagiotis Pikrammenos, while saying at the inauguration that the Greek State "must support and respect the significant potential of the sector which has established Greece at the summit of the global maritime industry," also noted, perhaps keeping in mind the mood of his countrymen, "I also call upon the Greek shipowners to support our country in these difficult times." It remains to be seen, three months later, if a small tax rate is in the offing.

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An era ends- world's oldest shipping company goes bust

The economic crisis has claimed a historic victim- Stephenson Clarke Shipping Ltd, the world’s oldest shipping company, has sold its last remaining ship and is headed for liquidation. The company has been trading for almost 300 years, starting in 1730 when it began carrying bulk coal and grain on short sea routes. The company is four years older than Lloyd's List, which was founded in 1734.

A statement by Stephenson Clarke Shipping and accounting company Tait Walker says that the company has been placed into liquidation after selling off its last remaining vessel last month. The company said, in a statement, “While previous economic downturns have been weathered, the current market is one of the worst experienced for many years, with no upturn forecast for at least 12-18 months.”

Stevie Clarke, as the company was locally known, was founded by Ralph and Robert Clarke during the reign of King George II, and prospered shipping coal from Newcastle, later expanding into the European, African and Mediterranean markets. It was forced to sell its six ships one by one after the dry freight markets collapsed two years ago and rates for all the cargoes it carried- coal, grain and iron ore- were particularly hard hit. The mayhem was only magnified by the huge tonnage overhang that plagues the markets even today.

The turmoil that has battered shipping shows no signs of easing. Stephenson Clarke may appear to be just another casualty, but, sadly, an era will end with its liquidation.

India looks far away for oil

India is looking to countries as far away as Venezuela for oil, media reports say. The country's abysmal power deficit was exposed when massive blackouts affected more than 640 million people late last month. That, coupled with continuing Western sanctions on Iran have forced the Indian hand, it appears. Leading broking and consultancy firm Gibson expects rising demand for power in the country to exacerbate circumstances. The result, analysts say, will be beneficial for the tanker segment with increased tonne-miles for Indian crude imports a near certainty.

Says Gibson, "India’s geographical location makes Iran the perfect source for the quantities of crude now demanded in the region. India is currently the fourth-largest oil importer in the world, with about 80% of its crude requirement needing tanker transportation. State run oil companies have identified the US, Canada, Australia and West Africa as potential areas, not just to source crude, but also opportunities for investment. India is following as similar path taken by China to own or control the source of its supplies of raw materials to feed economic growth. India has cash to invent in partnerships with other nations." 

Indian public sector giant ONGC has recently announced that it will invest $2.7 billion in Venezuelan oil fields; in addition, the two countries will build refineries together, including one in the Bay of Bengal  in a joint Venezuelan-Indian Oil Corporation venture. 

"It is estimated that only about 2% of India’s power generation comes from oil", Gibson says. "However, power is increasingly becoming a serious issue which the government must address quickly, not only to support a growing economy but also a growing population". Gibson notes that urbanisation and "demand for material wealth in terms of cars and white goods will continue to drive forward Indian oil demand" and put pressure on energy and the environment, as it did in China. 

Sudden and alarming Greenland ice melt.

 "Apocalyptic," say environmentalists.

Image: NASA: Extent of surface melt over Greenland’s ice sheet on July 8 (left) and July 12 (right).

 

Greenland's surface ice cover has melted over a larger area than at any time in recorded history, says NASA, and is the worst in 30 years of satellite observations. The phenomenon is usual in summer, but the spread, speed and intensity of the abrupt climate change- believed to have happened sometime in mid July- has alarmed everybody, including the NASA scientist who first analysed data from an Indian satellite- he thought there was a computer error. 

One environmentalist is calling it a "game changer"  "apocalyptic", and exceeding "all expectations".  Experts are also trying to figure out if the unprecedented drought in the US this year is linked to the ice melt. Satellite 'Melt maps' showed dramatically that on July 8, about 40 percent of the ice sheet's surface had melted. By July 12, 97 percent had melted.

"Nearly the entire ice cover of Greenland, from its thin, low-lying coastal edges to its two-mile-thick center, experienced some degree of melting at its surface, according to measurements from three independent satellites," a NASA press release stated, adding that researchers "have not yet determined whether this extensive melt event will affect the overall volume of ice loss this summer and contribute to sea level rise." 

Says NASA, "Son Nghiem of NASA's Jet Propulsion Laboratory in Pasadena, Calif., was analysing radar data from the Indian Space Research Organisation's (ISRO) Oceansat-2 satellite last week when he noticed that most of Greenland appeared to have undergone surface melting on July 12. Nghiem said, 'This was so extraordinary that at first I questioned the result: was this real or was it due to a data error?'

NASA's Tom Wagner says other recent abnormal natural developments are linked to the melting of Greenland's ice. "This event, combined with other natural but uncommon phenomena, such as the large calving event last week on Petermann Glacier, are part of a complex story."

Alarmingly, even the area around Summit Station in central Greenland, which at 2 miles above sea level is near the highest point of the ice sheet, showed signs of melting, NASA says, something that has not occurred since 1889. Glaciologist Lora Koenig analysed the data and said that it would be "worrisome" if events like this continued in the coming years. 

 Environmentalist are calling for governments across the world to come together and agree to defensive ecological policies. They claim that such abnormal phenomena- like the Greenland ice melt- are entirely consistent with scientific predictions regarding expected impact of climate change. 

"We ignore such evidence of potentially apocalyptic abrupt climate change and global ecological collapse at our peril. The Greenland ice sheet melting in a few days is shocking evidence of a global ecological emergency, and clearly highlights the urgency of immediately reducing greenhouse gas emissions, destruction of intact ecosystems, and growth in economies, consumption and population. The age of destroying ecosystems for resources must end, as we embrace ecological protection and restoration as society's central organizing principles." said Dr. Barry, President and Founder  of Ecological Internet, who agrees that mankind is facing a 'perfect storm' of ecological and social problems- driven by overpopulation, over-consumption and environmentally damaging technologies- and is heading for disaster. 

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28 million DWT scrapped, and counting.

The over tonnaged shipping industry must be relieved at the increase in ship breaking activity this year; statistics show that a massive 28.3 million DWT has been scrapped in the first six months alone, a figure greater than the tonnage demolished in the entire year 2010. Additional research by London based Clarksons shipbrokers says that last year saw up to 40.4 million DWT being sent to demolition yards by owners stung by the punishing market. 

The spike in ship breaking is despite the recent uncertainty in India, with the 'Oriental Nicety' (the infamous ex Exxon Valdez) only being cleared to be beached by the Supreme Court recently. The litigation before the apex court had caused much anxiety that the Indian demolition market may be effectively shut down over environmental concerns, as had happened for a while in neighbouring Bangladesh. Some analysts expect activity to pick up after more clarity emerges on the court's stance on hazardous materials on ships being brought to India. Unfortunately for shipping, the court ruling has not seen any improvement in prices in India; rather, they have marginally declined since then.

Shipbrokers Golden Destiny had reported before the Supreme Court ruling, "The potential closure of Indian ship recycling industry and the drop in steel prices keeps the scrap price momentum at low levels with some signs of recovery, while currency in India is again losing ground against dollar. Offered prices are now around at $370-$380/ldt for dry/general and $400/ldt wet cargo in the Indian subcontinent region, while China offers levels below $350/ldt for dry/general and about $350/ldt for wet cargo. India keeps winning some demo sales for its scrap yards given the uncertainty of the pending Supreme Court ruling in the coming days for banning vessels entering Alang unless any hazardous or toxic wastes had been removed". 

Chinese breakers are showing decreasing interest in bidding for ships, experts say, pointing out that the fall in steel prices amidst a slowing Chinese economy is the main reason for this. Other markets have turned sluggish too, although Bangladeshi buyers seem to be more active recently than those from Pakistan and India. Increasing volatility in prices indicates that the situation will remain unchanged for some time.

Shipbroker Intermodal warns that it is not "all clear sailing" for the ship breaking industry from here on in.  "The excess supply of demo candidates continues to keep things under pressure," it says, adding that "buying interest could well decrease over the next couple of weeks. At the same time there is still limited support from the current commodity price levels which is causing a more bearish sentiment to circulate amongst cash buyers." 

Regardless, most shipowners will take some heart in the demolition numbers so far this year and hope that the trend accelerates. Most experts believe that the broader shipping industry will not recover unless the tonnage oversupply situation normalises- and the global economy stabilises. 

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