Bimco Reflections

REFLECTIONS

2012

An ocean of expertise

BIMCO’s Reflections on Shipping Industry Issues

Yudhishthir Khatau, President of BIMCO

FOREWORD

by The President
We all know very well that shipping is cyclical, capital intensive and a high risk business. The year 2011 has changed nothing in that respect and neither will 2012. It gives me great pleasure to introduce to you Reflections2012, highlighting BIMCO’s viewpoint on some of the most critical issues facing the shipping industry. We have similarly tried to best present the situation in the various market segments, and I guess we shall have to be patient a little longer, as we await better times! But as often seen before, there will continue to be new opportunities and many will be tempted and some rewarded for exploringthem. We are also likely to see consolidation in the industry; in fact some of the largest carriers in the container trades are forming partnerships and others are forming VLCC pools to best ride out the storm. I firmly believe that shipping will prevail and find calmer waters, as has always been the case, but when? That’s the big question! With postponement in the delivery of newbuildings,restraint in the ordering of new tonnage and perhaps only ordering for replacement instead of speculatively, recycling of older tonnage and idling, we could see an earlier recovery, but I doubt that the will is there! Shipping is a cash-flow business and ship owners need cash to service their loan portfolios, particularly at present, with critical banking eyes closely monitoring balance-sheets and debtservicing. An idled ship unfortunately generates no cash, only costs! The environmental agenda continues to build up, but with some good news at least in the context of shipping’s contribution to Global Warming. It is as if the politicians have finally realised that shipping is indeed the most environmentally friendly mode of transport per tonnes/mile and that today’s high cost of fuel will induceships to be more energy efficient and thus emit less CO2. However, we will of course continue to work constructively with governments to find an equitable scheme that will ensure shipping can meet possible reduction targets. Happy reading! I hope you will enjoy it!

CONTENTS
4 8 10 12 14 State of the Shipping Industry and Forward Looking Perspectives Keep Regulation Global Shipping and theEnvironment The Human Element: It’s a People’s Business Piracy – A View on the Way Forward and Armed Guards

State of the Shipping Industry and Forward Looking Perspectives
GLOBAL ECONOMY: TACKLING UNPLEASANT ISSUES REMAINS VITAL TO BRINGING BACK OPTIMISM AND SPURRING DEMAND The world needs daring and decisive political leadership, especially in the EU and the US, for confidence and optimism tofind its way to the consumers. Unfortunately, the political stalemate in the US continued throughout 2011, bringing with it new uncertainty and doubledip horror stories and whereas the EU found ways to stabilise the Southern economies, the unease regarding the size of the problem and the question as to whether the EU has found the cure is still lurking. Emerging and developing nations, in particularChina and India, stayed on the growth track despite the large Western economies slowing down imports as a result of hesitant private consumption. With a slowdown as well in exports, China and other Asian economies heavily relying on exports will have to stimulate focus even more on domestic consumption. The need to nurture domestic demand in all Asian nations, even more than today, is a naturalcounterbalancing exercise. Consumers and governments are saving more and cutting costs, which are sound actions by themselves but not really helping economic growth to kick in. This is evident also when looking at JPMorgan Global Manufacturing PMI, which is now in limbo around the threshold level of index 50. The US Manufacturing sector is edging closer to stagnation while the Eurozone’s ditto...