Tag: global

shippingalexander

Alternative Ship Financing

As CEO of PBS SA Capital Group, Alexander’s Christodoulakis’ passion is to assist companies to grow, expand and reposition themselves in the market.

Using a vertically integrated management system for his global portfolio at PBS SA Capital Group, this has helped to provide companies under management with a degree of stability, sustainability, and growth in volatile global market times. Alexander’s management system enables asset and ship equity growth via alternative ship financing solutions. The ship financing solutions include fleet optimization and ship refinancing.

The global shipping industry is a capital-intensive business. The industry’s players need CapEx financing, credit lines, and ship operational liquidity to handle the large scale opex of the intense daily cash flows. Over the past decades, international shipping enterprises relied on traditional ship finance, which was heavily dependent on bank financing, while alternative ship financing was limited or unattractive, up until the recent years.

However, the introduction of a number of alternative financing options in the wake of the global economic crisis created new means of alternative funding which in turn came in handy to those who needed it and had nowhere else to go. Significant changes to the market conditions in many parts of the shipping industry with newly created successful partnerships between financiers and experienced shipping groups.The shipping industry gained added advantages from capital markets in the recent years since they are able to issue debt easier as well as attract more equity participations. Initial public offers (IPOs) became popular among investors and shipping companies.

Today, there is a relevant disconnect between freight rates which remain low and are expected to increase and gain more traction during the winter months and the attractiveness of last year’s IPOs which were relatively low. But, is expected to grow, starting from the winter season as well. While Private equity (PE) funds have been focusing on opportunistic investment options and have been doing well until presently, a number of capital management companies invested heavily with a specific focus on the shipping industry and real estate market.  Private Equity funds provide flexibility in extending credit and also extend loans to riskier projects where banks would be more restricted from providing such funding.

The capital markets remain critical for the enhancement as well as the promotion of shipping business growth and the creation of corporate value since capital markets perform the following fundamental functions. As capital markets act as qualified intermediaries in providing funds required to finance new investment projects and sustain business growth.

This has created the important shift that has been seen in the recent years until today in the shipping industry. The international capital markets played a protagonist role of key importance, predominantly equity and bond markets, which provided a large share in fund-raising for shipping enterprises.

As shipping is a cyclical industry with idiosyncratic characteristics, strategic market timing remains of key importance to any shipping investment. The behavioral pattern of shipping business is related predominantly to the nature of shipping demand and supply, being sensitive to economic growth and trade, cyclicality in freight rates and vessel prices, demand and supply imbalances and fragmented business structures.

The issue of optimal capital structure blending with the appropriate funding method is critical for an industry that is capital intensive and its operation employs real assets (Ships) of high commercial value. Strategic decisions in shipping enterprises today, shift from simple profit maximization to corporate value enhancement. The capital intensity and magnitude of shipping investments always requires capital availability, but also careful vessel selection and reliable fleet diversification, based on solid capital frameworks is a must. In a highly dynamic and volatile business environment, modern shipping finance becomes highly sophisticated, innovative as well as complex in today’s market environment.

 

alexanderchristodoulakisship

The Global Shipping Industry of Today

Inside the last century, the global merchant shipping industry has seen the increasing trade volumes along with the expansion of free trade and the increased demand for consumer and industrial goods. However, it is inside the last 50 years that shipping has become the predominant means of merchant transportation globally, making it responsible for the transportation of approximately 90% of global trade.  Main reasons for this leading position of shipping are of course globalization of trade and important technological advances that have taken place in the industry. Although the industry is growing, shipping is cyclical as well as capital intensive. By this, we mean that it is highly affected by the aggregate global demand for industrial or consumer goods whereas the global macroeconomic and financial events can affect the values of the shipping assets and their financing levels. Despite this, shipping industry as a whole is already diversified at some level.

Screen Shot 2017-07-05 at 11.30.53 AM

Different types of vessels are employed concurrently at every phase of the business cycle but with different performances depending on the phase of the cycle and the global demand levels.  So in the main categories of shipping, we meet tankers which transport crude oil, petroleum and chemical products, bulk carriers which transport unpackaged bulk cargo, such as grains, coal, iron ore, and cement, container ships which carry most of the world’s manufactured products, specialist ships like offshore supply vessels, anchor handling tug supply, platform supply vessels and construction support vessels among others. Finally, we meet Ferries which are passenger and vehicle ships (roll-on – roll-off, RoPax etc.). All these different types of vessels support today’s global transportation industry by offering a good diversification for those considering an investment in the shipping sector.

Shipping faced a serious economic downturn in the 2008 global financial crisis. From then on, it has faced and continues to face constant challenges and interesting changes. From recent collapses of shipping giants to good M&A activity that has taken place in the last 12 months and with the bigger deals taking place inside the last 3 years, the industry adjusts itself to the new policies and environmental regulatory standards that are about to be established soon and to those already implied. All these are expected to increase the financial burdens of shipping companies which are already facing increased pressures on their margins. Proactive anticipation has become the new norm in the industry, and it is definitely a realistic way for shipping managers and ship-owners to face the regulatory stakeholders.

Despite all the challenges, the existing functions of shipping like the proper management of security standards, the operational and technical management of ships, the management of the chartering function, the ship selection and acquisition process and the management of human resources and multicultural diversity are being kept at a very good quality level worldwide and this good level is expected to increase further also due to increased competition in the market. For the coming years and according to a consensus by many analysts’, we expect on average for the industry’s benchmark players the Earnings per share and Return on Equity ratios to be higher than the last 5-year average. It will take a long way, however, before seeing again pre-crises rates. Under these new circumstances, shipping companies will still have to optimize their fleet, acquire new vessels, hedge against macroeconomic, geopolitical and environmental risks while confronting at the same time the extra costs of the new policies. Therefore it is crucial for the shipping companies to manage cautiously the financing activity as an on-time and well-structured financing will determine the quality and types of fleets that will dominate the seas the coming years. The longer-term view for an industry moving in parallel with the increase of the global population, and new infrastructure developments that are expected to take place in major economic hubs of both east and west, suggest that the industry can proliferate enough from the estimated increase in demand.

Screen Shot 2017-07-05 at 11.31.09 AM

World seaborne trade has increased in a steady manner the last years and this is also reflected on major shipping stock benchmarks. Shipping transportation remains efficient, safe and economical and is set to remain competitive as an industry. Even if the current year is not an easy one, global maritime trade is expected to increase.

Air Freight vs. Ocean Freight

International shipping connects the global trade market. Exporters have major business choices to make in terms of how they transport their shipping. In the logistics industry, transporting goods requires a lot of consideration. Air freight and ocean freight are the two choices of transportation when shipping overseas. So how do businesses decide how they ship? Take a look at the factoral differences between air freight and ocean freight.

freightalexanderchristodoulakis

Cost  

Many people assume that ocean freight is cheaper than air freight, however, that is not always the case. Depending upon the chargeable weight, which is how carriers charge for international shipping, size will determine whether air or ocean freight is cheaper. When calculating which option is cheaper, a company has to compare the transportation fees with the value of the goods. Whichever way the company ships, they still have to consider the customs and destination fees. Warehousing fees at seaports are typically more expensive than airports. As a general rule, when we have to deal with heavier and larger shipments, it is often more economical to choose sea freight transportation. However, as a shipment becomes significantly smaller, margins between the prices of the different transportation means get smaller and sometimes air freight could even turn out to be less expensive.

 

Speed 

It’s no question that time is money. Speed is a priority for many companies, including cargo shippers and their clients. Air freight is much faster than ocean freight, only taking about a day or two for arriving at the destined airport. The faster a business can provide goods to their customers, the greater customer satisfaction is.

As technology expands, so does the ability to track shipping because it’s a component of a positive experience. There’s a level of comfort that consumers have when they know where an item that they paid for is at all times, even if it’s in transit. Consumers expect a speedy delivery. Airfreight provides tracking and shows how quickly a package arrives from location to location until it’s delivered to a consumer’s door.

 

Reliability

 In the world of international shipping, businesses and consumers want reliability with their shipments. Ocean carriers are nowhere near as reliable as air freight. Not only does air freight transport goods in a matter of days, but trackability is much more efficient as well. Ocean freight can take multiple days, or even weeks to arrive at the destination. Although air freight has a shorter history than ocean freight, it’s quickly progressed in terms of reliability and matching up to the expectations exporters have in the logistics industry.

 

Following an ocean carrier arriving at a seaport, there’s still land travel time that must be accounted for. Air freight has the ability to arrive closer to the final destination because of the numerous airports inland vs. the seaports on the coasts.

 

Powered by WordPress & Theme by Anders Norén