Event Recap: 22nd Marine Money Hamburg: Ship Finance & Investment

Last week, over 450 attendees gathered at the Grand Elysée hotel in Hamburg to share and discuss their views on the current state of our industry, where it is going, how they plan to navigate the markets, and buying football clubs for fun! A huge thanks to our Partner Sponsors, Berenberg , Hamburg Commercial Bank , and UniCredit for making the event possible, as well as Conference Chairman Stefan Rindfleisch, Partner at Ehlermann Rindfleisch Gadow , who along with International Registries, Inc. hosted an?amazing pre-conference party! If you missed the event but have an account on www.marinemoney.com , you can always review the audio of our various panels, presentations, or interviews online. And even if you did attend, we hope you find this commentary helpful by highlighting some of the themes we noticed.

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Market Drivers in 2024

Starting the day was a presentation from Adam Kent , Managing Director at Maritime Strategies International on what we can expect to impact shipping in 2024. Kent described his expectations with five words: Demand, Deliveries, Decarbonization, Deviation, and Disruption. After strong cargo growth rates in 2023, Kent sees 2024 as continuing this trend, with growth rates at or above historical values maintaining robust demand. Kent further highlighted China as a staunch supporter of the bulk sectors, pointing to coal and product tanker demand. On the opposing side, Kent described the deliveries or supply outlook referring to the orderbook as “chunky” with more shipyards coming back online, but also noting that this really depends on what sector you “put under the microscope.” Kent then touched on decarbonization, a major theme throughout the conference unsurprisingly which will be discussed further – however, Kent gave us a few insights of his own. With the prospective growth of clean methanol, ammonia and other near-term greener fuels supporting greater trade, Kent noted that the orderbook contains a significant amount of dual fuel newbuilds, however, these are mainly larger?vessels right now. As such, Kent noted that oil/fossil fuels will still be needed by 2050, and so carbon capture should be expected to develop in a much greater capacity. Wrapping it up with deviation and disruption, between geopolitical uncertainties and new systems (such as the Panama Canal’s queue system), the trade map has been redefined. While hard to predict based on the rapidly evolving seascape, earnings have remained supportive in Kent’s opinion, which is reflected in newbuilding prices as well as a strong secondhand S&P market.

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Cash Rich, Expensive Opportunities

With Mr. Kent’s points in mind about what factors to consider going forward this year, the conference jumped right into the panel Shipping Investment Summit: Where best to Deploy Capital Today. The panel was first led into a discussion on the investor landscape, how it has changed, and why investors might consider shipping. With the extremely chaotic global events going on, many pointed out that shipping can be a useful diversification investment, but also that the industry is going through substantial changes which is leading to new opportunities that some may seek to capitalize on. And that is not the only thing attracting new and different investors to the industry, but also as it was pointed out, shipping as it is currently, is not seen as a “distressed” asset class. However, it is this strong market that has many veteran players feeling a little bit uneasy, wondering where the opportunities lie next? With a resurging oil and gas market, Christoph Toepfer , CEO of Borealis Maritime Limited , told the audience he moved from containers into offshore, and G. Andy Tuchman , Partner at Clear Ocean Partners , noted he sees chemical tankers as a less commoditized market and more niche, especially regarding stainless steel tankers. However, the panel made a few key points about protecting downside risk with such an uncertain environment: Limit spot charter exposure with more fixed-rate contracts, maintain decent LTV values especially in elevated markets, and do not jump too fast on any investment!

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If assets are too expensive, some may find M&A the attractive course for deploying capital, or in some cases deploying no capital at all, rather using their stock as a form of “currency” as Chris Weyers , Managing Director at AMA Capital Partners, LLC , described it. We have discussed M&A a few times recently, as despite poor M&A markets in 2023, there are signs of a resurgence. Weyers did not just provide an M&A outlook though, but also provided his insight on key M&A drivers, highlighting that in many cases despite phenomenal market share performance recently, equities remain below NAV and at low multiples. The historical trend for this showed that the larger market cap companies traded higher relative to NAV, however, Weyers noted that the yield is now more correlated, in line with later discussions that investors want ship owners to return capital during peak markets which many argue, is when shipowners should be retaining cash for a downturn.

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Managing Risk, And Reward

Amidst largely unprecedented as well as unpredictable periods, trying to manage risk can easily become a series of “what if” scenarios. What if interest rates fall? What if they rise? Or, as was mentioned by our keynote speaker, Angeliki Frangou, Chairwoman and CEO of Navios Maritime Partners L.P. , what if the strait of Hormuz closes? Luckily, Frangou shed some light to the audience on Navios’s success as “risk manager” with a fleet now consisting of 176 ships since humble beginnings when Frangou acquired Navios in 2005. Frangou seems to accredit much of Navios’s success in staying grounded in the present, focusing on what are the relevant forces and factors today, and what is driving them. She particularly highlights the need to discern what is correlated with conflict driven inefficiencies or even underlying economic health, as these are things that change extremely quickly and are out of your control. On the contrary, she notes it is then important to focus on controlling what you can: balance sheet, reducing leverage, fleet efficiency, taking more long-term coverage and more.

In an interview with our President, Matt McCleery , billionaire Robert Yuksel Yildirim , shined a light on the opposite side of the coin having made a half billion-dollar investment in CMA CGM that was once referred to as the worst shipping investment and is now considered one of the best of all time. Interestingly, his approach is not so night and day from the values Frangou deems important, having said “I went to CMA as an industrial investor, and although all the risks were there, I knew how to control a worst-case scenario.” Sound familiar? To Yildirim, it seems that the key not only to mitigating risk but also determining potential reward is in the impact of what you can control. Having taken a significant 24% stake in CMA CGM, he assisted the company which had nearly $7 billion in debt after the financial crisis and a substantial order of newbuilds, to focus on deleveraging and not making mistakes of the past. It seemed to him, that instead of competing and creating an oversupply by ordering new vessels, the container liners should focus on secondhand vessels, industry consolidation, and alliances. The latter wound up being industry revolutionizing, with 2024 seeing alliances between Maersk?and Hapag-Lloyd?as well as most recently, a five-year extension to the Ocean Alliance agreement between CMA CGM, COSCO, OOCL, and Evergreen. So, what does Yildirim do now that he’s not only helped CMA CGM become one of the healthiest companies globally and changed shipping? Well, he is a self-proclaimed workaholic and the evidence is certainly there, but he also buys football clubs with the hope to “develop young players and bring them to the market.”

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Ready or Not, Here Comes Decarbonization

Many across the industry have anticipated 2024 as the year of implementation of carbon taxes for shipping, such as the EU ETS. Despite this, recently there has been a large uptick of orders for fossil fuel carriers and activity in the sector. Stefanie Sohm , Advisor – Transport and Climate of the Kühne Foundation , had the daunting task of discussing the demand-side risk for oil carriers and gas carriers on the way to net-zero by 2050. Sohm believes that it will not take until 2050 for the effects to be felt across these sub sectors, rather by 2030 the unused fleet value will peak by up to 19% of oil tankers and 31% of gas tankers. Further exemplifying this risk, Sohm pointed out that while these markets are highly fragmented, the share of owners whose fleet is made up by more than 90% of one specific type of carrier is astonishing, at 65% for oil tankers, 45% for LPG tankers, and 55% for LNG tankers. So again – how do you protect downside risk, this time from decarbonization? Sohm put it simply: Suspend investments in fossil fuel carriers to avoid your own risk and reduce everyone else's risk, assess options and costs for retrofits, and invest in ‘green’ industries and transport services. The following panel, EUAs have arrived in the Maritime World but is everyone Prepared? shared some closing recommendations with the audience as well. Be proactive and deal with a problem as soon as you realize it is there, time is on the side of shipowners currently, mitigate risk as much as possible and lower the cost as it is not something you can speculate on, be more transparent with banks, and things will get more expensive eventually so be prepared and embrace it!

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Raising Capital for Shipping

The last major theme we would like to highlight is raising capital. The panel Credit Conditions for Shipping – The Art of Leverage in a Cyclical Market immediately touched on the subject in every lender’s mind right now, they have the firepower after so many shipping companies have repaid debts, but owners are cash rich during a high interest rate environment. Lucky for lenders, the outlook seemed positive, as shipping is going through a highly transitionary phase which will undoubtedly require lots of capital investment – unlikely to be unleveraged. The final panel, the Shipowner Summit, pushed the narrative further, mentioning that diversification investment will be necessary across many strategies to protect against market downturn risk, ESG risk, geopolitical risk and more. While ship owners retain cash to ride out choppy waters, capital providers will surely still have their place.

Thank you to all of our attendees for joining us for the 22nd Marine Money Hamburg! If you missed it, be sure to head over to the events page to register for next year. And if you want to check out any of the bountiful photos from the event, or the presentations and audio, again please head to our website.

A very special thanks to our sponsors that made this event possible:

Berenberg , Hamburg Commercial Bank , UniCredit , Ehlermann Rindfleisch Gadow , International Registries, Inc. , Newport Shipping UK LLP , 荷兰銀行 , AMA Capital Partners, LLC , Clear Ocean Partners , Castor Maritime , Chrysses Demetriades & Co. LLC , CMB Leasing , 德勤 , Elbe Financial Solutions (EFS) , Euroseas Ltd. , FPG AIM , GMS Leadership , HSB Capital Corp. , Hudson Structured Capital Management Ltd. , Jefferies , LISCR | The Liberian Registry , Maritime Strategies International , NIBC Bank , NorthCape , Northern Lloyd Insurance Services – Part of Howden , OceanScore , Pelagic Partners , Seanergy Maritime Holdings Corp. , Seward & Kissel LLP , Stephenson Harwood LLP , Transport Capital , zero44