We all want a “green future”, but the cost should not burden only shipowners
The Slide2Open Shipping Finance 2020, held at Divani Caravel Hotel in Athens, on Thursday 30 January, was a great success.
The Minister of Maritime Affairs and Insular Policy, Mr Giannis Plakiotakis, in his opening address noted the multiple challenges facing the Greek and global shipping, and stressed the government’s will “to change it all in shipping in 2020”, on the basis of a comprehensive plan already drawn, while he also noted that no investment opportunity will be missed. During his speech, the Minister referred to the challenges facing the shipping industry today, the need to strengthen the Greek register, to support shipping education and capitalize on investment interest in Greek ports.
He also noted that Greece is on a sound economic footing, which is recognised by the markets all over the world, by the funds and by rating agencies.
He added that “the government is committed to implementing its pre-election plan, by reducing taxation, cutting red tape and creating an environment that is attractive to foreign and domestic investors”.
He also expressed his certainty that 2020 will be a year much better than the previous ones, something that he had the chance to ascertain from the Prime Minister’s visits to China and the United States and from his contacts with European leaders.
He also discussed about the Greek Shipping Register and the government’s will to make it more competitive, by adopting good practices, cutting red tape and developing e-processes, including an interface linking the Ministry with the tax authorities and the Ministry of Development, as well as all other public services required by shipowners in order to register ships under the Greek flag smoothly and swiftly.
He took special note of Merchant Marine Academies and the upgrading of both their human resources and their infrastructure.
He also talked about the approval of the master plan for the port of Piraeus (€610 million) and the investment program for the port of Thessaloniki, which is currently underway; the same applies for 10 large ports all over the country, which present “great investor interest”.
Minister Plakiotakis also noted that ports are included in the national strategy for ports, logistics and transport and can therefore accommodate multimodal transport.
Mr Leonidas Demetriades-Eugenides, IMO Ambassador in Greece and President of the Eugenides Foundation, noted that, although no global crisis is projected for 2020, there exist many adverse conditions, including the trade wars, Brexit and the coronavirus. He stressed that economic incentives are required because “we cannot cure structural problems with aspirins”.
He went on saying that much can be done to improve the shipping ecosystem, adding that the UN goals for sustainable growth will have been achieved by 2030, along with digitization. As regards autonomous shipping, he believes that relevant political decisions should be based on reliable technical solutions and technical studies. Finally, he mentioned that shipowners will require more support, especially those who own smaller and older vessels, who constitute the majority.
In his address, Dr George D. Pateras, President of the Hellenic Chamber of Shipping and Deputy Chairman of Contships Management Inc., commented on the conference title “Let’s ReFuture Shipping” and wondered who will do it. He stressed the changes required by the industry, the issue of speed and the reduction of emissions, and how important it is to focus on designing ships bearing in mind that “our future will not exist if we do not take steps to help the environment”.
In this context he noted that more funds should be invested in the development of batteries and other technologies, because the technology we are using today will become too expensive, either due to cost or due to the regulatory framework.
Professor Martin Stopford, non-executive President of Clarkson Research Services Ltd focused on “Cargo transport developments 2020-2050”, the contribution of technology in shipping and urged shipping companies to invest as much as possible in technology, as it allows shipping firms to lower costs and hugely increases efficiency. At the same time, he stressed that training in new technologies should start immediately, in all shipping companies, at all levels.
Professor Stopford added that technology not only helps in the process of management, but has a tremendous potential in terms maintenance and overall fleet health, noting that “computing power helps us get a detailed picture of every vessel, allowing us to monitor for instance erosion levels, thereby reducing repair costs. Technology allows us to remotely manage situations and to cut on management costs”.
He went on saying that the industry, in order to be competitive, should keep a watchful eye and swiftly adopt developments in telecommunication and that all technological advancement ultimately leads to electric ships. New environmental regulations will oblige ships to reduce their speed and cargo and, up to now, we do not have a good alternative to fossil fuel.
Mr James Bevan, Chief Investment Officer, CCLA, talked about “The Swindle of Globalisation”, noting that technology should be inclusive in order to avoid social exclusion. Along with climate change and population ageing, robotics is the largest challenge for the global economy, since it can lead to a large increase in production but also a correspondingly large decrease in employment.
Mr Anastasios Papagiannopoulos, Principal of Common Progress Co Na S.A. and immediate past President of BIMCO, said that there are no realistic economic policies for countries that disagree with EU policies and discussed the case of China, which opened its economy to new technologies, with very positive results. He also added that the Chinese miracle may have some flaws but is positive overall and noted that most Europeans seem unprepared to incorporate technological change.
Important issues were also raised during panel discussions. The first panel, moderated by Mr Yuri Bender, Editor-In-Chief, PWM at Financial Times, assessed global political and economic developments. Mr Jesper R. Pedersen, CEO, M.V. Cargo (Grain Terminal Port), in Odessa, Ukraine, talked about the modernization of the port of Odessa, which now allows producers to reach more consumers, and noted that Ukraine ports are open for investment. Dr George Vaggelas, Managing Director, Ports & Shipping Advisory, noted that the average salary paid by Cosco in the port of Piraeus is much higher than the average wage in Greece and added that, the rumors that labour Unions are not allowed in the Piraeus Container Terminal S.A. are not valid as currently two labour Unions exist in PCT. In his view, the port of Piraeus is no more the focus of European concern on Chinese investment in Europe as there are several other recent cases that draw the attention of EU, while the sale of Piraeus Port has been approved by the so-called Troika in which EU had a role.
The second panel discussed “Sustainability and Compliance”. The Chairperson and panel moderator Ms Danae Bezantakou, CEO, Navigator Shipping Consultants Ltd and Secretary General of the International Propeller Club, Port of Piraeus, initially gave the floor to Mr Greg Atkinson, Director & Chief Technology Officer, Eco Marine Power Co. Ltd, Fukuoka, Japan and Managing Director, Ohori Capital Pty. Ltd, who noted that “sooner or later, we will go to electric vessels” and added that “in the meantime, we will have some alternative technologies. Mr Costas Contes, Managing Director V.Ships Greece Ltd, noted that shipping management has not changed much up to now, but large changes and challenges are right in front of us, including digitization and cyber-attacks. He added that shipping will be more regulated and underlined that Greece possesses the know-how, technology is already available, and it is up to shipowners to realise the need to adopt it. Dr Ioannis Patiniotis, Finance Director, Carras (Hellas) S.A. presented a paradox: although Greek shipping is the first in the world, it does not have the power to affect developments as regards the formulation of shipping regulations. Mr John Cotzias, Projects & Finance, Xclusiv Shipbrokers and President of the Hellenic Shipbrokers Association noted that “a scrubber-fitted vessel ordered today will be ready in 2 years, but we do not know how fuel prices will have evolved by then. It is a difficult equation”. Capt. Kostas Karavasilis, Senior Loss Prevention Executive, Thomas Miller (Hellas) Ltd. said that insurance was cheap up to 2-3 years ago, causing problems to insurance firms. However, the insurance industry is being consolidated, it has matured, and stands ready to face the challenges related to the gradual change in regulations.
Mr Peter Sand, Chief Shipping Analyst in BIMCO, opened the “Future-Proof Strategies” session. He estimates that demand for crude oil will be robust in 2020, but in the long run tanker vessels do not seem to constitute a sustainable investment. He added that today there is more supply than demand and scrubbers are necessary in order to cut down on operating expenses. Turning to the trade war, he stressed that it has a negative effect, as it restricts globalization, which is the oxygen of shipping and that the bad relationship between the American and the Chinese presidents “has built walls”.
The highly interesting discussion of the next panel, moderated and chaired by Ms Katerina Stathopoulou, Executive Director, Investments and Finance Ltd and Governor of the International Propeller Club, Port of Piraeus, focused on whether “Shipping Finance can become attractive again to Banks”. The participants, Ms Alexandra Michalopoulos, Partner, Watson, Farley and Williams, Ms Korinna Tapaktsoglou, Chief Financial Officer, Pioneer Marine, Mr Christopher Conway, Managing Director, Global Head of Shipping and Offshore Export and Agency Finance, CitiGroup, Mr Christos Tsakonas, Global Head of Shipping, DNB Bank, Mr Marc Hari, Executive Director, Shipping Finance & ECA, Macquarie Bank, Mr Andreas Chrysostomou, CEO, Marine Fields and Mr Stavros Gyftakis, Chief Financial Officer, Seanergy Maritime Holdings Corp., agreed that while financing from banks is available, financing conditions are becoming stricter and stricter. As regards the current and the forthcoming regulatory framework, including the ESG, Mr. Conway said that the banks cannot become the police officers of regulatory authorities.
The panelists agreed that they see the changes coming, which will increase the cost currently weighing on shipowners, while the burden should be allocated among all parties involved. Shipowners invest on more “green assets” or make necessary alterations to their vessels in order to make them more environment friendly. Many shipping companies prefer this second option rather than new orders; this gives them the time to see the effect of new regulations on the market, which is not necessarily a negative development. Furthermore, they stressed the importance of the human factor as most threats and damages in shipping are caused by human actions or omissions.
Mr Filimon Antonopoulos, Managing Director, Tallon Commodities Limited, talked about Shipping companies & Hedging and underlined the exogenous factors (trade wars, coronavirus, Brexit, etc.) which do not allow investors and shipowners to completely control the course of their investment. This, as he said, can create a cashflow problem to shipowners, which could in turn be transferred to investors. “We cannot change the shipping industry, but we can help shipowners make better decisions”.
Financing from international and Greek banks was discussed during the panel discussion on “Mapping Shipping Finance opportunities”. Mr George Laios, Deputy CEO, Intermodal Athens, said that, despite uncertainty, shipping banks are reorienting their stance and that leasing and other alternative ways of financing now constitute the basic means of shipping financing – this way the shipping finance market becomes clearer. Mr Ali Susanto, Managing Director and Head of Singapore, Braemar Naves, added that Asian leasing companies are ready to increase their investment in shipping, as they estimate that the shipping industry will have a steady upward course. Mr Harrys Kosmatos, Corporate Development Officer, Tsakos Energy Navigation (TEN) Limited, noted that cheap money is no longer readily available from banks and that banks are becoming more selective in their lending. Mr George Cambanis, Managing Director, YieldStreet Marine Finance, talked about Fintech and noted that shipping firms that did not have access to bank financing in the past, now have the chance to find financing through fintech solutions. Mr Dimitris Anagnostopoulos, BoD member, Aegean Baltic Bank, underlined the further reduction of shipping capital by international banks. However, he said that Greek banks are now more positive towards Greek shipping firms. Mr. Christoph Beneke, Ship Finance Executive, Meerbaum Capital Solutions Inc., talked about private equity firms, which on the one hand increase their funds to shipping, but on the other hand offer them at a high cost. Mr Constantinos Kanellopoulos, Associate, Braemar Naves Corporate Finance, who moderated the discussion, noted that the fact that we now have more sources of financing does not necessarily mean that the problem of financing is solved, since capital comes at a considerably higher cost.
Human capital was the focus of the speech delivered by Ms Elisabeth Calbari, Neuropsychologist, Executive Trainer and Founder of Self-Balance. She talked about the virtual reality programs used by NASA and athletes, which are designed to help people realise and improve their weaknesses. She noted that these programs can be addressed to sea captains and help them make better use of the potential of both their vessel and their crew. She urged shipowners to seriously consider investing in such technologies as benefits outweigh investment.
Ms Eirini Liadi, ICT Senior Sales Specialist, OTE Group, talked about the importance of cybersecurity in shipping. She noted that customers are becoming more demanding and that digitization will help satisfy their demands. Unhindered interaction, unhindered communication and enhancement of security in the cloud and mobile communication are necessary.
Mr Konstantinos Papapanagiotou, Senior Manager, Cyber Security Solutions ΟΤΕ Group, noted that cybersecurity is important not only for shipping, but also for our everyday life and presented the special security centre of OTE, which can monitor IT infrastructure of OTE customers 24/7. It is the first operation centre in Greece which can simultaneously monitor IT and industrial systems, being in the position to protect, in real time, corporate users from hundreds of thousands attacks, on land or at sea.
Mr Konstantinos Georgiou, Management Consulting Manager, Accenture, noted that digital transformation requires the digitization of internal and external processes. In turn this requires a certain internal organisation, which may reflect a change in the internal operating model at firm level. He stressed the importance of recognizing and promoting talent, robotics, IoT technologies and clearly defining targets.
Mr Morten Lind-Olsen, CEΟ, Dualog, stressed the large discrepancies in internet speed on board and on shore, and this is why interconnected ships are still at their initial stages. However, technology is progressing and speed at sea is increasing. He also stressed the importance of investing in information and communication technologies as “cyberattacks will not just disappear”.
The Digital Transformation as the new source of competitive advantage was discussed by the next panel, chaired by Ms Eirini Liadi. Mr Konstantinos Georgiou, Mr Dimitris Kontinos, Managing Partner CloudFin, Mr Morten Lind-Olsen, Ms Katerina Raptaki, ICT Manager, Navios Group of Companies and Mr Ewan Robinson, Director, Yango Satellite Communications Ltd. raised the issue of digital transformation, which tends to become a “digital tsunami” and the bet for shipping firms is to prove ready to incorporate necessary adjustments in order to keep on being competitive and safe. Furthermore, it was stressed that cyberattacks do not come from “amateurs” but are organised and very well targeted and the threat for shipping companies and ships is large and increases exponentially. Risks are not only financial; they reach way beyond and can harm the reputation of the firm, causing even more damage. The human factor represents the weakest link in the area of security and attacks are many more than the ones reported.
The final panel, “The Shipowners Panel – Brighter days ahead?” was moderated and chaired by Mr Angelos Roupas Pantaleon, Founder, Second Wind and Partners, who encouraged panel members to speak freely. He added that, if there is a phrase befitting a shipowners panel, that should be “caught in the middle”, because shipowners are indeed in the middle of changing regulations, of USA and China, of banks, ESG, etc. Ms Marily Frangistas, Managing Director, Franco Compania Naviera, noted that most shipowners have been very responsible in adjusting to green shipping. Between 2008 and 2018 there was an at least 50% reduction in emissions. She also discussed the initiative of the international shipping community to finance a research fund to design a ship with zero environmental footprint. Mr George Goudromichalis, Managing Director, Phoenix Shipping and Trading SA, noted that shipowners have made so many “green” alterations that “we have damaged ourselves by accepting without objection all environmental regulations”.
Mr John Dragnis, Chief Executive Officer, Goldenport Group, foresees higher bunker prices. He added that there is the option of LNG powered ships, “but this technology will most probably be transitional, up to 2030 the most” and he mentioned that “we all want a green future”, but who is going to pay the bill? The cost should not burden only shipowners. Mr George Alexandratos, General Manager, Apollonia Lines SA and Vice President, Hellenic Chamber of Shipping, referred to the three large advantages of shipping, which have to be used for the benefit of the shipping community: the fact that nine out of ten goods are transported by sea, that ships can go anywhere and that 73% of the planet is covered by water. For these reasons, the shipping industry should be a part of the decision-making process. Mr Dimitris Theodorakis, Swissmarine Inc., noted that changes in engines are very significant but “it takes 10-15 years to develop an engine, which renders the decision of shipowners very difficult”. Lastly, Mr Nicholas Papalios, Vantage Shipping Lines, stressed that what ties all shipowners together is their love for shipping and the fact that there are goods that have to be transported and charterers that want to transport them. We all dream of a “green future for our kids”, he said, however the cost cannot be absorbed by shipowners alone, especially when everyone else gains from this.
As regards joint ventures, the shipowners agreed that funds (institutional investors) do not come as financiers but as equity funds. Such joint ventures will have to work on a medium-term time horizon. Modern shipowners have, more or less, some experience in this sort of investment – owing to the lack of bank financing. The panel members said that there are huge amounts of funds managed by institutional investors that wait to be invested.
In his closing speech, Mr George Tsavliris, Principal, Tsavliris Salvage Group, underlined that apart from artificial intelligence that expands (also) in shipping, “we should discuss more about emotional intelligence”. He noted that we talk about emissions from shipping, but we do not say a word about emissions from livestock farming which is responsible for 32.6 billion tons of carbon dioxide per year”.