September 2007

I write this on a weekend when the Baltic Dry Index has rocketed to a record 7319. In simple terms this means that a Cape-size can earn a princely $118000 a day; evidence that the world demand for commodities and indeed manufactured products remain unabated.

But the remarkable feature of this new freight market high is that it takes place after a near unique roller coaster ride in the world’s stock markets. The banking system globally is somewhat shaken by the apparent over-supply of credit to what are known as “sub prime” borrowers. As a result easy credit is no longer available, at least for the time being, while banks and investors reappraise their potential liabilities. Some commentators have labelled the stock market fall as a “useful correction”. Personally I have no idea of what these neat little words actually mean.

Can it really be that the shipping market has a life of its own independent of the nervousness of the money markets? To a certain extent I suppose it has.

China’s industrial and transport expansion means that the demand for raw materials continues unfulfilled. As one example, queues of vessels await berths in the Eastern Seaboard ports of Australia to take on board ore (1 million tons a day has been estimated as China’s demand figure) and this inevitably results in powerful, ever increasing, demand for shipping space.

Similarly the customers of China and the Eastern Tigers, principally the US and Northern Europe, have so far continued to buy apparently ignoring their dangerous borrowing position and balance of trade deficits. It would indeed be a sorry thing for the world if the US or Europe went into deep recession…. who else can take their place in the short, medium or even long term?

All this presents to me a brand new state of affairs different from any I have encountered in my 55 years in shipping.

IMIF is by definition a Forum where these matters should be debated. After all we alone represent all facets of the marine industries and should devote time to thinking about fundamentals, particularly in light of today’s globalisation. Even if the freight market does continue its merry upward way (which is worthy of profound scepticism) there is already in sight the likelihood of overtonnaging when the shipbuilding potential of the world is augmented and unleashed.

Also there is the growing realisation that despite population expansion something must be done to create sustainable growth (ie from an ecological and practical angle we simply cannot continue to use up the earth’s resources at the current rate. It would, argued one scientist at a seminar on the topic I recently attended, require three earths to provide the materiel if all the world were consuming at the same rate as the UK).

That, carbon footprints, terrorism, piracy, etc etc are matters that are going to affect our great industries over the next decades.

While enjoying the present let us therefore devote a proper portion of our time to thinking about the future and make prudent provision for it.

I sincerely hope I am not simply becoming boringly old (which possibly I am) but I commend the thoughts I have presented above as valid and worthy of debate by all of us.

Jim Davis

PS - Julian Brazier Shadow Minister for Transport, Shipping

Over the years we have maintained a close contact with the Department for Transport and the Minister and Shadow Minister responsible for Shipping.

I therefore asked the recently appointed “Shadow” Julian Brazier to lunch here at the Baltic Exchange where he was able to talk not just to me but to several of our members viz Ian Gooch (Director - A Bilbrough & Co Ltd, Managers - The London Steamship Owners’ Mutual Insurance Association), Captain William “Paddy” McKnight LVO RN (Manager, The London Branch - The Japanese Shipowners’ Association) and Spyros Polemis (Chairman - Seacrest Shipping Company Ltd, Vice Chairman – The Greek Shipowners’ Co operation Committee and Chairman – International Chamber of Shipping).

It was a useful occasion and Julian Brazier demonstrated that he is very anxious to hear more about shipping in general and the special problems that confront particularly UK shipping. We did not talk endlessly about the “UK flag” debate but concentrated on the broader problems of world shipping and the maintenance of London as the world centre of global maritime affairs. Members will recall that Theresa May, Brazier’s predecessor, was also intelligently open-minded. The ever present topics of European Union bureaucracy, safety, piracy, carbon footprints and manning problems were all debated.

We have not yet met Mr Jim Fitzpatrick, the recently appointed Labour Government politician who has taken over from Dr Ladyman. This we must do especially as the appointment appears to have demoted the shipping role from Ministerial level to that of Parliamentary Under Secretary of State.

Jim Davis