The panel agreed that demand is on the pick-up and it has actually been stronger than expected. Shipping remains a small fraction of the overall product cost and this explains why there is an increasing number of trades that are difficult to understand (e.g. Asia to US product trade when it's cheaper from US Gulf). Major market participants such as Shell, Vitol etc. go long on ships, indicating the expectation that demand will firm up while current asset prices are still attractive. However, asset prices have started to move up. The panel also debated how much of a catalyst eco ships are to the industry and opinions were divided. Given that the sector's problems stem to a large extent from oversupply, there was a lively debate on the issue of over-ordering and its impact in the future. Some panelists expressed the opinion that owners should exercise restraint and not succumb to the temptation of placing new orders given the attractive packages that shipyards are offering. Other panelists noted that shipping is not a team sport, and given the low asset prices, anyone who has the resources at hand should take advantage of the situation and expand the fleet.
SHIP RECYCLING IN TODAY'S MARKET CONDITIONS - PRESENTATION
Speaker: Evan Sproviero, Director - Global Marketing Systems (GMS)
"Ship Recycling in Today's Market Conditions and the Role of the Cash Buyer." The presentation highlighted the importance of ship recycling as a catalyst to help rebalance the greater shipping markets. In 2012 alone, 56.5+ million DWT was recycled and GMS, as the world's largest cash buyer of ships for recycling, predicts 2013 to be an even larger year in terms of the number of vessels and DWT that is expected to be recycled.
Mr. Sproviero also illustrated the evolving role of the cash buyer as the center of the recycling industry which now has a $5 billion+ per year turnover. In addition, Evan went into detail about how cash buyers, and GMS in particular, are now potential sources of finance and equity in the shipping space.
DRY BULK SECTOR PANEL DISCUSSION
Douglas Mavrinac, Shipping Analyst - Jefferies & Company, Inc.
Tom Beney, Head of Ocean Transportation - Cargill Americas
Fred Gordon, VP, Corporate Affairs - Navios Maritime Holdings
Polys Hajioannou, Chairman & Chief Executive Officer - Safe Bulkers
Spyros Capralos, Chief Executive Officer - Star Bulk Carriers
George Economou, Chairman, President & Chief Executive Officer - DryShips Inc.
The dry bulk owners panel concluded that the cause of the collapse of dry bulk shipping charter rates was due to the deluge of supply of new dry bulk carriers over the past few years. In fact, dry bulk shipping demand has actually remained quite robust in recent years despite the slowing of Chinese economic growth. Furthermore, with significant new iron ore production capacity scheduled to come online in Australia in 2H13, dry bulk shipping demand growth could accelerate further later this year and into 2014. Finally, as it relates to dry bulk shipping demand, the panel agreed that dry bulk shipping demand growth was going to play a key role in the recovery of the dry bulk shipping market.
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