Polys Hajioannou and the art of running a shipping company
Running a successful shipping company is about sharing your expertise with public shareholders
CRISES always create new opportunities, if shipowners are willing to focus on what makes ship owning an art and not a business. Running a public company is about sharing your expertise with your public shareholders for the benefit of all. And succeeding in a family-run shipping business is about passing your knowledge and good reputation to the next generation, the same way you inherited it from your father.
That in a nutshell is the business philosophy of Polys Hajioannou, chairman and chief executive of dry cargo specialist Safe Bulkers, who shared his views in an all-encompassing exclusive interview on Capital Link hosted by Lloyd’s List.
Mr Hajioannou was in New York to receive the prestigious person of the year award from the Hellenic-American Chamber of Commerce.
Below are some of the excerpts from the interview, which can be accessed in its entirety on Capital Link’s Podcast.
On the current market outlook
“We are optimistic for the next three years to say the least. We believe the market reached an equilibrium in 2017, because of very strong demand in iron ore and coal, which outperformed our most optimistic expectations…
“Next year will be a soft delivery year and the usual inflow of deliveries that we have at the beginning of each year does not apply in 2018. If charterers start fixing panamax vessels for a year at $14,000-$15,000 (instead of paying more in the spot market), asset prices will appreciate. Every 10% appreciation in asset prices results in 32% appreciation of Safe Bulkers’ net asset value”
On availability of debt capital
“We see history repeating itself, with banks exiting the sector when they should be entering it at the end of one the biggest crises in recent history…
“Finance is becoming more scare. The number of European banks available to Greek shipowners has been reduced to around 20 from the previous high of 42 in 2006…
“At this stage [scarcity of finance] is a positive sign because it will discourage owners from placing speculative orders.”
On ballast water management treatment regulations
“The required installation of treatment plants will expedite the scrapping of older vessels as they are about to undergo their next special survey.”
On new emission controls
“The use of scrubbers is not economically viable since shipowners cannot face the cost themselves, the whole industry will have to contribute, or provide enough fuel to meet the new standards…because of the uncertainty in new regulations, everybody including ourselves as shipowners, wouldn’t want to be the last ones ordering ships with older designs.
“The prudent course would be to wait for new designs to come that will incorporate the new emission regulations.”
On specialising in the panamax sector
“The panamax and post-panamax sector is the workhorse of the dry bulk market. It has the most concentration of cargo [10 to 15 major commodities] and the more diverse number of clients [over 100 charterers]. It’s the sector that adapts the fastest with any change of supply and demand.”
On how the new Panama Canal will affect dry bulk trades
“We are seeing new trade routes emerging, especially on coal trading from the US east coast and Colombia to the Far East, where our post-panamaxes can lift 25,000 tonnes more than a traditional panamax.
“We are very optimistic on the post-panamax sector since yards cannot build them economically. The current orderbook is just 30 ships, since the extra cost of $5m-$6m per ship cannot be justified in the current environment.”
On surviving one of the worst crises in history
“We had to sit down and do the basic work of a shipowner, which is more art than business…Focus on the relationships you have with your suppliers, how prompt you are with your payment. Make pooling arrangements with other shipowners and crewing arrangements to further reduce your operating costs… And focus on one sector [dry cargo] and a particular vessel type [panamax and post-panamax]”.
Mr Hajioannou wanted to drive home his company’s competitive advantage. “We cannot change the market but we can change how competitive we are when we are operating our vessels. We are in one sector where we operate sister ships. This gives us a competitive advantage both when we charter out ships that we outperform the market by $1,000 per day and on operating costs and G&A where we outperform by $1,500 per day.
“These are the savings we generate every year, savings that are embedded in our results to the favour of public shareholders.”
Last but not least, on running a public company passing the baton to the next generation
“Our philosophy is to run our company not to take advantage of public shareholders but have public shareholders take advantage of our experience by running the company as if it were owned 100% by my family.
“I inherited this business from my father and it would be a failure for me if I didn’t manage to pass the expertise and knowledge and the good reputation to next generation, at least the same way I inherited from my father.”