Maritime more important than ever after Brexit, says Liam Fox

BRITAIN'S maritime industries will become "more important than ever" in the period following Brexit, UK Secretary of State for International Trade Liam Fox has told Lloyd's List.

The international trade secretary stressed that shipping is crucial to his department's efforts to boost UK exports, opening up what he sees as the enhanced trading opportunities offered by departure from the European Union in 2019.

The post-EU game plan will see maritime employers encouraged to double the number of apprenticeships on offer, and there will be a renaissance in British shipbuilding under the National Shipbuilding Strategy, he pledged.

He also reassured ports that the government is committed to making trade as frictionless as possible, after several industry chiefs hit out at the potential for waterfront congestion once the UK comes out of the EU customs union. 

Mr Fox - twice an unsuccessful contender for the leadership of the Conservative Party - gave Lloyd's List an exclusive email Q&A interview prior to his speech at the Tory conference in Manchester this week, in which he made clear that he was optimistic about Britain's prospects after EU withdrawal.

In this 'Oxford-style' debate two ‘teams’ who will argue the motion “Can the shipping industry alone save the UK logistics crisis?”

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Critics, both inside and outside his own party, have instead pointed to the slow progress made in Brexit talks, with agreement with Brussels on divorce settlement basics required before talks on third country trade deals can even commence.

Mr Fox described the UK as a great place for maritime businesses, thanks to its attractive tonnage tax offering, low corporation tax rates, and the general ease of doing business here.

The maritime sector contributes £22bn ($29.2bn) a year to the economy and employs 360,000 people, he said.

But more must be done, and the government will build on the recommendations contained in the 2015 Maritime Growth Study, Mr Fox went on.
The document's 19 recommendations include commitments to double the size of the UK flag, increase commercial focus at the Maritime and Coastguard Agency, help market the British maritime sector abroad, and improve seafarer training.

"There is vast potential to unlock increased trade with the world post-Brexit, but we must do it by being technologically advanced and innovative. So this sector will become more important than ever," said Mr Fox.

"The sector has already made great strides and just as it was the driver of Britain's prosperity in the past, so it will be in the future as we move forward as an independent nation."

Mr Fox has previously spoken of a "post-geography trading world". Asked to unpack the concept, he pointed to the way in which communications technologies have done much to eliminate barriers of time and geography.
Shipping takes credit for making it economically viable to transport materials and components across the world, thus expediting the development of the global economy.

"These value chains have had a very real impact on the lives of ordinary people across the world.

"In this country, living standards have climbed to their highest level in history, as more goods become available at better prices, and wages go further."

Moreover, economic liberalisation in China and India could not have produced an economic boom without the ability to access global markets by sea.
In this way, shipping has contributed to a "great emancipation of the world's poor", which could not have taken place without it.

Nor is Mr Fox disheartened by recent unfavourable economic data, including a widening trade deficit with countries outside the EU, and the failure of British exporters to gain as much market share as some economic models predict in the wake of sterling depreciation.

"The fundamentals of our economy remain strong. Our exports are increasing and we're attracting more foreign direct investment projects than ever before," he insisted.

"Our science and research excellence, system of commercial law, low tax/low regulation economy continue to be a major draw for international investors."

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The offering, which expired after market closing in New York on Tuesday, raised less than $1m from outside investors, triggering an investment of $99.2m from Sierra Investments, one of Mr Economou's private vehicles.

Mr Economou and affiliates had agreed not to exercise any rights to shares in the rights offering, other than through the backstop commitment.

DryShips has said that proceeds may be used for vessel acquisitions or repaying amounts under its credit facility with Sierra.

Following the offering, the amount outstanding under the unsecured Sierra facility is calculated to be about $73.8m and this is expected to be refinanced with a new secured loan from Sierra, the company said.

Sierra's new investment in DryShips brings the total number of common shares controlled by Mr Economou to almost 104.3m, or 69.5% of the company.

The Greek shipowner has turned around the company in bewildering fashion over the last 12 months, expanding and diversifying the fleet to 22 bulkers, four tankers and four very large gas carriers.

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A total of 5.9m dwt of crude carriers went to scrapyards in the first nine months of this year, compared with 1.4m dwt in the whole of 2016 and 1.3m dwt in 2015.

The increase closed the gap between secondhand prices and scrap values of tankers aged 15 years or above, which, coupled with spot earnings dipping below operating costs for some time in the third quarter, triggered the latest round of tanker demolition, an industry official said.

"This increase in scrapping was mainly on account of a sharp decline in freight rates during the third quarter," Drewry's lead tanker analyst Rajesh Verma told Lloyd's List.

"As the market is oversupplied, older vessels are finding it difficult to get employment."

While industry officials generally agree the scrapping volume could have been higher if the International Maritime Organization had not announced a two-year grace period for the ballast water management convention, the dim market outlooks have provided more incentives for ship demolition.

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Cambodia denies links to North Korean shipping

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The Cambodian government had decided to close down the registration of vessels under the nation's flag since August 17, 2015, although it still allowed ships with valid registry certificate under the Cambodia flag to operate until the expiration date at end-August, 2016, said the ministry. "Any ships claimed to be under the Cambodian flag after this due date are considered illegal and subjected to applicable international laws and regulations," it added.

A recent investigation by Lloyd's List tracked a fleet of roughly 20 small product tankers that were moving fuel cargoes sourced from Chinese refineries and Russian oil terminals, and supplied to the North Korean port of Nampo.

The vessels are several decades old with a dubious trading history, mostly flagged in North Korea, but also include several Russian product tankers. So far this year, the number of product tanker shipments that can be followed by vessel tracking systems appear to have dropped significantly.

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Markets

Suezmax earnings on the Baltic Exchange rebound above $10,000 per day

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Market fundamentals are firming for product tankers

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Opinion

Can UK logistics avoid a looming crunch? Join Lloyd's List in Liverpool next week and find out for yourself

THE UK logistics sector is facing a tough year ahead with business conditions deteriorating amid greater competition and fears of a so-called hard Brexit.
Ninety per cent of the goods coming into and out of the country arrive by southern ports, which are congested and slow.

Shippers compete to secure cheap, but limited, rail freight space to carry container cargoes from southern ports to northern depots, before redistributing to a warehouse for local delivery.

Cargoes that miss out on rail freight must be trucked across the country, adding to overall cost of delivery, road congestion and environmental pollution.

The delicate balance of just-in-time supply chains could be upset should Brexit negotiations introduce delays and extra costs from routine customs checks at ports as part of any transitional customs arrangement.

The UK Chamber of Shipping has led a campaign to prevent 'operation stack' on the UK's roads and to keep goods flowing post-Brexit. With an overhaul of ports technology needed, alongside infrastructure upgrades to road and rail, there are clear challenges ahead.

Any restrictions on employment from the European Union and free movement of people will also increase pressure on an under-resourced trucking industry, with British road hauliers already facing a lack of skilled drivers and staff.

Meanwhile, businesses along the supply chain are being squeezed. UK ports have to compete on cost domestically and with large European hubs such as Rotterdam and Hamburg, which can undercut UK operations through cheap port fees and regular daily feeder services. 

UK logistics firms expect to continue to be squeezed on pricing, with simply too much capacity chasing too little freight, according to the UK Logistics Confidence Index, published by a Barclays Bank and accountants Moore Stephens.

And there is a ticking time bomb when it comes to available storage. The supply of warehousing in the UK has fallen by 72% since 2009, the report found.

Can the shipping industry help solve these pressing issues? Our Tuesday October 10 panel debate in Liverpool will consider what can, and should be done to benefit shippers, freight forwarders and ocean carriers alike. Register here.

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