At this year’s Asian Logistics and Maritime Conference (19-20 November Hong Kong Convention and Exhibition Centre) the third Maritime Forum raises the topic, “Today’s Shipping Dilemma – Is the Future in Owning or Managing?”
There are a number of angles from which this topic might be approached and ALMC has picked some of the best qualified Hong Kong-based professionals to debate it. Tim Huxley now the proud chairman of Mandarin Shipping, has during his long professional life in Hong Kong has been a broker and a chief executive of one of Hong Kong’s more prominent dynastic shipowners. Bjorn Hojgaard is the chief executive officer of Hong Kong’s largest ship managers, Anglo Eastern, and William Fairclough is a managing director of Wah Kwong, a traditional shipowner that has just recently branched out into ship management.
Third party ship management has been around since the 1970s when Hong Kong-based Wallem Group made the shift from owning vessels to managing them. But this shift has become much stronger since the financial crash of 2008. The following decade has been particularly harsh in the shipping industry and banking.
The result has been a withdrawal from the market by shipping’s traditional financiers, the European banks. This has led to opportunities for less conventional sources of financing looking for a return in a perennially low interest environment. Prime examples of this are American private equity funds that have been purchasing vessels at the bottom of the cycle. With no experience of operating ships these funds will look to the market for maritime services such as ship managers.
Also moving in to fill the gap created by the absence of the European banks are the Chinese and Japanese leasing firms. These institutions usually, but not always, have a banking connection. In China for instance the biggest players include ICBC, Bank of China, Bank of Communications, China Construction Bank, and Minsheng Financial Leasing in 2018, the joint portfolio of these institutions was estimated at around US$1trn. Such leasing firms that buy up floating assets and then lease them out to traditional shipowners were virtually non-existent at the time of the 2008 crisis. Ten years later they dominate the shipping market.
And Hong Kong has been quick to see the opportunity to expand its maritime centre by luring these financial institutions to set up business in Hong Kong. One component of last year’s policy address given by the Chief Executive of the Hong Kong SAR, was the intention to offer tax concessions to ship leasing companies operating in Hong Kong. It is hoped that the initiative will get through the Legislative Council during the 2019/2020 session.
Another variant on the owning vs management proposal is simply to do both. One of the surprise announcements this year was Wah Kwong’s new business model with the snappy title, Wah Kwong Lite. At the core of the new model is asset management, i.e. vessels.
For 67 years, Wah Kwong Maritime Transport Holdings built a reputation as a reliable tonnage provider and a masterful asset player. However, continued volatility sparked by the economic crisis of 2008 has led Wah Kwong to shift to a business model that is more resilient to market fluctuations. Wah Kwong still sees itself first and foremost, as a shipowner, but also felt compelled to re-examine its strategy for the future. That future is, at least in part, ship management.
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
Please Contact Us at：