Cambridge University Press - UBS Blue Sea Index - Freight Derivatives - FFA - ilija Murisic Keywords: Freight, Shipping, FFA, China, Port Congestion Factor, Commodities, Trading, Derivatives, Structured Products, Hybrids, UBS, Baltic Exchange

1. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
Index
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Index
acquisitions, approach by Georgiopoulos, cartels 45
Peter 250 change, response to 14
Aegean Marine Petroleum Network 188 China 22, 124
agents see using, shipbrokers container shipping 4
archetypes 251 demand growth 6, 47, 48, 259
critical success factors 86, 111 energy efficiency 22
four specialized 187, 215–32 environmental issues 22
asset bubble 42 iron ore 33
asset class, derivatives as 152 shipbuilding growth 54, 124
asset ownership, split from operation 84 Clarkson Shipping Hedge Fund 155,
asset play strategy 52, 194 198–9, 231
selection defined 193 Clipper, diversification 92
timing 100 clusters 62
Awilco 97 and human talent 67
and national state entities 65–9, 84–5
Baltic Exchange 148 and specialization 84
Basel I 225 composition 69–70
Basel II Accord 56, 222, 225–6 concept as paramount 63
unintended outcome 226 Danish 73
benchmarking, and specialization 87 Dutch 65, 68
bias, hindsight 60 focus in 64
biases, in data 59 global vs. national 65–9, 73–4
branding 104 logistical/port 62, 74
coherent strategy 105 maritime, financially oriented 62
cruise lines 27 network, importance of 63, 70
customer focus 105 Norwegian 69
shipbuilding segments 27 policy 62, 73
brokerage, in-house 258 prime global shipping 62–3
brokers, cost-benefits 257 prominent companies not in 63
bulk carriers, safety 19 shipping 62–75
bureaucracy, increased 252 secondary 64
business order, and political forces 8 success factors 64–5, 66, 139
business views, juxtaposing varied 108 CO2 emissions, environmental challenge
BW group, conversion program 19 10, 180
commodities
Capesize, winning strategic choice 195 demand growth 4–5
capital, abundance of 11–12 freight rates 36
and competitive advantage 12 supply shortages 4
scarcity 11 commodity business, shipping as 36, 44–50
capitalization, significance of distribution 72 competition, in shipping industry 79
Carnival 27 competitiveness 10, 138
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2. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
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i n d e x 267
competitors, differentiation from 258 DFA (Demolition Forward Agreements) 157
complexity 256 differentiation, positive 258
consolidation 80 Diogenes Fund 100
horizontal 83 double hull tankers 102
container-based shipping, demand double hulls, requirement 18
growth 4 Dynamic Trimming Assistant 181
containerization, impact on industry 21
Contracts of Affreightment economic performance 253–4
(CoA) 95 economic stability 6–8
corporate culture 79 employee development 108
cost, capital, success factor 102 entrepreneurs, internal 246
costs, need for control 256 Wang, Gerry 246
credit crisis 7, 11, 80 environmental concerns 9–10
tighter financing due to 116 equity, ability to raise 246
culture equity, need for sufficient 112
global vs. national 94 EUKOR 25, 29
headquarters 94 exit strategies, options 42, 51
risk-averse 252 experimentation, need for 107
trading activities 94 Exxon Valdez 9, 216
cultures, five, in shipping firm 254
currency, speculative, risk 58 family business dimension 99, 235–41
customer insight, key 109 archetype 235–47
customer relations firms 88 congruence between ownership and
strategies for 105–10 management 235
trading as focus 142, 248 decline 238
customer satisfaction, 104 fragmentation 239
customer value, critical success Klaveness 239
factors 245 Leif Höegh & Co 239
customer view, importance of 245 longer term view 236
customer-based network, importance of 91 management competence 238
customers, inspiring solutions orientation 237
108, 109 publicly traded firms 235
customs barriers 72 shareholder perception 238
cycles, shipping, 118 sibling rivalry 238
long-term view 118 stagnation 238
surviving 118 success factors 236
succession 240, 241
Damen shipyard 126 Tschudi & Eitzen 239
Danaos 13 FFAs 99, 147–58, 167
and IT services business 92 and new liquidity 152
debt, higher prices for 116 clearing platforms 149–50
decision making, speed 244 derivatives 147–58
shipowning built around 248 market, number of players in 148
decomposition 82–5 tradable investment index 155
derivatives market 99, 142, 152, 156 finance, as key 255
and container-based 154 financial crisis 12, 98
and dry bulk 142, 153, 248 financial engineering, importance 35, 58, 255
key requirements for 157 financing, function, importance 92–3
trading instruments, developing 158 firms, specialized, dominance 248
see also FFAs fiscal policy, as essential for shipowning 84
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3. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
Index
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268 i n d e x
flag of convenience 62, 139 IGLOO concept 242
flexibility, importance of strategy for 42 open attitude 244
forecasting consulting firms 101 risks, guidelines for 242
see also freight rates, forecasting; market speed and focus 243
forecasting; Marsoft truisms 244
forward trading instruments see FFAs growth platforms, key to success 256
Fredriksen, use of ship operating companies growth, and political stability 8
100 growth, and Western Europe 7
freight rates 31–61
and commodities 36, 45 hedging 38, 149, 150, 154
and currency fluctuations 58 Höegh Autoliners 25, 29
and demand 33–5 hull design 10, 18, 19, 129, 179
and financial markets 46 hull shape, aqua-dynamic 178
and financially oriented entrants 57–8 human resource policies, and global
and finished goods, availability 36–7 competence 251
and new capacity 47, 48 human resources see governance
and newbuilding and scrapping 38–44
and port congestion 37–8 IMAREX 99, 149
and ship type 55 disadvantages 149, 150
and timing 55 industry conditions, taxation influence on 71
and trade developments 35, 36, 45 industry, shipping 3–14
container, falling 37 capital-intensive nature 11
drivers for 31, 35–6, 44, 61 demographic shifts, impact on 5–6
forecasting 31, 51–7 dispersed manufacturing 4
and shipbrokers 55 economic growth, uneven 6–8
changes in 47 globalization 3–4
customers for 54 new entrants 12
cycles paradigm 43, 51, 52 speed of change 3
difficulties of 43 trading blocs 4
freight markets 31–2 value chain 3
locking in 57 information sharing, customer service 109
model for future VLCC spot rates 42 innovating, focus on speed and talent 249
ship utilization key to 34 innovation 101, 181–2
Frontline 94, 102 and ship design 178–81
fuel consumption, and trim 181 clusters, importance for encouraging 74
environmental 183
Gearbulk, closeness to customers key 106, focus on scope 103
107, 108, 109–10 forecasting capabilities 183
Genco Shipping 188 fuel-saving, charterers valuing 182
General Maritime Corporation 88, 188 in US economy 7
geopolitics 8 J. Lauritzen 250
governance 235–47 research leading to 74
action orientation 244 Skipsteknisk 249
and dictatorship 243 see also steel, innovating
and simplicity 247 innovativeness, as cluster success factor 66
balance between top team 243 integrated company, revision 89
CEO 242 integrated shipping company, decline 82
chair and board, role of 242 investing in shipping 97–100
challenges 243 investment
healthy culture, issues 244 costs, increasing 10, 11
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4. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
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i n d e x 269
mode of 97 niche markets 15
turnaround time 35 offshore ships 27–8
iron ore, demand for 19 passenger ships 26–7
irrational exuberance 42, 118, 136 reefers 27
ro-ro 24–6, 29
J. Lauritzen 96, 202–3, 250 Norwegian focus on 24
John Frederiksen 63, 96–7 strategic advantage from IT 26
Jotun 73 tanker 16–19
Aframax 18
K Line 29 conversion to bulk 19
Kommanditgesellschaft investment funds Handysize 18
(KGs) 101 Panamax 18
Kyoto protocol 10 product tankers 18
rates, and oil prices 17
leadership 246, 252–3 Suezmax 18
style, clarity in 253 VLCC 18
learning, systematic, need for 107–8 Marsoft 53, 56
Leif Höegh 83 and independence 92
liquidity availability 246 and risk management 53
logistics, critical competence 13 Decision Support System 221
luck, key to success 60 dry bulk case 54
factors taken in to account 56
Maersk Line 132–5 limitations 57, 60, 61
difficulty with integrating IT 26 Shipping Risk Management 221
management capabilities 248–59 tanker freight model 43
management focus, driver for specialization Timing and Risk Management System 221
93–4 middleman function 257, 258
maritime network, Dutch 65 trend away from 257
market capitalization 72–3 see also using steel, shipbrokers
market forces, microeconomic 7 Mitsui-O.S.K. Line 29
market forecasting 51–61 Moller-Maersk 83, 91, 101, 205–11
biases and uncertainty in data 59 container market, share 24
importance of accurate assumptions 56 see also Maersk Line
need for shipowners to supplement data 57 Moore Stephens 171
market, freight derivatives 95 MTM, conversion program 19
markets, shipping 15–30
bulk carrier 19–21 New York, as powerful cluster 64
bulk, utilization rates 20 newbuilding and scrapping 38–44
Capesize 19 capacity 20, 35
Handysize 19 managing programs 136
Panamax 19 tankers, double hull requirement 18
potential for growth 20 trading orders 144
car carriers 24–6 see also shipbuilding
chemical tankers 28–9 not invented here syndrome 108, 109–10
commodity strategy 15 NOX emissions, reducing 180
container 21–4 NYK 29
trend to larger ships 24
worst case scenario 21 OBO see ore-bulk-oil
cruise ships 26–7 multiple markets, ability to serve 20
LNG/LPG carriers 28 OOCL, effective approach to IT 26
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5. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
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270 i n d e x
operating steel,100, 170–4 IT as change driver 187
annual benchmarking study 171 learning curve effect 213
competitive focus 173 liner and terminal business related 210
cost-efficiency 171, 249 logistics business 207–8
crew costs 173 niche sector, Gearbulk 212
critical success factors 170, 172, 173 niche shipping, success factor 212
customers 173 offshore supply ships 208
key dilemmas 91 strategic process design 213
outsourcing 171 cost discipline 212
shorter term focus 89 tramp ship business 207–8
options vs swaps 159 Morgan Stanley active in 204
ore-bulk-oil 19 portfolio planning 191
organizational change, constant 255 need for liquidity 58–9
organizations, networked 255 selection problem 191
OSM 172–3 portfolio strategy 190–2, 194,
outsourcing 83 196–204, 232, 249
Frontline 256 A.P. Moller-Maersk 205–11
owners, relationship with users 94–5 and cash flow 191
owning steel see shipowning and focus on costs 206
and operating 95 asset choice 192–6
and trading 101–3 board, determined by 242
economies of scale 248 container liner business 206–7
pull systems 88 CSAV and specialization 206
push systems 88 diversification 190, 191, 195, 202–3
time-correlated 195
paper trading, evolution towards 99 exiting 194
perfect competition 30, 55, 258 growth patterns, changing 49
planning and control process see governance, indices for stock market sectors 193
management processes passive investing 193
policies, fiscal 71 pick the winner 195
pools 102–3 regular revision of 191
port congestion risk, challenge of understanding 200
and container industry 37 profile 250, 254
Australian 37 Seaspan as long-term model 197
capacity 37 specialization 207
effect on freight rates 37–8 stop-loss criteria 194
port delays see port congestion success factors for acquisitions 204
port delays, and dry bulk markets 52 timing and 194
portfolio management 187–214 yield or stock based 199, 200
and diversity 190, 214 ports, productivity in US, limited 138
and risk management 187, 189, 193, 212 professionalism 13, 252
asset selection 193 project initiatives, new firm structure
car carriers 209 along 252
performance criteria for 194 protectionism 71
commodity sector, success factors 211 puts vs. calls 159–60
container terminals 209–11
complexity 210 rates of return, factors dictating 16
exit strategy 189 rechartering risk 16
gas carriers 208–9 research and development, impact for
chartering policies 189 shipping 9
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6. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
Index
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i n d e x 271
risk and revenue management 187, 215–32 risk exposure, understanding 201
Aker Kvaerner 230 Scandinavian firms 187
archetypes, risk different for each 217 risk, diversification 99
bankruptcy, critical to avoid 218 risks, trading-related, need to manage
benefits 218–22 149, 150
capacity and future demand, identifying Royal Caribbean International 27
219
capital, competition for 217, 226 safety concerns 9–10
commoditization 224 scale benefits 88
currency and interest rates 223 scrapping 44
decision making, key parameters 220 Seaspan Corporation 11, 79, 198
exposure management key 215 container shipping lines 113
forecasting scenarios containerization 15
and decision maker 220 innovation through standardization 181
and timing purchases 219–22 lease-inspired niche 13
Marsoft’s approach 220 long-term charter strategy 93
need for stress-testing 220 newbuilding programme 131
setting risk levels 221 portfolio model 196–204
forward prices, importance of 231 standardization policy 88
stakeholder influences 216 transnational structure 85
hedging 218 Seatrade 27
innovations 231 sector asset management 97–9
key message 215 Sector Maritime 204
lending, portfolio approach to 225 services, top class, near clusters 63
new capital 216–17 Ship Finance International 102
Norden, and VaR approach 222 ship operating companies, largest 100
credit worthiness, perception 224 ship owning, by public companies 102
performance, dictated by investors 216 ship types, segmentation 120
probability estimation 219 shipbuilders, three biggest 119
residual values, risk around 228–9 shipbuilding 124, 129
influencing factors 229 capacity growth 33
risk for Seaspan 231 capacity, availability a factor of 118
volatility 228 financial support for 71–2
rising importance of 80 growth, banks drivers of 34
risk 217, 218, 219, 226–7 new prices 124
attitudes to 217 productivity 126
credit 224 subsidies 71
exposure, income and 224, 227–8 see also newbuilding
lower market exposure 223 shipowning 139–40
management and 223–5, 229–30 adding tonnage 137–8
market 224 and operating, different time horizons
minimization, securitization as 229 89–91
profile, and liquidity 89 business cycles 136
requirements for 226 charter-vessel owners 129
unintended, elimination 218 competitive focus 112–13
stop-loss management 230 container line, complexity 134
strategies 217 container ships market 127
trading results, VaR as predictor 222 container ships, newbuilding 129–35
Value at Risk (VaR) 222–3 customers 113–14
VaR, limitations 223 customers as infrastructure contractors 114
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7. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
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272 i n d e x
shipowning (cont.) critical success factors 85
cycles, timing in 135–7 speed reduction 179
emotional elements 89 SPFAs (Sell Purchase Forward Agreements
financial management 141 for ships) 157
critical success factor 112 spot market 95
strategies 116 steady steaming 179
understanding, role of 115 steel, innovating 101, 175–83
innovation in practice 140 commercial 175
investment behavior, principles 135 competitive focus 175–6
large companies, advantageous financial customers 176, 177–8
terms 115 environmental 178–81
long-term focus 89 Marsoft 177
orderbook to fleet ratio 131 niches 176–7
scale, equivalence to scope 134 online 177
scale economies 114–15 success factors 175
scrapping, market in 138 technical 175, 178
second-hand prices 128 see also innovation
segmentation of ships on order 119–24 steel, operating 100, 170–4
sentimentality in 89 see also operating steel
ship acquisition, timing in 137 steel, owning 112–41
specialization 112 see also shipowning and owning steel
supply and demand 127–9 steel, using see using steel
and financial markets 117 stocks and shares 160–1
shipping Stolt-Nielsen 110–11
archetypes 77, 85–111 strategic issues, need for open
companies 3 discussion 245
global approach 251 strategies, niche 1, 75, 79–111
need for analysis 98 clear, developing 103
crisis, overcapacity as 50 subsidies 71
funds, investment in 100 success, new innovations for 80
industry, success factors 255 succession planning 240
markets, atomistic nature of 55 see also family business dimension,
ocean, stability and growth 8 succession
types of, differing success factors 139 sulfur fuels, low 180
world 1, 75, 79–111
ships, categories 120 T. Klaveness 151–2
ships, demand, macro factors 138–9 technology, changing 9
ships, new, demand and supply for 118–120 Teekay 81
shipyards, growth 124, 127 terrorism 9
silo thinking 108, 109, 251 TEU 11
Singapore, growth in maritime strategies 113
industry 70 TK Gas Partners 102
single-hull tankers 10, 19, 129 TMT Corporation 150–1
Skaugen I.M. 81 TPM 152
Skipsteknisk 176, 177 trade, free, barriers to 36
specialist firm, types 85–7 trading instruments, new 157
specialization 80–4, 86, 91–2 trading terms 159–63
A.P. Moller-Maersk 83 tramp shipping, Norwegian owners,
benchmarking as contributor to 87 focus on 24
core activities, aid to defining 83 transaction costs, and specialization 91–2
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8. Cambridge University Press
978-0-521-76149-9 - Shipping Strategy: Innovating for Success
H. C. Mult and Peter Lorange
Index
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i n d e x 273
Tufton Oceanic 204 shipbrokers 163–4, 168
turbulence, regional instability reason Cargill 165
for 8 transaction oriented 164
success factors 142, 143, 195
UBS Blue Sea Index 155–6 time charters 161–3
uncertainty, need to prepare Western Bulk 162–3
for 59 see also operating
using steel 142
bargaining power, shift 146 value chain, integrated 82, 104
branding 146–7 decomposition of 82
capital markets, access 142 economic, stability needed for 8
customers 144–6, 249 enablers 84
customer, final 145 trend to dispersal 84
demand-side factors 143 value creation, volatility in 253–4
derivatives 147–8, 168 van Oord 81
DFDS 166–7 Vietnam, low-cost manufacturing 4
financial capabilities,
key 142 Wallenius Wilhelmsen Logistics 25, 29
Frontline 161 World Trade Organization 36
Golden Ocean 162 world trade 5
purchase options 163 and world shipping 8
routes dictated by
customers 145 yourship.com 177
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