To be a successful shipping equity investor, it pays to be flexible and humble. Whatever I was worried about at the end of September turned out to be inconsequential and wrong. I wasn’t thinking about China retaliating with new port fees on US-linked ships. Yet luckily for me I was at Capital-Link’s New York Conference this past Tuesday.
My initial reaction to the Chinese port fees was that retaliation would be self-harm. China imports 10.0 million to 11.0 million barrels per day of oil versus the US, at2.0 million to 2.5 million. Based on initial calculations, the fees would typically add $6.0 million per voyage to a non-exempt VLCC, making the journey uneconomical. It would result in China having fewer vessels to choose from, causing VLCC rates to rise. While it could change any day, it appears that there is some flexibility in Chinese port attestations that would cause the penalties not to be triggered. Many shipping equities have rallied.
On Tuesday at Capital Link 17th Annual Capital Link Shipping Maritime Forum, we had 1:1’s with management teams in the middle of the Chinese retaliation maelstrom. In between meetings, I started buying shipping equities to take advantage of temporarily dislocated prices. I know had I not been there, I would have missed the opportunities. The quote of Woody Allen, “80% of success is showing up,” proved again to be true.
