For more than two decades, container shipping guru Paul Dowell has been the go-to man at Howe Robinson Partners for those seeking views on the container shipping market.
But not for much longer. Dowell will step down in August from the role he has held for 22 years as head of the container research desk of the London-based brokerage.
He is doing so in the belief that the container shipping industry has “unlearned” many of the hard lessons over the years.
Following the leader
“If we keep looking for reducing slot costs, you’re on a hiding to nothing,” he told TradeWinds. “Because everybody will follow the leader and catch up.”
Upsizing to bigger ships will not ultimately help the industry return to profitability. It simply results in liner operators spending billions of dollars to level the playing field, Dowell believes.
He likened the behaviour of liner operators to people at a parade standing on tiptoe to get a better view — eventually everyone stands on tiptoe and ends up with the same view.
But Dowell conceded that individual liner operators may have had no choice but to upsize.
“If you didn’t copy the leader, then you go bust,” he said.
But he added that makes no sense for the industry as a whole, as it leads to a low return on investment.
“Every decision made for the liner company is 100% right for the individual liner company. But 100% wrong for the industry,” he said.
Dowell believes the solution is consolidation, which enables operators to take control of costs and freight.
Every decision made for the liner company is 100% right for the individual liner company. But 100% wrong for the industry
Paul Dowell
In that respect, the container industry has moved forward. When he started with Howe Robinson in 1997, he said the top-10 liner companies controlled 20% of the liner business. Today, the top nine liner operators control 84%.
Consolidation is key
“I think I could name 40 companies that have disappeared while I’ve been at Howe Rob,” Dowell said.
“So there’s been a big change in terms of consolidation process.”
Consolidation has also been impacting on the core container shipowning centre of Germany.
But the formation of big chartering entities such as Contchart, Hanseatic Unity Chartering and Blue Net Chartering has not yet enabled tonnage providers to lift charter rates.
“The German guys have been beaten up for 10 years,” Dowell said. “There’s a lack of confidence to drive the market up. That’s because the market is weak. When the market is tighter, consolidation will allow the Germans to take greater control.”
Dowell said one very significant change is the “international diversification of the ownership base” of container shipping.
New players that bought ships cheaply are working on a much lower cost basis than traditional German owners.
He conceded that part of the success of his research operation was entering the market at a time when banks needed help to understand the shipping market.
Role of research
“We quickly worked out the banks would need this role,” he said. “What was apparent at the time is that the banks really had very little idea what they were lending to. They didn’t understand shipping, yet they were lending to shipping.
“When the banks got into trouble, we already had this relationship built over 10 years, to help them get rid of distressed assets.”
He said it is difficult for researchers to be right every time, but he is confident that shipping research has a future.
“I think research works,” he said. “If I look back at what we’ve done over time, we’ve been right more than we’ve been wrong.
“And, unless you can answer the questions of more sophisticated investors, you’re not going to be able to work with their principals.”
Ultimately, it reflects how shipbroking is changing. “The old ways that brokers work will change over time,” Dowell said.