SHIP FINANCE AUTHOR MCCLEERY & GREEKS BEARING GIFTS
BY STAS MARGARONIS
THE SHIPPING MAN is the saga of a hedge fund manager named Robert Fairchild who takes a plunge into the shipping business by way of the intoxicated purchase of a 35-year-old bulk carrier. The novel has become a best-seller among shipping executives, investors, lenders, brokers and marine suppliers in North America, Europe andAsiafor its ability to capture the fabled, and largely private, world of international shipping tycoons. There has even been some interest from Hollywood in adapting the story into film.
Part lighthearted satire and part instruction on how to be successful in the world’s second oldest profession, the book explores a variety of issues from U.S. Coast Guard inspections to maintenance and repair, efficient vessel operations, piracy, war risk, insurance, charter requirements and the variables of ship finance “The purpose of the book was to try and capture the magic of the international shipping business in a fun way. It is meant to be both educational and entertaining. My idea was that the novel could be read alongside more serious books like Martin Stopford’s Maritime Economics.”
A big fan of the book is Bill Nickson, regional general manager of Transmarine Navigation, based in San Francisco: “When I read this book I see my life in it. I see the ship agent, the shipowner, the Coast Guard inspector. I really loved the book. I have probably spent $1,000 buying copies and distributing them as gifts to Coast Guard people captains, agents, and people in the industry.”
Matt McCleery, the author, joined Marine Money International in 1997 as managing editor of Marine Money magazine and is now the president of the company. The inspiration for the book was an article he wrote for Marine Money in 2010 describing Robert Fairchild’s journey to Hamburg, Germany where he naively thinks he will be able to buy discounted shipping loans after the dry bulk market crash in 2008. What he finds instead is the courtly world of ship finance, one in which the multi-generational loyalty still exists between borrowers and lenders.
McCleery says that readers found the story so intriguing and humorous that they urged him to keep it going. The result was the publication of THE SHIPPING MAN in 2011. Although Fairchild is not successful inHamburg, he realizes that through his chance encounter he has caught the shipping bug and fallen in the love with the industry. “I think what readers appreciate and identify with most about this book is just how special the shipping industry is in the often soulless modern corporate world,” McCleery said. “Shipping is the original global village and the people involved in the business know they are lucky they are to be involved with it.”
In his odyssey to become a shipowner, Fairchild meets an entrepreneurial Greek shipowner named Spyrolaki who convinces him about the virtues of operating older vessels, a strategy on which many former Greek sea captains first built their empires in the middle of the 20th century, but fails to mention the incredible amount of expertise and “street smarts” required to be successful with such ships. While many Greek shipping companies have transitioned to corporate ownership, and the character of Spyrolaki represents a shrinking breed, it is breed that McCleery highly respects and one that made a big impression on him early in his career.
“When I started in the business in 1995, I remember visiting guys like Spyrolaki in their offices on the Akti Miaouli and being really excited by how close they were to the business. I recall meeting one shipowner who had a big map on the wall with pushpins showing where his ships were at the time. There are still some guys like that around, but Greek owners have definitely corporatized over the course of the last 15 years in order to better serve charterers, comply with increasingly strict regulations and renew their fleets. The entrepreneurial spirit is still alive and well in the corporate world; at the core of the largest Greek shipping companies, from Tsakos to Navios to DryShips, is a man or woman who lives and breathes shipping and who knows every detail about the business. The scale of shipping is enormous, but the management of even the tiniest of details, and costs, is the real key to success,” McCleery added.
McCleery says the current shipping market continues to be weak because too many new ships have been ordered and as more and more ships are delivered they drive down the charter rates and vessel values. “The market is in a period of purging; ships will have to be scrapped before the balance between supply and demand tips in favor of shipowners again. The real question now is how long this scrapping process will take and what vintage ships will be demolished before the market is healthy again. This is a process that takes some time.”
What has made this cycle unique, McCleery says, is that a handful of companies have actually gained a relative advantage from it. Companies like Navios, Teekay Corporation and the companies controlled by Norwegian tanker tycoon John Fredriksen have raised capital, strengthened their relationships with commercial banks and private equity funds, diversified their fleets and made attractive investments throughout the weak part of the cycle; when things improve, these companies will have a meaningful competitive advantage. Many of the marginal players will be gone.”
McCleery predicts the container market there will soon be dominated by a few carriers that can afford bigger, more fuel-efficient ships that will drive freight rates down. Such an example is Maersk’s new orders for a fleet of giant 18,000 teu container ships:
“Yes, the market for big ships, be they tankers, capesize bulkers or giant container vessels, and trades that require infrastructure are definitively moving that way. And why shouldn’t they? Those guys have lower cost of capital, more efficient operations and the infrastructure to book cargo and manage logistics on behalf of their clients. But the rest of the business, which is the overwhelming majority of the business, will rely on independent providers of tonnage. This is especially true of the bulk trades and it is unlikely to change in our lifetimes.”
McCleery is not one who believes in the theory that China is in the process of dominating the major shipping markets:
“I do not believe in the conspiracy theory about China over-tonnaging the market to reduce freight costs nor did I believe it with respect to Japan. To think that these countries could stick to such a sweeping and theoretical strategy while their shipyards and shipping companies are hemorrhaging money year after year is, in my view, an oversimplification. Shipbuilding is, and always has been, a pretty low-tech way to create jobs and during the China Boom, the demand for new ships was enormous so new yards could make the case for why they should be financed. My guess is that after a few years of losses we will see the marginal yards inChinashut down and remaining yards will focus on higher value ships, just like we have seen in Korean andJapan.”
The reader response to the book has encouraged him to write a second book:
“The response to THE SHIPPING MAN has definitely exceeded my expectations. The sales of the book been robust and a lot of people seem to have connected with the story. I receive a letter almost everyday from people who have discovered the book and are excited to share their experiences in shipping and ship finance. I love this part of it because I learn something from everyone with whom I communicate. A lot of the feedback has actually made it into the next book, which is great.”
McCleery says he has received one serious criticism of the book from a German shipowner who felt that the need for a long-term strategic approach to shipping needed to be better expressed because of the booms and busts still result in survivors who adhere to conservative investment strategies of investing in new ships over a long period of time rather than going on buying binges and treating shipping as a casino trade: “a German owner…felt like I reinforced stereotypes of the business which were neither positive nor realistic. I took that criticism seriously and the new book has a very serious, responsible, multi-generational Northern European shipping company in it. Although that group tends not to party at the Astir (the Astir Palace outside of Athens is a favorite among Greek shipowners-ed note)…one of my personal favorite things about shipping!”
McCleery says that the book seems to have made a big hit with younger shipping executives and students. This includes students at City University London, a graduate program at City University in London headed-up by legendary ship finance professor Costas Grammenos.
“I am probably most proud of the response that I have received from young people in the business who received the book exactly as I hoped it would be received; as a fun way to get to know the industry and highlight some of the key issues that are worth thinking about.”. There are a few schools in the US and Europe considering using it (THE SHIPPING MAN) as part of their ship finance classes, which would be the ultimate thrill.
Even so, his next book is about China and its attempt to dominate the natural gas market: The new book is called THE SHIPOWNER’S DAUGHTER…It is a continuation of THE SHIPPING MAN, but the protagonist is Alexandra Meriwether, the investment banker from The Shipping Man. The story involves China trying to dominate the market for LNG carriers.”
At the end of the day, McCleery believes there will always be competition and always room for enterprising new shipowners to create new possibilities as long as they can provide lost cost freight rates: “There is no business in the world as purely competitive and romantic as shipping. It will always attract entrepreneurs from every corner of planet; and thankfully that will never change.”