December 2008 / January 2009 - Association of Dutch Businessmen

November Review
Integrated solutions for the Shipping
and Oil & Gas industry By Frank Kuijsters
Hans van der Vlugt, Senior Vice President for Pareto
Securities Asia Pte Ltd gave approximately 35 of
our ADB members an interesting lecture on Pareto’s
integrated solutions for the shipping and oil & gas
industry on the 10 th of November.
Pareto is a leading independent player on the
Singaporean, European and Norwegian, market for
financial services to the shipping and offshore oil &
gas industry.
Pareto’s Singapore division (Pareto
Securities Asia Pte Ltd) was opened in 2006
and today consists of 7 professionals. Due
to an increased demand from clients for
integrated services Hans’ activities consist
of a combination of traditional finance
solutions and unconventional banking
services.
The Corporate Finance department
of Pareto Securities is structured around
Corporate Finance, Capital Markets,
Offshore, Equity sales and Industry and
Equity research.
Pareto also established a number of shipping funds with a joint portfolio of around 84 ships with
an estimated market value of around US$ 2.5 billion at the moment.
Commercial shipping has as main characteristics:
1. It’s a commercial Industry – anyone can enter
2. It can be roughly divided in Deep Sea, Short Sea, and Inland
3. It’s part of a chain
4. There is also non-commercial shipping such as the navy
Most importantly, the demand for shipping is a derived demand of the World economy and specifically
the demand for transportation of goods globally. A large part of the shipping services drives around
commodities like Iron Ore, Crude Oil, rice, etc.
Of course the demand for commodities such as oil and iron ore is ultimately driven by a region’s
economical growth i.e. a country / region’s Gross Domestic Product – or – on a macro level, the
world’s GDP.
Since the demand for Shipping is a derived demand from the World Economy it is cyclical and depends
on supply and demand for ships. If for instance China requires more Iron Ore to support its construction
boom, the iron ore will need to be imported from places such as Australia and Brazil and carried by
ships to China. Supply of ships comes from ship owners, but it takes about 3 years to build new ships
causing supply constraints. The 5 main factors influencing the demand for sea transport are; the world
economic activity, sea born commodity trade, average haul (ton- mile), political events, wild cards such
as hurricanes and transportation costs.
There are four segments of the shipping industry: the freight market, the sale & purchase or secondhand
market, the new building market and the scrap or demolition market. Other markets important
to shipping industry are: the freight derivatives markets, the bunker fuel market, commodity markets
and financial markets. These markets are all closely related and ship-owners, managers and operators
have to make decisions regarding their operation in each market.
Pareto is different from competitors in that it offers ‘packaged’ solutions both from an acquisition
perspective as well as a corporate finance perspective. Services are aimed to build the company’s
Vol.18 • No. 10 • December 2008 / January 2009