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Keeping it in the family C C Hsu on the importance of longevity in playing the markets
Family business is good for continuity and to remember how bad things can get
H
eaven help you if you are from the sales department at any shipyard pitching Chih-Chien Hsu a newbuild or two. The Taiwanese chairman of both private Eddie Steamship and dual-listed Courage Marine has a war chest ready to make the most of the cheap bulker prices on offer, but he has bided his time longer than just about all his compatriot owners, waiting for prices to head further south. “Taiwanese owners are very canny,” says one Hong Kong shipbroker, “They tend to hold out till right near the bottom of the newbuild price cycle.” For Hsu, his aim is to catch the metaphorical price ball millimetres from the ground before it bounces. SinoShip caught up with Hsu twice in recent months – in Shanghai and Athens – and both times he emphasises the importance of longevity and being in a family business. “Because shipowning is volatile,” Hsu says, “it is good to be in a family business for continuity and to remember how bad things can get.” Hsu’s family business can trace its history back 85 years. “We have been dealing with shipping banks for generations. The person in charge of ship finance changes every four or five years and so sometimes they do not even go through one complete cycle,” notes Hsu. In his 32 years in the business Hsu experienced the horrendous five-year slump of the mid-’80s, the sensational record bulk boom
from 2003 to 2008 and plenty of other smaller cycles too. “If you have not been in the business continually or heard such stories,” says Hsu, “I think it is quite hard to imagine that [the Baltic Dry Index] can drop from 11,800 to 640 in a matter of two months or that a shipping depression can last from 1981/’82 to 1987. I often think how am I going to be able to explain such things to my children, it is impossible, beyond imagination.” Because of his experience of previous depressions, both Courage and Eddie have always kept their debt levels low. Indeed, Hsu recalls how repeatedly at AGMs in 2007 and 2008 a number of shareholders berated him for not investing in more ships. The same shareholders stood up at this year’s AGM and thanked him for holding off. For most of the past decade both Eddie and Courage have had around 10 bulkers each of all sizes from handies to capes. This has dropped to just three in each company as Hsu has sold plenty of ships for scrap. He explains: “Recently because demolition prices have been extremely high and newbuild prices have been plunging and still going lower we think this is a great time to sell our old ships at very high prices and then possibly acquiring newbuildings at possibly really almost historic low prices.” Just how low can these newbuild prices go? More than 50% off their peak will not do for Hsu. A capesize newbuilding in 2008 was
$100m, soon after Lehman Brothers it plunged very quickly to about $55m, still not low enough for Hsu to bite. His yardstick is a series of capes built by CSBC for U-Ming Marine Transport around the dawn of the new millennium for around $33m. When Hsu gives this example to today’s beleaguered shipyard executive, the salesman invariably says today’s prices cannot be compared with a decade ago as steel plate, main engines and labour prices have all gone up. “They always emphasise that current prices are near break-even for them so how can we expect prices to go down further. My immediate response is that where is there a law that guarantees shipyards a profit just as where is there a law that guarantees shipowners a profit.” Recently newbuild prices are approaching rock bottom, Hsu admits, noting how Jinhaiwan had six resale capes at $36.5m each. When considerading the CSBC newbuilds from ten years ago were 149,000dwt and the Jinhaiwan ships are 176,000dwt, “you would say this is just about the same as the CSBC ones price-wise”. With this in mind, expect Taiwan’s top price juggler to unscrew his favoured contract-signing pen soon.
NEED TO KNOW NEED TO KNOW
Courage/Eddie Eddie Steamship is the Hsus’ private shipowning vehicle whose history dates back 85 years, while Courage Marine was founded in 2000 and is listed in Singapore and Hong Kong. Scrapped many ships this year and will soon order a rash of newbuilds. Bought a secondhand cape for $6.65m in August.
Sinoship AUTUMN 2012
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