Infrastructure M&A Transactions

Global Maritime Industry Update: December 2021

The global maritime industry is undergoing stiff challenges on the back of the ongoing COVID-19 pandemic, which has severely impacted global demand and stalled manufacturing activities (Exhibit 1).

Exhibit 1: Forecast for Main Shipping Markets

Source: BIMCO; Team analysis SG and JBR

The impact of COVID-19 is being witnessed largely on the Chinese manufacturing output that exerted negative pressure on demand for coal and iron ore during the first half of 2020 in line with decline in manufacturing activities. Such a downward shift in manufacturing and production activities have adverse ripple effects on the supply chain that is now being felt by the global shipping industry. Global credit rating agency Moody’s has downgraded the outlook for the global shipping industry from “stable” to “negative” due to the coronavirus outbreak. Further, decline in demand for container and dry bulk shipping services is anticipated to exert downward pressure on the EBITDA of market participants. Oxford Economics predicts that “despite renewed restrictions in a number of economies in recent months, the growth rate of trade in 2021 will be strong.” They expect world trade volumes to expand by around 9 percent in 2021, after slumping by 7 percent in 2020.

Figure 1: Development of International Maritime Trade and Global Output (2006–2021)

Looking for a more in-depth analysis of the international shipping industry? Download our comprehensive 69-page Maritime & Offshore report that takes a deeper dive into the most pressing issues impacting the industry today.

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Contact our Transportation & Logistics Investment Banking Team

Led by Effram E. Kaplan, BGL’s Transportation & Logistics investment banking team stays up-to-date with the latest trends and challenges in the global shipping sector and beyond. Please reach out via our contact form below to learn more about our record of success for our transportation & logistics clients.

Container Shipping Industry Overview: December 2021

The container shipping market is heavily dependent on consumer spending, which was severely impacted during lockdowns across the globe. The short-term outlook for the container market appears strong. Increased spending on retail goods, combined with low fleet growth and port congestion, has paved the way for an extremely positive environment, taking freight rates to new highs. The market has created an urgent need for vessels, propelling secondhand prices to levels not seen since before the financial crisis in 2008. The favorable conditions are set to continue in the coming months due to restocking and further port congestion reducing the active fleet. The fleet will expand massively in 2023 and 2024, driven by an inflow of 15,000+ TEU vessels, while we expect demand growth to level out. The need for scrapping will increase.

Figure 11: Change in Container Volumes from 2019

On main trade lanes and the rest of the world

For the rest of 2021, 40 new vessels will be added to the fleet, while 144 will join in 2022. This corresponds to 2% and 4% of the fleet, respectively. The inflow will be driven by 15,000 TEU+ vessels, whose fleet is set to expand to the tune of 14% by the end of 2022. In contrast, the mid-sized fleet (3,000-12,000 TEU vessels) will receive hardly any new vessels in the same period. By September of 2021, newbuilding orders for the year had surpassed the previous record for annual orders. Vessels equaling 3.9 million TEU (16% of the fleet) have been contracted. We expect most of these vessels to be delivered in the second half of 2023 and in 2024. In this 18-month period, fleet capacity is set to grow by 12%, driven by an astonishing 40% expansion of the 15,000+ TEU fleet. Investments in LNG as a transition fuel explain some of the orders, but the main driver of future capacity expansion seems to be shipowners’ expectation of the current high demand for containerized goods continuing.

Strong retail consumption, combined with supply chain disruptions, has created extremely positive market conditions. On average, box rates are up 112% in 2021. The three-year time charter rate has followed the same trajectory and has increased by 123%, reaching $89,000 per day for a 9,000 TEU vessel in October. The average time charter length has now passed four years. The five-year-old second-hand price for an 11,000 TEU vessel rose 85% in the first three quarters of 2021, from $84 million to $155 million.

Regional trade has benefited from the redirection of trade caused by the supply chain disruptions, which has boosted the segment. As of October, the three-year time charter rate stood at $73,200 per day, while the five-year-old second-hand price for a 6,800 TEU vessel reached $135 million.

Figure 12: Container Ship Fleet Growth (2016A–2022E)

Looking for a more in-depth analysis of the international shipping industry? In addition to the container shipping industry, we also take a deeper look at the dry-bulk sector, tanker shipping, offshore supply vessels, cruise lines, ports/terminals, and more in our comprehensive 69-page Maritime & Offshore report.

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Contact our Transportation & Logistics Investment Banking Team

Led by Effram E. Kaplan, BGL’s Transportation & Logistics investment banking team has extensive experience across the sector. As investment bankers and advisors, we have executed numerous transactions in maritime and offshore, trucking and logistics, transportation infrastructure, and passenger transport. Please reach out via our contact form below to learn more about our record of transportation & logistics client success.

BGL Insider Special Report – Maritime & Offshore Newsletter: Chemical Tankers

The chemical tanker market is a very fragmented one, with over 600 companies operating in the sector and only a few major companies dominating the market. Furthermore, pools are formed for homogenous and commoditized services while giving owners regular cash flow and long-term security.

Another characteristic of the chemical tanker market is the entrance of swing tonnage. Swing tonnage comprises vessels that are usually involved in the oil products trade but may also swing into parts of the chemical trade when economical. As chemicals are less volatile, usually MRs can swing across to chemicals if earnings get too low.

The chemical tankers also will have to adapt to stricter environmental regulations concerning greenhouse gas emissions. This will include substantial investments and compliance rules.

Emergence of innovative technologies for tanker modification, and globalization are the major factors that fuel the demand for shipping tankers and ultimately drive the shipping market. The growing demand for fluids, gases and chemicals across the globe lead to an increase in demand for shipping tankers. However, government norms, irregular distribution channels, growing prices of customized tankers and oil prices are the major challenges in the tanker shipping industry.
Globally, in the shipping industry, chemical tankers play an important role in transporting various organic chemicals (Methanol, Para-Xylene/, Xylenes, Ethlyene Glycol, Styrene and Benzene), inorganic chemicals (Sulphuric Acid, Caustic Soda and Phosphoric Acid) and vegetable oil. Such tankers are designed to maintain the consistency of the substances that are being shipped. Various types of tankers such as stainless steel and coated chemical tankers are used to ship bulk chemicals.
The low shipping cost is the major reason for transporting the chemicals via sea. Moreover, the rising capacities of the chemical manufacturers and a growing chemical industry in emerging economies demand efficient solutions for transportation. Increased production of chemicals in Asia-Pacific and growing demand for chemicals create opportunities for the chemical tanker industry.

BGL Advises Veolia North America

Client Description

Headquartered in Quebec, Canada, Veolia’s Canadian Industrial Cleaning Division is the largest provider of industrial cleaning services in Eastern Canada operating out of 20 branch locations in Quebec, Ontario, and British Columbia. The Division provides a broad range of specialized and critical services to a broad set of markets, including mining, municipal, petrochemical refining, chemical, and pulp & paper, among others. Such services, including industrial vacuuming, hydroblasting, CCTV inspection, sewer line and pipe cleaning, waste transportation, and spill response, are provided to support routine maintenance, plant turnaround/shutdowns, and urgent on-demand service needs.

BGL Advises New State Capital Partners

Client Description

New State Capital Partners LLC is an entrepreneurial-minded private equity firm that strives to be nimble, decisive, and cooperative. New State prides itself on a long-term outlook, approaching each potential investment as an opportunity to create lasting and valuable relationships with company founders and especially independent sponsors. New State has the ability to invest up to $100 million in equity per transaction. New State seeks to invest in market-leading companies with $8 million to $35 million of EBITDA in the areas of business services, industrials, and consumer. New State and its affiliates have invested in 27 companies to date.

BGL Advises New State Capital Partners on Acquisition of Wilmington Paper Corp.

Brown Gibbons Lang & Company (BGL) is pleased to announce that its client, New State Capital Partners, has acquired Wilmington Paper Corp., a leading global intermediary and processor of production scrap and post commercial use recovered fiber waste.

BGL’s Environmental & Industrial Services investment banking team served as the financial advisor to New State Capital Partners in the transaction. The specific terms of the transaction were not disclosed.

Wilmington Paper is a trusted and reliable service provider that leverages its network and operations to assist thousands of suppliers in maximizing the value of their fiber scrap and waste streams while providing a steady supply of recovered fiber to producers of corrugated, tissue, and paperboard products. The company’s Wilmington Paper division is known for its unique on-premise supplier service model, The Program, a proprietary audit, logistics and revenue management platform, while its Recycling Management Resources division operates specialty recycling centers throughout the U.S.

WWETT Show 2022

The Water & Wastewater Equipment, Treatment & Transport Show (the WWETT Show) is the world’s largest annual trade show for wastewater and environmental service professionals. The event offers an educational program, live demos, networking opportunities, and an expo floor where buyers and sellers come together to see and experience the latest product innovations and technology.

BGL Managing Director and Head of Environmental & Industrial Services Effram Kaplan and Director Jim Cocita will be attending the conference and available to discuss upcoming opportunities in the EIS market.

BGL’s EIS team ranks #1 in cumulative domestic M&A transaction volume within the Environmental Services sector over the past five years. We have executed numerous transactions related to a broad range of industrial and environmental investments and have developed significant expertise in many subsectors, including waste & recycling, facility & field services, plant & equipment maintenance, and commercial services.

James M. Cocita

Jim Cocita is a Managing Director and senior member of BGL’s Infrastructure and Services verticals, focusing primarily on Environmental Infrastructure and Environmental Services, with significant experience advising clients across the solid and specialty waste, specialty industrial services, and environmental field services sectors.

Jim’s nearly two decades of advisory experience encompass the strategic and capital markets needs, including mergers and acquisitions, recapitalizations, divestitures, strategic alternatives, and other shareholder and board advisory assignments for private, public, and private-equity backed companies.

Prior to joining BGL in 2015, Jim was an associate at Candlewood Partners where he provided investment banking and financial advisory services to a diverse industry client base. He began his career as a senior equity research associate with Northcoast Research.

Education

MBA, John Carroll University
B.S., John Carroll University

Certifications

Series 63, 7, 86, and 87 Licensed