Stealth Maritime’s Harry Vafias discusses the long-term prospects of the Greek shipping industry, access to ship finance and the pressing issues of decarbonisation and ESG
Greece has struggled with some well-documented economic problems over the last decade or so, compounded by frequent and irregular changes in government. But the situation is now improving, according to Stealth Maritime’s founder and chief executive officer Harry Vafias. “2019 was a very good year for the economy,” he said. “2020 pushed us back a few steps, but fortunately the European Union (EU) and outside investors believe Greece is going to do well [so] Greece can still borrow money at very cheap rates.”
Greece was severely hit by the 2008 financial crisis and had to borrow extensively. It took three bailout loans from the EU and other international agencies but in 2018, Greece declared it had exited the bailout programmes; 2019 saw a significant step forward with the sale of 10-year bonds for the first time since 2008.
The Greek economy is reliant on tourism and the Covid-19 pandemic has had a severe impact. What happens in 2021 will be crucial to the continuing economic recovery. “If we have a good season this summer, I think Greece will be on the right path for recovery,” said Mr Vafias.
Greek governments have long been distant to the shipping community, preferring to leave the industry alone. During the financial crisis there were some attempts to intervene in the sector, but essentially, shipping does not receive any assistance or subsidies from the government.
However, there is now a more proactive minister of maritime affairs and insural policy, Yiannis Plakiotakis, whose portfolio covers international shipping. Mr Vafias said: “[Mr Plakiotakis] is a close friend of mine is very open minded, he is very progressive. He has taken steps to help shipping and Greece in the global shipping community.”
“We will jump from traditional fuel to exotic fuels, such as hydrogen or methanol, sooner than we think”
Mr Vafias also pointed to the three-tier finance market that currently exists. Regarding the first tier, he said: “You have the top-tier corporate clients with the holding companies, with visibility of earnings and strong balance sheets and financials. We (Stealth) are in this category, where everybody wants to find themselves, having the bankers competing for our business and lowering the cost of finance. Then you have the middle tier of medium-size, well-run companies with 15 to 25 ships, which some banks are willing to finance, but some banks are less disposed to finance. The finance cost will be higher than the top tier,” he said. “Then you have the small, family-owned companies with 10 ships or less. There is no holding company, and no balance sheet or earnings visibility. Very few banks are willing to finance these companies, and only at a high cost.”
Turning to the issue of decarbonisation, Mr Vafias said: “It’s very simple. The charterers do not want to pay a premium for fuel and I understand that, but it’s very frustrating. On one hand they say, “We want greener ships, we want a smaller carbon footprint” and then, when the time comes, when the owner has paid US$10M more for a dual-fuel [vessel] – they don’t want to pay the premium.”
Mr Vafias also feels the level of carbon reduction available from dual-fuel is not yet sufficient to warrant the expense. “People are beginning to realise the carbon reduction from dual-fuel ships is very small,” he said. The transition fuel avenue may yet prove a dead end and the shipyards need to offer zero-carbon ships.
“I think we will jump from traditional fuel to exotic fuels, such as hydrogen or methanol or even electrification, which have zero carbon emissions,” said Mr Vafias, “maybe sooner than we think.”
On the subject of Environmental, Social and Governance (ESG), Mr Vafias said this has been part of Stealth Maritime’s operations for 10 years, noting that it is demanded by American investors. Looking back on the last 12 months, Mr Vafias was pleased that the group managed to fix a number of ships on time charters during the peak in the market in April/May 2020. The aim is to acquire more ships: “It is very difficult to find high quality modern ships for sale,” he said.
One of the company’s more significant strategic moves has been to acquire medium-size LPG carriers after 10 years working in the Handysize sector. The fleet is in a good position, fixed away on period charters producing steady earnings, while the company is carrying a low level of debt. This is a good position to be in during a difficult point in the cycle, and the company’s low leverage is one of its attractions for investors.
“We are very bullish for the second half of 2021, for tankers and for the gas carriers,” said Mr Vafias. “This will be the time to start reaping the benefit of having a large and diversified fleet. We have 82 ships spanning four different sectors and we are the third largest fleet in Greece by number of owned ships.”
The impact of the pandemic on Greek shipping
Athens-based Palau International Ship Registry (PISC) chief executive Panos Kirnidis describes how the registry has coped during the pandemic: “It has been a tough 12 months for anyone in business and yet the steadfast attitude and the desire not to allow the pandemic to crush the spirit of the world’s shipping industry has proved it is resilient and still vital,” he said.
Mr Kirnidis added: “At PISR we have spent the last year working without interruption, despite our staff shielding and working safely from home. As one of the world’s leading digital ship registries, our ’smart’ online technology has given us a real edge when it comes to performance. We are justifiably proud that we have not experienced any interruptions in our service over the past 12 months.”