April 15, 2025 • 41 mins
The global container-liner industry is facing increased uncertainty stemming from the protectionist measures coming out of Washington. Trade between Asia and North America accounts for about 13% of global container trade, with the majority from China to the US. In this Talking Transports podcast, Thomas Lister, CEO of Global Ship Lease, joins Lee Klaskow, Bloomberg Intelligence senior transportation and logistics analyst, to share his insights about its fleet of small-to-midsize containerships could provide some insulation from the growing trade war between the US and China. Lister also talks tariffs, the potential for fees places on Chinese-built ships, the orderbook, remaining disciplined through the cycle, capital allocation and how he talked his way into the marine-shipping industry following graduation from university.
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Episode Transcript
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Speaker 1 (00:07):
Hi everyone, this is Lee Claskow when We're Talking Transports.
Welcome to the Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Claskows, Senior Freight transportation logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysting
strategists around the globe. Before diving in a little public
service announcement, your support is instrumental to keep bringing great
(00:28):
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up on the Bloomberg terminal, on LinkedIn or on Twitter
at Logistics Leap Now onto our episode and we're delighted
(00:49):
to have with us today. Tom Listener, CEO of Global
Ship Lease, a role is hell since March of last year.
Tom has been with GSL for about seventeen years, holding
various management positions including CFO and Chief Commercial Officer. He
graduated from Durham University and holds an MBA from INCIAD.
Global Ship Lease has a market cap around seven hundred
(01:13):
million in trade on the New York Stock Exchange under
the simvil GSL.
Speaker 2 (01:17):
Welcome to Talking Transports Podcast, Tom.
Speaker 3 (01:20):
How you doing I'm doing well, Lee, Thank you very
much for having me on your podcast.
Speaker 1 (01:25):
So you know, global Ship Please might not be a
household name for many. Can you tell us a little
bit about your company that you run.
Speaker 3 (01:32):
By all means? And I would say probably container shipping
itself is it's not something that many households think about either.
So maybe I'll provide a little bit of context for
the overall industry and then explain how global Ship Please
fits into that whole puzzle. If that sounds okay to
you here, that's fantastic, okay, Well, listen, roughly eighty percent
of global physical trade is carried by c and of that,
(01:55):
roughly ninety percent of non bulk seaborn cargoes. So in
other words, no, not oil, not gray and stuff like
that is carried by container ships. And if you look
at containerized trade, the last year, roughly two billion tons
of cargo were carried by container ship and that amounts
to two hundred and twenty five million TEU and tuser
(02:16):
recurrent acronym that you'll you'll hear throughout this podcast and
stands for twenty foot equivalent unit, which is effectively a container. Now,
what we do is we provide container ships to the
container shipping lines themselves, the likes of MSc, MRSK, CMA, CGM,
et cetera. So you know, if I were to use
(02:37):
an analogy, the shipping lions are like the airlines, and
GSL is a less are capacity of tonnage of ships
to those shipping lions, So it's like, you know, air
cap within the av education industry leasing aircraft to the airline.
(03:00):
We're doing exactly the same thing for the shipping lines.
Now in terms of positioning, we're about the seventh largest
in the world by capacity and about the fourth largest
in the world by the number of ships which we
charter in. We lease in to those shipping lines, and
(03:21):
our leases are wet leases, which is another aviation term,
So we not only provide the ships, but we also
provide the people to run those ships, so the crews,
we maintain the ships, and we operate the ships at
the instruction of the shipping lines themselves. The only thing
we don't do is provide the fuel so the fuel
(03:44):
is provided by the charterers, the shipping lines themselves, our customers.
So that's really where we sit in the heart of things.
Speaker 1 (03:55):
Can you talk about you know, I'm assuming these are
long term leases. Can you talk about the average length
of a lease?
Speaker 3 (04:03):
Sure? I mean, we do aim to put in place
medium to long term leases. So if you look across
our overall fleet portfolio, we've got in weighted average terms,
about two point three years still to run. And that's
with contracted revenues of a little under two billion, so two.
Speaker 1 (04:25):
Point three years to run. But is the average when
you sign a new lease with somebody, is it a
lot longer than the two point three years?
Speaker 3 (04:35):
Well, that very much depends, and you know, it's a
fair question. So first of all, I should say that we,
as a less are tend to operate in the mid
size and smaller container ship markets. So you know, maybe
that's another sort of piece of context that I should
provide up front. When you look at the container ship fleet,
(04:55):
there are huge difference differences in sizes. So at the
very small end of the ship sizes, you get ships
that can carry a few hundred containers, you know, two, three, four,
five hundred containers, and at the very upper end you
have ships that can carry twenty four thousand containers. So
(05:16):
that's the sort of the equivalent of the A three
eighty air bus size of things. Now we global ship,
please focus upon mid size and smaller, which broadly speaking
means anything between roughly two thousand tu and ten thousand tu.
And within that range, typically you would be able to
(05:40):
put in place longer charters call it three, four, five
years for ships of between five and a half and
ten thousand tu, whereas typically, once again you would expect
to see charters of call it one, two and three
years for ships smaller than five and a half thousand tu.
Speaker 2 (05:58):
Okay, that's actually very interesting.
Speaker 1 (06:00):
So on that note, you know, I'm just always curious
because I guess I never had anyone ask this, But like,
you know, let's just say a Maerskin and I return
a ship to you guys, and there's no one to
lease it out to.
Speaker 2 (06:14):
What do you do with that ship?
Speaker 3 (06:16):
Well, you have you have various options depending upon your
view of how the market is going to evolve going forward.
So typically actually when you get a ship back, you
would expect to redeploy her Comparatively quickly. If you're getting
her back at a low point in the cycle, you
would tend to look for actually very short term charters
(06:38):
of two or three months at a time, so you're
biding your time keeping the vessel running, covering operating costs
on that vessels, which are you know, approximately seven eight
thousand dollars a day just to keep the vessel running,
and then when the market moves up or notches up,
you would expect to deploy her on a slightly longer
(07:01):
term charter. So essentially you're looking to minimize your time
exposure at the bottom of the market and maximize your
charter exposure when the market is at its most firm
and most lucrative. And because container shipping is both cyclical
(07:22):
and seasonal, that means that you are always going to
have a combination of short term charters covering the bumps
and much longer term charters covering the more lucrative points
in the cycle. And actually that cyclicality is both, you know,
the blessing and the curse of shipping. The curse in
that you know it obviously presents risks that you have
(07:45):
to manage, particularly in a capital intensive industry such as ours,
but at the same time, it represents the opportunity it's
in the cycle, sin's the opportunity to generate outsize returns.
So I would say say, we and ship owners, tonnage
providers as a whole welcome cyclicality. And this may sound
(08:08):
a little bit perverse, but we also welcome disruption. So
if the supply chain is being disrupted and running less efficiently,
the people who are actually moving the cargo to and fro,
so the shipping lines need more capacity from people like
us in order to keep the supply chain functioning. So
(08:30):
if you jam a ship in the sewers canal, as
you'll remember happened a few years ago, very quickly, the
ramifications of that rippled out through the supply chain, and
there was a demand for additional capacity in order to
keep folks running their liner services on schedule. So disruptions
such as that are as I say, counterintuitively, helpful and
(08:53):
supportive earnings for people like us.
Speaker 1 (08:56):
So to follow on questions for that, you know first
that you said disruptions are good. So are you looking
your lips right now with what's going on with tariffs?
And you know tariffs and tariff's off kind of mentality
that's going on.
Speaker 2 (09:11):
Is this kind of good for business?
Speaker 3 (09:15):
I think it's too early to say, Lee, I think,
you know, we're at a time of maximal uncertainty, So
we know there are going to be challenges to manage,
for sure, and we also know there are going to
be opportunities that are going to come out of this,
(09:35):
for sure. We just don't know exactly what they're going
to be yet. So our strategy, at least at the
moment is, you know, in the face of maximal uncertainty,
we're looking to maximize our optionality. And what that means
at an operational level is that, first of all, the
fact that we're operating mid size and smaller container ships
(09:57):
means that they can be redeployed very very buy the
shipping lines our customers across multiple different trades within the world,
so they're not captive to certain trades unlike the much
larger ships in some instances. And it also means that
we're looking to maximize the resilience and optionality of our
(10:19):
balance sheet. In other words, we've de levered to a
huge extent, so we've got financial leverage of around about
one times now, which is great news and We've built
quite a lot of cash on our balance sheets, so
we're in a position to sort of weather the challenges
at the moment and when the time is right, leap
on the opportunities, opportunities, whatever those opportunities might be.
Speaker 1 (10:43):
What's what's that kind of like a high leverage multiple
that you guys have had. You know, you mentioned that
you're around one time, So where was it?
Speaker 3 (10:53):
Yeah, that's a that's a very good question. I think
at its peak it was probably north of eight times.
So one times, particularly when you've got forward visibility on
revenues and cash flows of two point three years, we
consider to be very modest indeed, right.
Speaker 1 (11:14):
And you know, obviously your business is very capital intensive,
as you alluded to, How do you when you buy
a ship? How do you how do you guys finance it?
Speaker 3 (11:26):
It depends when you buy it. So that the secret
in shipping, and this is something that the Greeks have
been getting right for generations and making terrific amounts of
money for generations on is to be highly disciplined. So
you know, you pick the right point in the cycle
or the right transaction to get involved with. You are patient,
(11:50):
so you wait and when the right opportunities arise. You
are nimble, so you move very very quickly, and I
think broadly speaking, there are a couple of flavors of
transactions that are interesting to us. The first would be
countercycle call transactions, so you know, when, effectively, when there's
(12:10):
blood in the water and other folk are fearful, you
can buy ships in some instances add a small premium
to scrap value. So that's an attractive acquisition in a
highly cyclical industry, but you've got to be in a
position to hold onto that vessel and trade her up
when the cycle turns. And the other flavor of transaction
(12:33):
is to buy a ship with a charter attached, which
could be a sort of a purchase and charter back
transaction with one of our customers, which allows you to
effectively write down the residual value risk on that ship
by the end of the charter to very modest levels,
and once again you can then subsequently play the cycle.
(12:55):
So the combination of a stable platform with contracted cash flows,
which is what we have now going into what could
be a very choppy set of waters full of you know, opportunities,
purchase opportunities, feels like a good place to be albeit,
you know, going back to your original expression, I don't
think anyone is necessarily rubbing their hands at the moment.
(13:16):
It's such an uncertain time.
Speaker 1 (13:20):
Yeah, And so you know, I'm just curious because you
mentioned how discipline is so important. And listen, I'm an
outsider looking in, you know, when I look at the
order book and how much supply is coming, and it
doesn't seem like the industry itself is very disciplined. So
are you saying that most people don't follow that we'll
call it the Greek playbook.
Speaker 3 (13:42):
Well, I think that you have to, first of all,
look at the order book not as a homogeneous hole,
but one that is sort of chopped up by segments.
And I'll come back to that at the moment. And
then you also have to look at the different participants
in the industry through different lenses. So the shipping lines
(14:05):
our customers are effectively logistics service providers. They like the airlines,
need to offer high quality, extraordinarily reliable service to their customers,
usually on a fixed day sailing basis. So you know,
their services need to work like clockwork. Hence having capacity
(14:28):
available allows them to build margins of error into their networks.
And then on the other side of the coin, you've
got tonnage providers like us, and there are one or two,
i would say, other Greek minded players in the tonnage
provider segment, where the discipline and selecting the right assets
(14:49):
at the right times is fundamental to our business. And
like us, many of the third party owners tend to
be focused upon the midside and smaller tonnage segments. And
one implication of that is that comparatively little capital has
flowed into the mid size and smaller tonnage segments, which
(15:12):
means that when you look at the order book, the
overall order book to fleet ratio is between twenty seven
and twenty eight percent, which is, you know, obviously something
that makes you think twice. However, if you back off
or you zoom out and look at the composition of
the order book, the order book to fleet ratio for
(15:33):
ships of ten thousand tu and smaller is between ten
and eleven percent, much more manageable in many ways. And
it's also important to think of, you know, an order
book as not something that's going to deliver from one
day to the next. It's stretched over the course of
(15:54):
several years. So if you were to go on order
a ship today, the earliest that you would actually yet
that ship is probably twenty twenty nine. So there is
a lead time on the order book. And I think
another thing to keep in mind is you have to
have a think about the composition of the fleet into
which that order book is delivering, and particularly the age
(16:15):
profile of that fleet. And going back to what I
was saying earlier, the fact that people haven't been investing
in mid size and smaller tonnage certainly speculatively they haven't
been ordering. That means that the ten thousand TIU and
smaller fleet is aging. And I would say there are
quite a lot of ships on the water today that
(16:35):
have had their scrapping date deferred by virtue of the
fact that they've been enjoying an extraordinary bull market for
the last few years. So if you were to run
the exercise of scrapping out every ship that turned twenty
five years old or older over the course of the
next call it three years through to the end of
(16:57):
twenty twenty eight, you would actually see the mid size
and smaller fleet shrink by roughly six and a half
percent over that same time period. So yes, there's a
big order book. Yes, it's something to think about, but
it is very clearly weighted towards the much bigger ships
(17:20):
against which we're not competing. We're competing against a peer
group of mid size and smaller ships. Whether the order
book is much smaller.
Speaker 2 (17:28):
Yeah, definitely, that nuance is important, you know.
Speaker 1 (17:31):
So like when you guys are looking for you know,
new capacity or capacity are you how much of it
are you doing it on the secondary market versus ordering
new ships?
Speaker 3 (17:45):
Well, that's that's exactly right. I would say since twenty eighteen,
which is when we went through a transformative merger with
another shipping company, we have only ever acquired ships from
the secondhand market. We haven't ordered any new tonnage and
we have an order book of zero as things currently stand.
(18:07):
But as your as you say, we're not dogmatic about that.
We're willing to look at any deal as long as
the risk and return metrics work. But certainly, to date,
the more favorable returns and certainly the sort of de
risked approach has been on the on the side of
(18:29):
secondhand ships.
Speaker 1 (18:31):
You know, we don't know where this is going to land,
but you know, in the US, I'm sure you're you're
paying attention to the US trade representatives, you know, when
they're talking about penalizing Chinese flag or Chinese built ships
that call into two US supports. Do you think that's
changing the way shipping companies? I mean, maybe not so
(18:51):
much yourself, because as you mentioned, you really you don't
have any new orders.
Speaker 2 (18:57):
But like how they're going to order ships.
Speaker 1 (19:00):
Obviously they're not going to order a US built ship
because it's next to impossible to do that. But are
they going to go to other countries like South Korea
or Japan and that go through China just to kind
of hedge themselves.
Speaker 3 (19:15):
Incredibly difficult to say. I mean, if you look at
the order book today, roughly seventy percent actually a little
over seventy percent seven zero percent is ordered in China.
And as I said to you just now, if you
wanted to order a ship today, regardless of geography, you
would have to wait until twenty twenty nine or so
(19:35):
for that ship to be delivered. So there isn't a
huge amount of flex in the system, at least in
the near term, to reshape or redirect build location. Frankly speaking,
So the other thing is that given the actual implementation
or the final shape of the USTR, which is, you
(19:58):
know what you've just been referring to is actually going
to take I don't think it's going to drive hard
decisions one way or the other. What it may do
is catalyze something of a break on ordering as people
wait for the cards to fall. But if it were
to be implemented in its currently mooted form, I think
(20:20):
what you would see is liner companies looking to potentially
rationalize port calls, because as things are currently structured, the
levee would fall on a per pork call basis. So
if you're calling at three or four different ports in
the US, you'd be pinged three or four different times.
It makes no difference whether you're calling with a big
(20:41):
ship or a small ship. And given that it applies
not only on Chinese built ships, but also on operators
who have Chinese built ships within their broader fleet, which
frankly is almost everyone, everyone's going to get pinged. So
the obvious alternate would be, Okay, do we size up
(21:02):
the ships? Do we minimize the port calls and thus
ratchet down the levees. Now, it's all very well to
say that, but what that has the effect of doing
is building up additional congestion, not in the ports. If
everyone's rationalizing their port calls building up additional congestion in
(21:23):
the shore side infrastructure, so they would be bottlenecks across
the railheads and other things flowing out of ports. And
as I said, at the very outset, if you're providing
capacity to the industry, disruption is good. Congestion is supportive
of earnings. So I would say that we at least
(21:47):
as providers of tonnage into the space, and we have
very few Chinese built ships in our fleet, I would say,
as a sort of parenthetical, we're not losing a tremendous
amount of sleep over USTR. And we also think it's
probably going to go through various different iterations before it
hits its final four.
Speaker 2 (22:05):
Yeah, I would definitely agree with that. I mean, I
think there's a.
Speaker 1 (22:08):
Low probability of it being law as it was originally written,
but you know, assuming that it is or it's something similar,
it would have a bigger impact per container for the
smaller ships, which I guess you play in. As you mentioned,
you don't really have that many Chinese built ships, so
it's not that much of an issue for you.
Speaker 2 (22:32):
So would that be a.
Speaker 1 (22:33):
Competitive advantage versus other fleets that have more Chinese built ships.
Speaker 3 (22:37):
Possibly, Lee, I mean, it's hard to say. And it
flows back into the optionality point, because all of our
ships are mid size and smaller and can be moved
around the chessboard by the line of operators. They can
or or they can at the line of operators, decision
discretion be deployed in trades that touch the US or not.
(23:00):
So again, it's it's not something that we spend a
lot of time thinking about. What we spend a lot
more time thinking about is trying to figure out how
tariffs are going to sort of change the patterns of
global trade. And I mean, as you know, probably better
than anyone, it's quite quite difficult to keep up with
(23:21):
the various sort of changes in the structures. So I mean,
just to provide some more data, if you look at
containers flowing into the US as a proportion of global
containerized trade volumes, you're looking at somewhere between ten and thirteen,
(23:41):
So between ten percent and thirteen, one to three percent
of global containerized trade volumes actually flowing into the US.
So US demand prompting the transport of those goods, and
of that thirteen percent between forty and forty five percent
(24:04):
is coming directly from China. So the moment you levy
a one hundred and twenty five percent tariff on forty
to forty five percent of goods flowing into the US,
that's clearly going to be massively disruptive. And the fact
that it was it's being rolled out over a matter
of days, and given that it takes anywhere between call
(24:27):
it eighteen and thirty days for ships to travel from
Chinese and Southeast Asian ports to the US, that means
there's a lot of cargo that's already a board that
is about to be hit by one hundred and twenty
five percent tariffs upon arrival in the US. Now, because
things are moving so fast, there's a bit of a
(24:47):
lag time on the data. So what I'm telling you
now is based upon anecdotal evidence as opposed to hard data.
But we're hearing that containers are being discharged, so you
know where it's possible people who are moving cargo from
China to the US are looking to discharge some of
(25:08):
that cargo and interimports and pay for it to be
repatriated to China. Simply because neither they the exporters nor
the importers are in a position to absorb one hundred
and twenty five percent tariffs. Now, what's going to happen
when ships over the coming days arrive in calling the
(25:29):
port of Los Angeles with X thousand number of Chinese
origin containers aboard. We simply don't know. Are they going
to be discharged? Are they going to be retained aboard
and returned? We simply don't know. But disruption is absolutely
the name of the game at the moment, an unpredictability,
(25:50):
and this is going to choke up as we saw,
you know, a single vessel getting stuck in sewers had ramifications.
Can you imagine if ten thirteen percent of well of
global trade, of which broadly half is of Chinese origin,
is going to be caught in this sort of tangle
(26:11):
of hold on? Can we accommodate these tariffs?
Speaker 2 (26:15):
It's also worth noting that tariffs have been a moving
target in one hundred and twenty five percent target is
at the time of us recording this episode of Talking Transports.
Speaker 3 (26:24):
So we're waiting to see how trade patterns will will
reshape in the interim, and there could be opportunities here,
So I mean it's it's a very rough proxy to use,
but in sort of call it Trump one point zero.
When tariffs were imposed upon China, we saw a diversion
(26:47):
of cargo, so cargo flowing out of China to Southeast
Asian locations Vietnam and Indonesia, for example, and then flowing
on you know, semi manufactured goods being sent to those locations,
finished and then transported to the US. And that actually
(27:08):
meant that additional capacity, additional shipping capacity was required to
support those longer, more dispersed and complicated supply chains. So
although you know, the actual total volume of cargo actually
moving between Asia and the US hadn't changed at all,
(27:28):
because it was far more complex and dispersed, you needed
more ships, and typically mid sized and smaller ships to
carry that. So weirdly that acted as a stimulant for
our business. It's too early in the game to know,
you know, if that's going to happen all over again,
but I'm just pointing to the fact that there can
be sort of second and third order implications that can
(27:52):
actually be supportive to surprisingly supportive to participants earning.
Speaker 1 (28:00):
I don't know if you have this available, But do
you guys have a rough understanding of or breakout of,
you know, where your ships, what trades are involved, because
I'm assuming very little is trans Pacific directly between China
and the US, just because they, as you mentioned, they're
small and medium sized ships.
Speaker 2 (28:19):
Did you have that breakout at all?
Speaker 3 (28:22):
I couldn't give you an exact breakout, but what I
could say to you is that if you look at
the big East West trades, of which obviously the Transpacific
is one, collectively Transpacific plus Transatlantic plus Asia Europe represents
between twenty five and twenty seven percent of global containerized trade,
(28:45):
which means, you know, roughly seventy three seventy four percent
of global containerized trades sits outside those main lanes in
intermediate trades such as intra Asia, which is actually the
biggest single trade block from a containerized cargo perspective. But
I'm also talking about the Africa trades, the Latin America trades,
(29:07):
the intra Europe trades, et cetera, et cetera, et cetera,
and typically those non mainlane trades representing the seventy three
to seventy five percent of cargo flows are serviced by
mid size and smaller ships like ours. So typically I
mean it changes obviously depending upon liner's discretion, but typically
(29:28):
the lion's share of our ships would be in those
non main lane trades at any given time.
Speaker 1 (29:35):
So you know, on the Bloomberg terminal we follow container
rates that come out weekly.
Speaker 2 (29:41):
How much are your.
Speaker 1 (29:44):
Rates that you set to your customers tied to where
the spot market is?
Speaker 2 (29:50):
Is it highly correlated over time?
Speaker 3 (29:54):
It tends to be highly correlated. However, at the moment
there's a curious location. So while freight rates, which are
the rates you're watching, have been under some downward pressure,
charter rates, which are the rates that sit at the
core of my business, have been plateauing at comparatively high levels. Now,
(30:19):
in part, that's a function of the fact that in
the charter market, our market, there's comparatively limited liquidity. Why
because most of the chartered vessels are on comparatively long
term charters as a result of the bull market that's
been in place up until this moment. And secondly, some
(30:39):
of the liner companies have been buying ships second hand
ships out of the charter market, which has shrunk the
size of that charter market, which is a result, has
shrunk both liquidity and availability, meaning that if a liner
company wants to charter a ship out of our market,
they have to pay up for it if they want
(31:00):
to plug holes in their network. So there is a
curious dislocation at the moment. And I would say, once again,
it's not just us who are looking to maximize optionality
in the face of maximal uncertainty. It's also the liner
operators and for the liners, having capacity is having options.
Not having capacity is not having options.
Speaker 1 (31:24):
So you know, you guys probably have a pretty good
idea what your revenues are going to be over the
next twelve months. I'm guessing do you have a high
conviction of you know where your margins are going to
be as well, or are there things throughout the year
that will affect the margin aspect.
Speaker 3 (31:42):
I think through twenty twenty five at least, our conviction
is really quite high because pretty much all of our
positions for twenty twenty five are already closed out, and
for a very substantial portion of twenty twenty six they're
also closed out. So there's very good forward visibility, I
(32:04):
would say, on our earnings at this point in time,
and Actually that's what prompted us to ratchet up our dividend.
So you know, we pay a dividend which we're increasing
to two dollars and ten cents annualized per common share,
which yesterday's close. Well, I mean, who knows it's going
to be between ten and eleven percent dividend yield at
(32:27):
the moment. But we were able to increase the dividends
in no small part because we have such good forward
visibility on cash flows.
Speaker 1 (32:37):
And I'm assuming your dividend, you know, can be volatile
at times. You know, you increase it when times are
good and sometimes you have to reel it back in
when when things aren't as good.
Speaker 3 (32:48):
Actually, no, you know we've we've thought about this quite
a lot, and certainly in our business, where the idea
is to continue to build out forward visibility on cash flows.
You know, we're a leasing company, not an asset player.
We think it makes sense to do whatever we can
(33:08):
to stabilize the dividend. So we put in place a
dividend of a dollar fifty with you know, we've been
been paying i think, once again annualized, but we've been
paying on a quarterly basis. We ratcheted that up to
a dollar eighty on the back of the most recent
(33:30):
sort of ball market, and we ratcheted it up again
to two dollars and ten cents again because we have
seen our ability to lock in forward contracts and revenues
surprising to the upside. So we felt that, you know,
it made sense to share that with customers, not by well,
not customers with investors, not by way of you know,
(33:54):
a special dividend or or something of that nature, but
by by trying to sort of build this dividend stream
with a level of confidence interpaired it.
Speaker 1 (34:05):
And you know, speaking of uses of capital, does Global
ship lease also did you do you are you active
in buybacks?
Speaker 2 (34:14):
Sare buybacks? Yes?
Speaker 3 (34:16):
We have been active in the past in share buybacks.
I mean we we've brought back I think, in aggregate,
roughly fifty seven million dollars worth of shares to date. Now,
we did a lot of that actually during the COVID
(34:36):
super cyclical uptick, where because asset values went so high,
it became clear to us that it wouldn't make sense
for us to try to buy ships at that point
in time. So rather than buying ships, we decided to
return capital to shareholders by way of buybacks. So yes,
buybacks are very much on the radar. A solid dividend
(34:59):
is is on the well, I mean it's implemented, not
just on the radar. In terms of return of capital
to investors, we always de lever and continue to delever
to manage balance sheet risk and build equity value that way,
and of course the idea is to build cash, particularly
at a time such as this, in order to be
(35:20):
able to move on on opportunities that the crop up.
Speaker 1 (35:24):
You know, given the visibility you have, do you guys
provide guidance to the street at all?
Speaker 3 (35:30):
We we do. We provide guidance in our quarterly earnings materials,
and we try to provide as much granular information there
to allow people to model out, you know, their own
ideas of what we're going to generate in terms of
EBIT DAR et cetera, et cetera, et cetera. So we
don't provide explicit we expect to hit x ebit DAR
(35:53):
or net income this year, but we provide all of
the tools to analysts to model up that out themselves,
and by and large, when we deliver quarterly result, they're
either in line with or mudually better than analysts' expectations,
so that does tend to be fairly good forecasting visibility
(36:13):
after a.
Speaker 2 (36:14):
Number of you know, good revenue growth.
Speaker 1 (36:16):
Right now, consensus for twenty twenty five is for flat
revenue growth for growth for you guys, and about three
percent lower earnings per share at nine dollars and seventy cents.
So I guess we'll we'll see if with twenty twenty
five brains.
Speaker 2 (36:34):
Yes, yes, So Tom, how did you get into shipping?
Speaker 1 (36:38):
Because I know some people either born into it or
they kind of fall into it.
Speaker 3 (36:44):
I'm very much in the second category.
Speaker 2 (36:47):
Lee.
Speaker 3 (36:48):
I came out of university in the early nineties with
a degree in biological sciences and at that stage the
market was pretty grim and I thought, okay, well, nothing
to lose in a bit of adventure. So I managed
to talk my way aboard a containership and did a
working A working passage which started in Liverpool, went all
(37:12):
around Northern Europe, across the Atlantic, through the Panama Canal,
down the west coast of South America to Chile to Valpreiso,
where I eventually got off and then got a job
with a liner company there. Hamburg, sud which is one
of the liner companies which has subsequently been purchased by
MRSK and to their immense credits, at least in my view,
(37:37):
they took a punt on me and so that's how
my career in shipping began. So it was liner shipping
for the first ten years of my life in Latin
America and the US. Then it was I took an
MBA at INCIAD and from their move into more the
(38:02):
ship owning asset finance side of things. So it's it's
been a career of two halves. And here I am
as CEO of a publicly listed containership owner, so it's
been a it's been a fun ride.
Speaker 2 (38:20):
That's great.
Speaker 1 (38:22):
I was down at the Panama Canal once like ten
years ago, and I saw the ships you know in
the canals, you know.
Speaker 2 (38:29):
From Afar, and it's one of the things I want
to do.
Speaker 1 (38:31):
I want to talk my way onto a ship through
uh uh, through through the through the canal.
Speaker 3 (38:38):
So sure, I mean, sadly, it's much more difficult to
do than it was thirty years ago.
Speaker 2 (38:43):
So I guess you know.
Speaker 1 (38:45):
I like to ask all my guests this, like is
there a book, whether it's on leadership or the industry
that's kind of close to your heart that you know,
you would recommend for people to take a look at.
Speaker 3 (38:58):
Yes, it's actually a book called ninety Percent of Everything,
and the subtitle to that book is Inside Shipping, the
invisible industry that puts clothes on your back, gas in
your car, and food on your plate. And it's and
it was written by Rose George about ten to twelve
(39:21):
years ago, I think now. And it's an interesting sort
of warts and all examination of the industry and certainly,
you know, things to learn from it that we need
to do better. And it also, i think, just says
exactly what or does exactly what it says on the tin.
It talks about an industry that really no one thinks
(39:42):
about as long as everything's going well, so it is
genuinely invisible. But as soon as things start going wrong,
COVID being an example, you know, people suddenly see that
supply chains are more complex and more vulnerable than perhaps
the a thought.
Speaker 2 (40:01):
They certainly are. I haven't heard that one. I got
to check that one out.
Speaker 1 (40:04):
And just to close out, you know, is there anything
you know that keeps you up at night running GSL?
Speaker 3 (40:13):
I'm a warrior by nature, Lee, So everything keeps me
up at night. But no, I would say that as
far as the business is concerned, you know, the sort
of the business model, the structure, the forward visibility on
cash flows, great counterparties, et cetera, et cetera. I think
I'm sleeping as well as I possibly could in these
uncertain times.
Speaker 1 (40:33):
Well, I'm very glad to hear that, and Tom, I
really want to thank you for your time and insights.
Speaker 2 (40:38):
This is a delightful conversation.
Speaker 3 (40:41):
Well, thank you very much for having me on all right, and.
Speaker 1 (40:43):
I also want to thank you for tuning in. If
you liked the episode, please subscribe and leave a review.
We've lined up a number of great guests for the podcast,
so please check back to hear conversations with C suite executives, shippers, regulators,
and decision makers within the freight markets. Also, if you
want to learn more about the free transportation market, please
check out our work on the Bloomberg terminal at BIGO.
Speaker 2 (41:06):
Or on social media.
Speaker 1 (41:08):
This is Lee Klascau signing off and thanks for talking
transports with me.
Speaker 2 (41:12):
Take care,
Hi everyone, this is Lee Claskow when We're Talking Transports.
Welcome to the Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Claskows, Senior Freight transportation logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysting
strategists around the globe. Before diving in a little public
service announcement, your support is instrumental to keep bringing great
(00:28):
guests and conversations to you, our listeners, and we need
your support. So please, if you enjoyed this podcast, share it,
like it and leave a comment. Thanks so much for
your help. Also, if you have any ideas for future
episodes or just want to talk transports, please hit me
up on the Bloomberg terminal, on LinkedIn or on Twitter
at Logistics Leap Now onto our episode and we're delighted
(00:49):
to have with us today. Tom Listener, CEO of Global
Ship Lease, a role is hell since March of last year.
Tom has been with GSL for about seventeen years, holding
various management positions including CFO and Chief Commercial Officer. He
graduated from Durham University and holds an MBA from INCIAD.
Global Ship Lease has a market cap around seven hundred
(01:13):
million in trade on the New York Stock Exchange under
the simvil GSL.
Speaker 2 (01:17):
Welcome to Talking Transports Podcast, Tom.
Speaker 3 (01:20):
How you doing I'm doing well, Lee, Thank you very
much for having me on your podcast.
Speaker 1 (01:25):
So you know, global Ship Please might not be a
household name for many. Can you tell us a little
bit about your company that you run.
Speaker 3 (01:32):
By all means? And I would say probably container shipping
itself is it's not something that many households think about either.
So maybe I'll provide a little bit of context for
the overall industry and then explain how global Ship Please
fits into that whole puzzle. If that sounds okay to
you here, that's fantastic, okay, Well, listen, roughly eighty percent
of global physical trade is carried by c and of that,
(01:55):
roughly ninety percent of non bulk seaborn cargoes. So in
other words, no, not oil, not gray and stuff like
that is carried by container ships. And if you look
at containerized trade, the last year, roughly two billion tons
of cargo were carried by container ship and that amounts
to two hundred and twenty five million TEU and tuser
(02:16):
recurrent acronym that you'll you'll hear throughout this podcast and
stands for twenty foot equivalent unit, which is effectively a container. Now,
what we do is we provide container ships to the
container shipping lines themselves, the likes of MSc, MRSK, CMA, CGM,
et cetera. So you know, if I were to use
(02:37):
an analogy, the shipping lions are like the airlines, and
GSL is a less are capacity of tonnage of ships
to those shipping lions, So it's like, you know, air
cap within the av education industry leasing aircraft to the airline.
(03:00):
We're doing exactly the same thing for the shipping lines.
Now in terms of positioning, we're about the seventh largest
in the world by capacity and about the fourth largest
in the world by the number of ships which we
charter in. We lease in to those shipping lines, and
(03:21):
our leases are wet leases, which is another aviation term,
So we not only provide the ships, but we also
provide the people to run those ships, so the crews,
we maintain the ships, and we operate the ships at
the instruction of the shipping lines themselves. The only thing
we don't do is provide the fuel so the fuel
(03:44):
is provided by the charterers, the shipping lines themselves, our customers.
So that's really where we sit in the heart of things.
Speaker 1 (03:55):
Can you talk about you know, I'm assuming these are
long term leases. Can you talk about the average length
of a lease?
Speaker 3 (04:03):
Sure? I mean, we do aim to put in place
medium to long term leases. So if you look across
our overall fleet portfolio, we've got in weighted average terms,
about two point three years still to run. And that's
with contracted revenues of a little under two billion, so two.
Speaker 1 (04:25):
Point three years to run. But is the average when
you sign a new lease with somebody, is it a
lot longer than the two point three years?
Speaker 3 (04:35):
Well, that very much depends, and you know, it's a
fair question. So first of all, I should say that we,
as a less are tend to operate in the mid
size and smaller container ship markets. So you know, maybe
that's another sort of piece of context that I should
provide up front. When you look at the container ship fleet,
(04:55):
there are huge difference differences in sizes. So at the
very small end of the ship sizes, you get ships
that can carry a few hundred containers, you know, two, three, four,
five hundred containers, and at the very upper end you
have ships that can carry twenty four thousand containers. So
(05:16):
that's the sort of the equivalent of the A three
eighty air bus size of things. Now we global ship,
please focus upon mid size and smaller, which broadly speaking
means anything between roughly two thousand tu and ten thousand tu.
And within that range, typically you would be able to
(05:40):
put in place longer charters call it three, four, five
years for ships of between five and a half and
ten thousand tu, whereas typically, once again you would expect
to see charters of call it one, two and three
years for ships smaller than five and a half thousand tu.
Speaker 2 (05:58):
Okay, that's actually very interesting.
Speaker 1 (06:00):
So on that note, you know, I'm just always curious
because I guess I never had anyone ask this, But like,
you know, let's just say a Maerskin and I return
a ship to you guys, and there's no one to
lease it out to.
Speaker 2 (06:14):
What do you do with that ship?
Speaker 3 (06:16):
Well, you have you have various options depending upon your
view of how the market is going to evolve going forward.
So typically actually when you get a ship back, you
would expect to redeploy her Comparatively quickly. If you're getting
her back at a low point in the cycle, you
would tend to look for actually very short term charters
(06:38):
of two or three months at a time, so you're
biding your time keeping the vessel running, covering operating costs
on that vessels, which are you know, approximately seven eight
thousand dollars a day just to keep the vessel running,
and then when the market moves up or notches up,
you would expect to deploy her on a slightly longer
(07:01):
term charter. So essentially you're looking to minimize your time
exposure at the bottom of the market and maximize your
charter exposure when the market is at its most firm
and most lucrative. And because container shipping is both cyclical
(07:22):
and seasonal, that means that you are always going to
have a combination of short term charters covering the bumps
and much longer term charters covering the more lucrative points
in the cycle. And actually that cyclicality is both, you know,
the blessing and the curse of shipping. The curse in
that you know it obviously presents risks that you have
(07:45):
to manage, particularly in a capital intensive industry such as ours,
but at the same time, it represents the opportunity it's
in the cycle, sin's the opportunity to generate outsize returns.
So I would say say, we and ship owners, tonnage
providers as a whole welcome cyclicality. And this may sound
(08:08):
a little bit perverse, but we also welcome disruption. So
if the supply chain is being disrupted and running less efficiently,
the people who are actually moving the cargo to and fro,
so the shipping lines need more capacity from people like
us in order to keep the supply chain functioning. So
(08:30):
if you jam a ship in the sewers canal, as
you'll remember happened a few years ago, very quickly, the
ramifications of that rippled out through the supply chain, and
there was a demand for additional capacity in order to
keep folks running their liner services on schedule. So disruptions
such as that are as I say, counterintuitively, helpful and
(08:53):
supportive earnings for people like us.
Speaker 1 (08:56):
So to follow on questions for that, you know first
that you said disruptions are good. So are you looking
your lips right now with what's going on with tariffs?
And you know tariffs and tariff's off kind of mentality
that's going on.
Speaker 2 (09:11):
Is this kind of good for business?
Speaker 3 (09:15):
I think it's too early to say, Lee, I think,
you know, we're at a time of maximal uncertainty, So
we know there are going to be challenges to manage,
for sure, and we also know there are going to
be opportunities that are going to come out of this,
(09:35):
for sure. We just don't know exactly what they're going
to be yet. So our strategy, at least at the
moment is, you know, in the face of maximal uncertainty,
we're looking to maximize our optionality. And what that means
at an operational level is that, first of all, the
fact that we're operating mid size and smaller container ships
(09:57):
means that they can be redeployed very very buy the
shipping lines our customers across multiple different trades within the world,
so they're not captive to certain trades unlike the much
larger ships in some instances. And it also means that
we're looking to maximize the resilience and optionality of our
(10:19):
balance sheet. In other words, we've de levered to a
huge extent, so we've got financial leverage of around about
one times now, which is great news and We've built
quite a lot of cash on our balance sheets, so
we're in a position to sort of weather the challenges
at the moment and when the time is right, leap
on the opportunities, opportunities, whatever those opportunities might be.
Speaker 1 (10:43):
What's what's that kind of like a high leverage multiple
that you guys have had. You know, you mentioned that
you're around one time, So where was it?
Speaker 3 (10:53):
Yeah, that's a that's a very good question. I think
at its peak it was probably north of eight times.
So one times, particularly when you've got forward visibility on
revenues and cash flows of two point three years, we
consider to be very modest indeed, right.
Speaker 1 (11:14):
And you know, obviously your business is very capital intensive,
as you alluded to, How do you when you buy
a ship? How do you how do you guys finance it?
Speaker 3 (11:26):
It depends when you buy it. So that the secret
in shipping, and this is something that the Greeks have
been getting right for generations and making terrific amounts of
money for generations on is to be highly disciplined. So
you know, you pick the right point in the cycle
or the right transaction to get involved with. You are patient,
(11:50):
so you wait and when the right opportunities arise. You
are nimble, so you move very very quickly, and I
think broadly speaking, there are a couple of flavors of
transactions that are interesting to us. The first would be
countercycle call transactions, so you know, when, effectively, when there's
(12:10):
blood in the water and other folk are fearful, you
can buy ships in some instances add a small premium
to scrap value. So that's an attractive acquisition in a
highly cyclical industry, but you've got to be in a
position to hold onto that vessel and trade her up
when the cycle turns. And the other flavor of transaction
(12:33):
is to buy a ship with a charter attached, which
could be a sort of a purchase and charter back
transaction with one of our customers, which allows you to
effectively write down the residual value risk on that ship
by the end of the charter to very modest levels,
and once again you can then subsequently play the cycle.
(12:55):
So the combination of a stable platform with contracted cash flows,
which is what we have now going into what could
be a very choppy set of waters full of you know, opportunities,
purchase opportunities, feels like a good place to be albeit,
you know, going back to your original expression, I don't
think anyone is necessarily rubbing their hands at the moment.
(13:16):
It's such an uncertain time.
Speaker 1 (13:20):
Yeah, And so you know, I'm just curious because you
mentioned how discipline is so important. And listen, I'm an
outsider looking in, you know, when I look at the
order book and how much supply is coming, and it
doesn't seem like the industry itself is very disciplined. So
are you saying that most people don't follow that we'll
call it the Greek playbook.
Speaker 3 (13:42):
Well, I think that you have to, first of all,
look at the order book not as a homogeneous hole,
but one that is sort of chopped up by segments.
And I'll come back to that at the moment. And
then you also have to look at the different participants
in the industry through different lenses. So the shipping lines
(14:05):
our customers are effectively logistics service providers. They like the airlines,
need to offer high quality, extraordinarily reliable service to their customers,
usually on a fixed day sailing basis. So you know,
their services need to work like clockwork. Hence having capacity
(14:28):
available allows them to build margins of error into their networks.
And then on the other side of the coin, you've
got tonnage providers like us, and there are one or two,
i would say, other Greek minded players in the tonnage
provider segment, where the discipline and selecting the right assets
(14:49):
at the right times is fundamental to our business. And
like us, many of the third party owners tend to
be focused upon the midside and smaller tonnage segments. And
one implication of that is that comparatively little capital has
flowed into the mid size and smaller tonnage segments, which
(15:12):
means that when you look at the order book, the
overall order book to fleet ratio is between twenty seven
and twenty eight percent, which is, you know, obviously something
that makes you think twice. However, if you back off
or you zoom out and look at the composition of
the order book, the order book to fleet ratio for
(15:33):
ships of ten thousand tu and smaller is between ten
and eleven percent, much more manageable in many ways. And
it's also important to think of, you know, an order
book as not something that's going to deliver from one
day to the next. It's stretched over the course of
(15:54):
several years. So if you were to go on order
a ship today, the earliest that you would actually yet
that ship is probably twenty twenty nine. So there is
a lead time on the order book. And I think
another thing to keep in mind is you have to
have a think about the composition of the fleet into
which that order book is delivering, and particularly the age
(16:15):
profile of that fleet. And going back to what I
was saying earlier, the fact that people haven't been investing
in mid size and smaller tonnage certainly speculatively they haven't
been ordering. That means that the ten thousand TIU and
smaller fleet is aging. And I would say there are
quite a lot of ships on the water today that
(16:35):
have had their scrapping date deferred by virtue of the
fact that they've been enjoying an extraordinary bull market for
the last few years. So if you were to run
the exercise of scrapping out every ship that turned twenty
five years old or older over the course of the
next call it three years through to the end of
(16:57):
twenty twenty eight, you would actually see the mid size
and smaller fleet shrink by roughly six and a half
percent over that same time period. So yes, there's a
big order book. Yes, it's something to think about, but
it is very clearly weighted towards the much bigger ships
(17:20):
against which we're not competing. We're competing against a peer
group of mid size and smaller ships. Whether the order
book is much smaller.
Speaker 2 (17:28):
Yeah, definitely, that nuance is important, you know.
Speaker 1 (17:31):
So like when you guys are looking for you know,
new capacity or capacity are you how much of it
are you doing it on the secondary market versus ordering
new ships?
Speaker 3 (17:45):
Well, that's that's exactly right. I would say since twenty eighteen,
which is when we went through a transformative merger with
another shipping company, we have only ever acquired ships from
the secondhand market. We haven't ordered any new tonnage and
we have an order book of zero as things currently stand.
(18:07):
But as your as you say, we're not dogmatic about that.
We're willing to look at any deal as long as
the risk and return metrics work. But certainly, to date,
the more favorable returns and certainly the sort of de
risked approach has been on the on the side of
(18:29):
secondhand ships.
Speaker 1 (18:31):
You know, we don't know where this is going to land,
but you know, in the US, I'm sure you're you're
paying attention to the US trade representatives, you know, when
they're talking about penalizing Chinese flag or Chinese built ships
that call into two US supports. Do you think that's
changing the way shipping companies? I mean, maybe not so
(18:51):
much yourself, because as you mentioned, you really you don't
have any new orders.
Speaker 2 (18:57):
But like how they're going to order ships.
Speaker 1 (19:00):
Obviously they're not going to order a US built ship
because it's next to impossible to do that. But are
they going to go to other countries like South Korea
or Japan and that go through China just to kind
of hedge themselves.
Speaker 3 (19:15):
Incredibly difficult to say. I mean, if you look at
the order book today, roughly seventy percent actually a little
over seventy percent seven zero percent is ordered in China.
And as I said to you just now, if you
wanted to order a ship today, regardless of geography, you
would have to wait until twenty twenty nine or so
(19:35):
for that ship to be delivered. So there isn't a
huge amount of flex in the system, at least in
the near term, to reshape or redirect build location. Frankly speaking,
So the other thing is that given the actual implementation
or the final shape of the USTR, which is, you
(19:58):
know what you've just been referring to is actually going
to take I don't think it's going to drive hard
decisions one way or the other. What it may do
is catalyze something of a break on ordering as people
wait for the cards to fall. But if it were
to be implemented in its currently mooted form, I think
(20:20):
what you would see is liner companies looking to potentially
rationalize port calls, because as things are currently structured, the
levee would fall on a per pork call basis. So
if you're calling at three or four different ports in
the US, you'd be pinged three or four different times.
It makes no difference whether you're calling with a big
(20:41):
ship or a small ship. And given that it applies
not only on Chinese built ships, but also on operators
who have Chinese built ships within their broader fleet, which
frankly is almost everyone, everyone's going to get pinged. So
the obvious alternate would be, Okay, do we size up
(21:02):
the ships? Do we minimize the port calls and thus
ratchet down the levees. Now, it's all very well to
say that, but what that has the effect of doing
is building up additional congestion, not in the ports. If
everyone's rationalizing their port calls building up additional congestion in
(21:23):
the shore side infrastructure, so they would be bottlenecks across
the railheads and other things flowing out of ports. And
as I said, at the very outset, if you're providing
capacity to the industry, disruption is good. Congestion is supportive
of earnings. So I would say that we at least
(21:47):
as providers of tonnage into the space, and we have
very few Chinese built ships in our fleet, I would say,
as a sort of parenthetical, we're not losing a tremendous
amount of sleep over USTR. And we also think it's
probably going to go through various different iterations before it
hits its final four.
Speaker 2 (22:05):
Yeah, I would definitely agree with that. I mean, I
think there's a.
Speaker 1 (22:08):
Low probability of it being law as it was originally written,
but you know, assuming that it is or it's something similar,
it would have a bigger impact per container for the
smaller ships, which I guess you play in. As you mentioned,
you don't really have that many Chinese built ships, so
it's not that much of an issue for you.
Speaker 2 (22:32):
So would that be a.
Speaker 1 (22:33):
Competitive advantage versus other fleets that have more Chinese built ships.
Speaker 3 (22:37):
Possibly, Lee, I mean, it's hard to say. And it
flows back into the optionality point, because all of our
ships are mid size and smaller and can be moved
around the chessboard by the line of operators. They can
or or they can at the line of operators, decision
discretion be deployed in trades that touch the US or not.
(23:00):
So again, it's it's not something that we spend a
lot of time thinking about. What we spend a lot
more time thinking about is trying to figure out how
tariffs are going to sort of change the patterns of
global trade. And I mean, as you know, probably better
than anyone, it's quite quite difficult to keep up with
(23:21):
the various sort of changes in the structures. So I mean,
just to provide some more data, if you look at
containers flowing into the US as a proportion of global
containerized trade volumes, you're looking at somewhere between ten and thirteen,
(23:41):
So between ten percent and thirteen, one to three percent
of global containerized trade volumes actually flowing into the US.
So US demand prompting the transport of those goods, and
of that thirteen percent between forty and forty five percent
(24:04):
is coming directly from China. So the moment you levy
a one hundred and twenty five percent tariff on forty
to forty five percent of goods flowing into the US,
that's clearly going to be massively disruptive. And the fact
that it was it's being rolled out over a matter
of days, and given that it takes anywhere between call
(24:27):
it eighteen and thirty days for ships to travel from
Chinese and Southeast Asian ports to the US, that means
there's a lot of cargo that's already a board that
is about to be hit by one hundred and twenty
five percent tariffs upon arrival in the US. Now, because
things are moving so fast, there's a bit of a
(24:47):
lag time on the data. So what I'm telling you
now is based upon anecdotal evidence as opposed to hard data.
But we're hearing that containers are being discharged, so you
know where it's possible people who are moving cargo from
China to the US are looking to discharge some of
(25:08):
that cargo and interimports and pay for it to be
repatriated to China. Simply because neither they the exporters nor
the importers are in a position to absorb one hundred
and twenty five percent tariffs. Now, what's going to happen
when ships over the coming days arrive in calling the
(25:29):
port of Los Angeles with X thousand number of Chinese
origin containers aboard. We simply don't know. Are they going
to be discharged? Are they going to be retained aboard
and returned? We simply don't know. But disruption is absolutely
the name of the game at the moment, an unpredictability,
(25:50):
and this is going to choke up as we saw,
you know, a single vessel getting stuck in sewers had ramifications.
Can you imagine if ten thirteen percent of well of
global trade, of which broadly half is of Chinese origin,
is going to be caught in this sort of tangle
(26:11):
of hold on? Can we accommodate these tariffs?
Speaker 2 (26:15):
It's also worth noting that tariffs have been a moving
target in one hundred and twenty five percent target is
at the time of us recording this episode of Talking Transports.
Speaker 3 (26:24):
So we're waiting to see how trade patterns will will
reshape in the interim, and there could be opportunities here,
So I mean it's it's a very rough proxy to use,
but in sort of call it Trump one point zero.
When tariffs were imposed upon China, we saw a diversion
(26:47):
of cargo, so cargo flowing out of China to Southeast
Asian locations Vietnam and Indonesia, for example, and then flowing
on you know, semi manufactured goods being sent to those locations,
finished and then transported to the US. And that actually
(27:08):
meant that additional capacity, additional shipping capacity was required to
support those longer, more dispersed and complicated supply chains. So
although you know, the actual total volume of cargo actually
moving between Asia and the US hadn't changed at all,
(27:28):
because it was far more complex and dispersed, you needed
more ships, and typically mid sized and smaller ships to
carry that. So weirdly that acted as a stimulant for
our business. It's too early in the game to know,
you know, if that's going to happen all over again,
but I'm just pointing to the fact that there can
be sort of second and third order implications that can
(27:52):
actually be supportive to surprisingly supportive to participants earning.
Speaker 1 (28:00):
I don't know if you have this available, But do
you guys have a rough understanding of or breakout of,
you know, where your ships, what trades are involved, because
I'm assuming very little is trans Pacific directly between China
and the US, just because they, as you mentioned, they're
small and medium sized ships.
Speaker 2 (28:19):
Did you have that breakout at all?
Speaker 3 (28:22):
I couldn't give you an exact breakout, but what I
could say to you is that if you look at
the big East West trades, of which obviously the Transpacific
is one, collectively Transpacific plus Transatlantic plus Asia Europe represents
between twenty five and twenty seven percent of global containerized trade,
(28:45):
which means, you know, roughly seventy three seventy four percent
of global containerized trades sits outside those main lanes in
intermediate trades such as intra Asia, which is actually the
biggest single trade block from a containerized cargo perspective. But
I'm also talking about the Africa trades, the Latin America trades,
(29:07):
the intra Europe trades, et cetera, et cetera, et cetera,
and typically those non mainlane trades representing the seventy three
to seventy five percent of cargo flows are serviced by
mid size and smaller ships like ours. So typically I
mean it changes obviously depending upon liner's discretion, but typically
(29:28):
the lion's share of our ships would be in those
non main lane trades at any given time.
Speaker 1 (29:35):
So you know, on the Bloomberg terminal we follow container
rates that come out weekly.
Speaker 2 (29:41):
How much are your.
Speaker 1 (29:44):
Rates that you set to your customers tied to where
the spot market is?
Speaker 2 (29:50):
Is it highly correlated over time?
Speaker 3 (29:54):
It tends to be highly correlated. However, at the moment
there's a curious location. So while freight rates, which are
the rates you're watching, have been under some downward pressure,
charter rates, which are the rates that sit at the
core of my business, have been plateauing at comparatively high levels. Now,
(30:19):
in part, that's a function of the fact that in
the charter market, our market, there's comparatively limited liquidity. Why
because most of the chartered vessels are on comparatively long
term charters as a result of the bull market that's
been in place up until this moment. And secondly, some
(30:39):
of the liner companies have been buying ships second hand
ships out of the charter market, which has shrunk the
size of that charter market, which is a result, has
shrunk both liquidity and availability, meaning that if a liner
company wants to charter a ship out of our market,
they have to pay up for it if they want
(31:00):
to plug holes in their network. So there is a
curious dislocation at the moment. And I would say, once again,
it's not just us who are looking to maximize optionality
in the face of maximal uncertainty. It's also the liner
operators and for the liners, having capacity is having options.
Not having capacity is not having options.
Speaker 1 (31:24):
So you know, you guys probably have a pretty good
idea what your revenues are going to be over the
next twelve months. I'm guessing do you have a high
conviction of you know where your margins are going to
be as well, or are there things throughout the year
that will affect the margin aspect.
Speaker 3 (31:42):
I think through twenty twenty five at least, our conviction
is really quite high because pretty much all of our
positions for twenty twenty five are already closed out, and
for a very substantial portion of twenty twenty six they're
also closed out. So there's very good forward visibility, I
(32:04):
would say, on our earnings at this point in time,
and Actually that's what prompted us to ratchet up our dividend.
So you know, we pay a dividend which we're increasing
to two dollars and ten cents annualized per common share,
which yesterday's close. Well, I mean, who knows it's going
to be between ten and eleven percent dividend yield at
(32:27):
the moment. But we were able to increase the dividends
in no small part because we have such good forward
visibility on cash flows.
Speaker 1 (32:37):
And I'm assuming your dividend, you know, can be volatile
at times. You know, you increase it when times are
good and sometimes you have to reel it back in
when when things aren't as good.
Speaker 3 (32:48):
Actually, no, you know we've we've thought about this quite
a lot, and certainly in our business, where the idea
is to continue to build out forward visibility on cash flows.
You know, we're a leasing company, not an asset player.
We think it makes sense to do whatever we can
(33:08):
to stabilize the dividend. So we put in place a
dividend of a dollar fifty with you know, we've been
been paying i think, once again annualized, but we've been
paying on a quarterly basis. We ratcheted that up to
a dollar eighty on the back of the most recent
(33:30):
sort of ball market, and we ratcheted it up again
to two dollars and ten cents again because we have
seen our ability to lock in forward contracts and revenues
surprising to the upside. So we felt that, you know,
it made sense to share that with customers, not by well,
not customers with investors, not by way of you know,
(33:54):
a special dividend or or something of that nature, but
by by trying to sort of build this dividend stream
with a level of confidence interpaired it.
Speaker 1 (34:05):
And you know, speaking of uses of capital, does Global
ship lease also did you do you are you active
in buybacks?
Speaker 2 (34:14):
Sare buybacks? Yes?
Speaker 3 (34:16):
We have been active in the past in share buybacks.
I mean we we've brought back I think, in aggregate,
roughly fifty seven million dollars worth of shares to date. Now,
we did a lot of that actually during the COVID
(34:36):
super cyclical uptick, where because asset values went so high,
it became clear to us that it wouldn't make sense
for us to try to buy ships at that point
in time. So rather than buying ships, we decided to
return capital to shareholders by way of buybacks. So yes,
buybacks are very much on the radar. A solid dividend
(34:59):
is is on the well, I mean it's implemented, not
just on the radar. In terms of return of capital
to investors, we always de lever and continue to delever
to manage balance sheet risk and build equity value that way,
and of course the idea is to build cash, particularly
at a time such as this, in order to be
(35:20):
able to move on on opportunities that the crop up.
Speaker 1 (35:24):
You know, given the visibility you have, do you guys
provide guidance to the street at all?
Speaker 3 (35:30):
We we do. We provide guidance in our quarterly earnings materials,
and we try to provide as much granular information there
to allow people to model out, you know, their own
ideas of what we're going to generate in terms of
EBIT DAR et cetera, et cetera, et cetera. So we
don't provide explicit we expect to hit x ebit DAR
(35:53):
or net income this year, but we provide all of
the tools to analysts to model up that out themselves,
and by and large, when we deliver quarterly result, they're
either in line with or mudually better than analysts' expectations,
so that does tend to be fairly good forecasting visibility
(36:13):
after a.
Speaker 2 (36:14):
Number of you know, good revenue growth.
Speaker 1 (36:16):
Right now, consensus for twenty twenty five is for flat
revenue growth for growth for you guys, and about three
percent lower earnings per share at nine dollars and seventy cents.
So I guess we'll we'll see if with twenty twenty
five brains.
Speaker 2 (36:34):
Yes, yes, So Tom, how did you get into shipping?
Speaker 1 (36:38):
Because I know some people either born into it or
they kind of fall into it.
Speaker 3 (36:44):
I'm very much in the second category.
Speaker 2 (36:47):
Lee.
Speaker 3 (36:48):
I came out of university in the early nineties with
a degree in biological sciences and at that stage the
market was pretty grim and I thought, okay, well, nothing
to lose in a bit of adventure. So I managed
to talk my way aboard a containership and did a
working A working passage which started in Liverpool, went all
(37:12):
around Northern Europe, across the Atlantic, through the Panama Canal,
down the west coast of South America to Chile to Valpreiso,
where I eventually got off and then got a job
with a liner company there. Hamburg, sud which is one
of the liner companies which has subsequently been purchased by
MRSK and to their immense credits, at least in my view,
(37:37):
they took a punt on me and so that's how
my career in shipping began. So it was liner shipping
for the first ten years of my life in Latin
America and the US. Then it was I took an
MBA at INCIAD and from their move into more the
(38:02):
ship owning asset finance side of things. So it's it's
been a career of two halves. And here I am
as CEO of a publicly listed containership owner, so it's
been a it's been a fun ride.
Speaker 2 (38:20):
That's great.
Speaker 1 (38:22):
I was down at the Panama Canal once like ten
years ago, and I saw the ships you know in
the canals, you know.
Speaker 2 (38:29):
From Afar, and it's one of the things I want
to do.
Speaker 1 (38:31):
I want to talk my way onto a ship through
uh uh, through through the through the canal.
Speaker 3 (38:38):
So sure, I mean, sadly, it's much more difficult to
do than it was thirty years ago.
Speaker 2 (38:43):
So I guess you know.
Speaker 1 (38:45):
I like to ask all my guests this, like is
there a book, whether it's on leadership or the industry
that's kind of close to your heart that you know,
you would recommend for people to take a look at.
Speaker 3 (38:58):
Yes, it's actually a book called ninety Percent of Everything,
and the subtitle to that book is Inside Shipping, the
invisible industry that puts clothes on your back, gas in
your car, and food on your plate. And it's and
it was written by Rose George about ten to twelve
(39:21):
years ago, I think now. And it's an interesting sort
of warts and all examination of the industry and certainly,
you know, things to learn from it that we need
to do better. And it also, i think, just says
exactly what or does exactly what it says on the tin.
It talks about an industry that really no one thinks
(39:42):
about as long as everything's going well, so it is
genuinely invisible. But as soon as things start going wrong,
COVID being an example, you know, people suddenly see that
supply chains are more complex and more vulnerable than perhaps
the a thought.
Speaker 2 (40:01):
They certainly are. I haven't heard that one. I got
to check that one out.
Speaker 1 (40:04):
And just to close out, you know, is there anything
you know that keeps you up at night running GSL?
Speaker 3 (40:13):
I'm a warrior by nature, Lee, So everything keeps me
up at night. But no, I would say that as
far as the business is concerned, you know, the sort
of the business model, the structure, the forward visibility on
cash flows, great counterparties, et cetera, et cetera. I think
I'm sleeping as well as I possibly could in these
uncertain times.
Speaker 1 (40:33):
Well, I'm very glad to hear that, and Tom, I
really want to thank you for your time and insights.
Speaker 2 (40:38):
This is a delightful conversation.
Speaker 3 (40:41):
Well, thank you very much for having me on all right, and.
Speaker 1 (40:43):
I also want to thank you for tuning in. If
you liked the episode, please subscribe and leave a review.
We've lined up a number of great guests for the podcast,
so please check back to hear conversations with C suite executives, shippers, regulators,
and decision makers within the freight markets. Also, if you
want to learn more about the free transportation market, please
check out our work on the Bloomberg terminal at BIGO.
Speaker 2 (41:06):
Or on social media.
Speaker 1 (41:08):
This is Lee Klascau signing off and thanks for talking
transports with me.
Speaker 2 (41:12):
Take care,
Host
Lee Klaskow
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