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May 6, 2014
Industry Trends

…and why the news should follow shipbuilding and ships.

 “This is the first job I’ve ever had where what’s on the nightly news massively affects our business; it’s not just trivia.” Thus sayeth one of the executives at SSI and he’s right.

Here are some random news stories:

Think about what’s happening in Crimea. There are reports that the situation there could affect naval shipbuilding in Canada! (Concerns about defending the Arctic from Russia) This could impact our clients and by extension, SSI.

Who’s going to win the 2014 election in Brazil? The market it betting the results will affect Petrobras which orders ships built with ShipConstructor.

In other news, China’s economy is now set to overtake the USA in GDP and there are a rising number of Asian millionaires and billionaires. That affects the orders for our luxury yacht-building customers so that also has an impact on us.

But it works both ways as well.

The demand for shipbuilding is dependent on the demand for shipping which is also a measure of how much global trade is occurring. For instance, throughout the global economic meltdown, in monitoring Google alerts for “shipbuilding”, we saw that there was an immediate and significant uptick in cancellations of new builds and a drastic drop in orders. From that we had a predictor of what would happen in our business.

To get even more advance warning, for both our industry as well as the wider economy, another indicator is the Baltic Dry Index (BDI), issued daily from London. Technically, The BDI is an assessment of the price for moving the major raw materials by sea taking into account 23 different shipping routes. These raw materials are inputs to the production of intermediate and future goods and that is why the BDI is so useful. Obviously, people don’t book freighters unless they have materials to move. Therefore, the BDI is not only a guide to the possible need for more ships, it’s also a leading economic indicator predicting the future state of the economic production and growth.

Why Does this Matter?

The news has an effect on shipping and shipbuilding and the reverse is also true. It matters because SSI wants to better understand the world and how global events might affect our clients. Consequently, on many occasions, SSI was aware of the challenges that our clients were facing and was able to implement temporary policies and practices consistent with the company’s commitment to “partner for success”.  When challenges arise due to global geo-political circumstances outside our clients’ control, SSI is committed to being part of the solution, NOT part of the problem.


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