“Let's be clear. If I look at the earnings trend I certainly can't complain. But that's not the way I like to make money." Paolo D'Amico, together with his cousin Cesare at the helm of D'Amico international Shipping, does not mince words. The situation of maritime trade, which a few months ago also made it possible to pay shareholders a rich dividend, remains at high risk for all companies exposed and vulnerable to reprisals from the Houthi guerrillas, it now has a relative value. “Don't ask me for predictions – he adds -. We live in a climate of war. A conflict now at a stalemate. It's one thing if this emergency situation is destined to last a few months. Otherwise? I can only appeal to common sense. Because the situation is high risk for everyone."
Also because many factors contribute to complicating the picture, not all of which are easy to understand. Why, for example, did Aramco, the Saudi oil giant, choose this moment to cut energy supplies to Europe?
“In this case the Suez problem has nothing to do with it. The reality is that at one time the Saudis embarked on a pharaonic plan to develop energy exports and are now trying to backtrack. In this case we are faced with an excess of supply. Also because the Chinese have invested a lot in electricity and have less need for petrol".
In short, for once Suez is "innocent".
“For once. Because Suez has always caused problems since its inauguration. Not to mention Nasser's season which culminated in the blockade of the Canal after the Six Day War."
In recent years we have had a blockade caused by an accident that created gigantic traffic jams and significant damage to logistics chains. The channel is necessary, but brings ongoing problems. Since the time of Aida, we could say.
“We'll see how it ends this time. Before the crisis, diesel passed through the Red Sea, crossed the Suez Canal, and entered the Mediterranean, i.e. Europe. Then there were the Houthi attacks. But there is one aspect that gives rise to hope: Biden did not react, thus demonstrating his desire to contain the crisis. It is an anomalous situation, open to every possible outcome."
What will the contenders do? Maybe Iran will calm things down. And what will Netanyahu do?
“With the change of suppliers, the routes have become terribly longer, it takes 14 days of navigation more to transport the same quantity of product. At the same time, a larger number of ships is needed. Last week there were a hundred more ships at sea. Demand has skyrocketed and there has been a very strong increase in freight prices, from which all companies are benefiting."
Does this apply to freight but also to containers?
“We do not operate in containers, which follow fixed lines along the import-export routes between the East and Europe. We mainly transport refined petroleum products, also available in Brazil, America or the western part of Africa”.
SAre you forced to change routes to get supplies from the Middle or Far East and circumnavigate the Cape of Good Hope?
“Yes, at the moment none of our ships pass through Suez.”
From an earnings point of view, you have nothing to complain about, he told us.
“With two caveats on the cost front. In the case of long-term contracts, the economic conditions are already agreed and cannot change. However, for spot rentals from the Middle and Far East we will see a probable further increase in prices to cover the increased costs, which in principle are passed on to the customer. But not all items are transferable: insurance costs, for example, continue to burden shipping companies and in some cases have quadrupled".
Then there is the cost of personnel.
“There are the biggest bonuses for the crew, who deserve to be rewarded if they cross a risk area. And as regards pollution, the effect induced by the lengthening of routes is an increase in carbonisation which complicates the achievement of the long-term programs to which the maritime sector is committed: a 40% reduction in emissions by 2030 and in practice to eliminate them by 2050. The situation entails great difficulties for Italy, given its position in the Mediterranean and consequently that of its port system.”
And what about D'Amico?
“We worked well on both spot activity and long-term contracts, which secured cash flow. Now that we have strong cash on hand, we will use some of it to reduce debt, as we already did substantially last year. With what remains we will evaluate the purchase of ships, not necessarily new ones because prices remain high and our fleet is young".
Finally, allow me a joke about Panama. That canal also has its problems related to drought.
“The situation in Panama has worsened further. This too will have heavy repercussions on maritime transport costs. It will not have an impact on European trade, because Europe-Asia trade passes through the Suez Canal, but on that between the United States and Asia and on all European companies like ours that also serve those routes. It is a second bottleneck that affects traffic from East to West. The inconvenience is limited by the fact that the companies have had the opportunity to reorganize the routes. But on the price front the impact will be significant both for the companies involved and for American consumers."
