Connecticut/New York Shipping: Changing Financial Tides
Published in the July 2024 edition of the Connecticut Maritime Association Newsletter.
The center of gravity for the world's most shipping industry-focused cities is its shipowners—specifically, their current quantity of ships and amassed fortunes. Entire ecosystems of ship brokers, bankers, lawyers, and other service providers traditionally develop in shipping-centric cities to cater to local shipowners and the cash flows their fleets generate.
The Connecticut/New York area’s competitive advantage on the world maritime stage does not stem from the tradition of fleets passed down from generation to generation, as you would find in Greece. The region's superpower is its proximity to some of the deepest pools of capital in the world—the "smart money".
Today, Connecticut/New York financial investors have mostly sold their ships and taken their chips off the table. The recent years of increased daily earnings and sale prices for ships have driven local, private equity-backed shipowners Eagle Bulk, Chem Bulk, Team Tankers, and Ridgebury Tankers to sell material portions of their fleet or their entire business.
While other local funds, such as Entrust Global and Hudson Structured Capital Management, have remained in the shipping sector, their approach is predominantly as a debt provider rather than as an equity owner of vessels.
The distinction between debt and equity matters. A debt provider does not influence day-to-day ship operations to steer shipowners towards utilizing certain brokers as an example. On the other hand, a fund that is the controlling equity investor in a shipping company would have much greater influence on which outside firms to work with.
Funds’ relationships matter in selecting outside firms, and the firms they choose are often close to their headquarters. Relationships drive the shipping business, so proximity is paramount in building a successful venture. The location of funds influences the shipping ecosystem—this is why New York/Connecticut is part of the changing financial tide of shipping, especially when those investors use their substantial chip stacks to go “all-in” on shipping by acquiring their own fleet of vessels.
As the market continues on its current trajectory, I do not see the downward trend of funders in the New York/Connecticut area reversing. However, shipping is a notoriously cyclical business. When the market turns (and it will), I have no doubt the same “smart money” from Connecticut/New York will opportunistically “buy the dip”, re-entering the shipowning market and breathing fresh life into our local maritime center of gravity.
