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Speaker 1: Hi everyone, this is Lee Claskow when We're Talking Transports.

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Speaker 1: Welcome to the Bloomberg Intelligence Talking Transports podcast. I'm your host,

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Speaker 1: Lee Claskows, Senior Freight transportation logistics Analysts at Bloomberg Intelligence,

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Speaker 1: Bloomberg's in house research arm of almost five hundred analysting

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Speaker 1: strategists around the globe. Before diving in a little public

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Speaker 1: service announcement, your support is instrumental to keep bringing great

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Speaker 1: guests and conversations to you, our listeners, and we need

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Speaker 1: your support. So please, if you enjoyed this podcast, share it,

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Speaker 1: like it and leave a comment. Thanks so much for

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Speaker 1: your help. Also, if you have any ideas for future

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Speaker 1: episodes or just want to talk transports, please hit me

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Speaker 1: up on the Bloomberg terminal, on LinkedIn or on Twitter

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Speaker 1: at Logistics Leap Now onto our episode and we're delighted

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Speaker 1: to have with us today. Tom Listener, CEO of Global

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Speaker 1: Ship Lease, a role is hell since March of last year.

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Speaker 1: Tom has been with GSL for about seventeen years, holding

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Speaker 1: various management positions including CFO and Chief Commercial Officer. He

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Speaker 1: graduated from Durham University and holds an MBA from INCIAD.

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Speaker 1: Global Ship Lease has a market cap around seven hundred

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Speaker 1: million in trade on the New York Stock Exchange under

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Speaker 1: the simvil GSL.

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Speaker 2: Welcome to Talking Transports Podcast, Tom.

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Speaker 3: How you doing I'm doing well, Lee, Thank you very

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Speaker 3: much for having me on your podcast.

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Speaker 1: So you know, global Ship Please might not be a

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Speaker 1: household name for many. Can you tell us a little

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Speaker 1: bit about your company that you run.

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Speaker 3: By all means? And I would say probably container shipping

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Speaker 3: itself is it's not something that many households think about either.

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Speaker 3: So maybe I'll provide a little bit of context for

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Speaker 3: the overall industry and then explain how global Ship Please

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Speaker 3: fits into that whole puzzle. If that sounds okay to

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Speaker 3: you here, that's fantastic, okay, Well, listen, roughly eighty percent

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Speaker 3: of global physical trade is carried by c and of that,

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Speaker 3: roughly ninety percent of non bulk seaborn cargoes. So in

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Speaker 3: other words, no, not oil, not gray and stuff like

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Speaker 3: that is carried by container ships. And if you look

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Speaker 3: at containerized trade, the last year, roughly two billion tons

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Speaker 3: of cargo were carried by container ship and that amounts

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Speaker 3: to two hundred and twenty five million TEU and tuser

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Speaker 3: recurrent acronym that you'll you'll hear throughout this podcast and

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Speaker 3: stands for twenty foot equivalent unit, which is effectively a container. Now,

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Speaker 3: what we do is we provide container ships to the

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Speaker 3: container shipping lines themselves, the likes of MSc, MRSK, CMA, CGM,

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Speaker 3: et cetera. So you know, if I were to use

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Speaker 3: an analogy, the shipping lions are like the airlines, and

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Speaker 3: GSL is a less are capacity of tonnage of ships

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Speaker 3: to those shipping lions, So it's like, you know, air

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Speaker 3: cap within the av education industry leasing aircraft to the airline.

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Speaker 3: We're doing exactly the same thing for the shipping lines.

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Speaker 3: Now in terms of positioning, we're about the seventh largest

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Speaker 3: in the world by capacity and about the fourth largest

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Speaker 3: in the world by the number of ships which we

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Speaker 3: charter in. We lease in to those shipping lines, and

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Speaker 3: our leases are wet leases, which is another aviation term,

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Speaker 3: So we not only provide the ships, but we also

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Speaker 3: provide the people to run those ships, so the crews,

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Speaker 3: we maintain the ships, and we operate the ships at

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Speaker 3: the instruction of the shipping lines themselves. The only thing

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Speaker 3: we don't do is provide the fuel so the fuel

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Speaker 3: is provided by the charterers, the shipping lines themselves, our customers.

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Speaker 3: So that's really where we sit in the heart of things.

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Speaker 1: Can you talk about you know, I'm assuming these are

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Speaker 1: long term leases. Can you talk about the average length

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Speaker 1: of a lease?

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Speaker 3: Sure? I mean, we do aim to put in place

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Speaker 3: medium to long term leases. So if you look across

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Speaker 3: our overall fleet portfolio, we've got in weighted average terms,

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Speaker 3: about two point three years still to run. And that's

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Speaker 3: with contracted revenues of a little under two billion, so two.

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Speaker 1: Point three years to run. But is the average when

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Speaker 1: you sign a new lease with somebody, is it a

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Speaker 1: lot longer than the two point three years?

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Speaker 3: Well, that very much depends, and you know, it's a

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Speaker 3: fair question. So first of all, I should say that we,

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Speaker 3: as a less are tend to operate in the mid

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Speaker 3: size and smaller container ship markets. So you know, maybe

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Speaker 3: that's another sort of piece of context that I should

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Speaker 3: provide up front. When you look at the container ship fleet,

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Speaker 3: there are huge difference differences in sizes. So at the

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Speaker 3: very small end of the ship sizes, you get ships

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Speaker 3: that can carry a few hundred containers, you know, two, three, four,

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Speaker 3: five hundred containers, and at the very upper end you

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Speaker 3: have ships that can carry twenty four thousand containers. So

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Speaker 3: that's the sort of the equivalent of the A three

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Speaker 3: eighty air bus size of things. Now we global ship,

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Speaker 3: please focus upon mid size and smaller, which broadly speaking

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Speaker 3: means anything between roughly two thousand tu and ten thousand tu.

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Speaker 3: And within that range, typically you would be able to

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Speaker 3: put in place longer charters call it three, four, five

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Speaker 3: years for ships of between five and a half and

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Speaker 3: ten thousand tu, whereas typically, once again you would expect

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Speaker 3: to see charters of call it one, two and three

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Speaker 3: years for ships smaller than five and a half thousand tu.

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Speaker 2: Okay, that's actually very interesting.

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Speaker 1: So on that note, you know, I'm just always curious

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Speaker 1: because I guess I never had anyone ask this, But like,

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Speaker 1: you know, let's just say a Maerskin and I return

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Speaker 1: a ship to you guys, and there's no one to

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Speaker 1: lease it out to.

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Speaker 2: What do you do with that ship?

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Speaker 3: Well, you have you have various options depending upon your

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Speaker 3: view of how the market is going to evolve going forward.

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Speaker 3: So typically actually when you get a ship back, you

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Speaker 3: would expect to redeploy her Comparatively quickly. If you're getting

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Speaker 3: her back at a low point in the cycle, you

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Speaker 3: would tend to look for actually very short term charters

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Speaker 3: of two or three months at a time, so you're

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Speaker 3: biding your time keeping the vessel running, covering operating costs

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Speaker 3: on that vessels, which are you know, approximately seven eight

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Speaker 3: thousand dollars a day just to keep the vessel running,

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Speaker 3: and then when the market moves up or notches up,

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Speaker 3: you would expect to deploy her on a slightly longer

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Speaker 3: term charter. So essentially you're looking to minimize your time

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Speaker 3: exposure at the bottom of the market and maximize your

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Speaker 3: charter exposure when the market is at its most firm

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Speaker 3: and most lucrative. And because container shipping is both cyclical

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Speaker 3: and seasonal, that means that you are always going to

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Speaker 3: have a combination of short term charters covering the bumps

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Speaker 3: and much longer term charters covering the more lucrative points

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Speaker 3: in the cycle. And actually that cyclicality is both, you know,

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Speaker 3: the blessing and the curse of shipping. The curse in

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Speaker 3: that you know it obviously presents risks that you have

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Speaker 3: to manage, particularly in a capital intensive industry such as ours,

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Speaker 3: but at the same time, it represents the opportunity it's

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Speaker 3: in the cycle, sin's the opportunity to generate outsize returns.

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Speaker 3: So I would say say, we and ship owners, tonnage

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Speaker 3: providers as a whole welcome cyclicality. And this may sound

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Speaker 3: a little bit perverse, but we also welcome disruption. So

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Speaker 3: if the supply chain is being disrupted and running less efficiently,

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Speaker 3: the people who are actually moving the cargo to and fro,

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Speaker 3: so the shipping lines need more capacity from people like

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Speaker 3: us in order to keep the supply chain functioning. So

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Speaker 3: if you jam a ship in the sewers canal, as

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Speaker 3: you'll remember happened a few years ago, very quickly, the

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Speaker 3: ramifications of that rippled out through the supply chain, and

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Speaker 3: there was a demand for additional capacity in order to

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Speaker 3: keep folks running their liner services on schedule. So disruptions

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Speaker 3: such as that are as I say, counterintuitively, helpful and

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Speaker 3: supportive earnings for people like us.

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Speaker 1: So to follow on questions for that, you know first

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Speaker 1: that you said disruptions are good. So are you looking

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Speaker 1: your lips right now with what's going on with tariffs?

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Speaker 1: And you know tariffs and tariff's off kind of mentality

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Speaker 1: that's going on.

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Speaker 2: Is this kind of good for business?

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Speaker 3: I think it's too early to say, Lee, I think,

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Speaker 3: you know, we're at a time of maximal uncertainty, So

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Speaker 3: we know there are going to be challenges to manage,

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Speaker 3: for sure, and we also know there are going to

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Speaker 3: be opportunities that are going to come out of this,

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Speaker 3: for sure. We just don't know exactly what they're going

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Speaker 3: to be yet. So our strategy, at least at the

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Speaker 3: moment is, you know, in the face of maximal uncertainty,

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Speaker 3: we're looking to maximize our optionality. And what that means

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Speaker 3: at an operational level is that, first of all, the

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Speaker 3: fact that we're operating mid size and smaller container ships

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Speaker 3: means that they can be redeployed very very buy the

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Speaker 3: shipping lines our customers across multiple different trades within the world,

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Speaker 3: so they're not captive to certain trades unlike the much

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Speaker 3: larger ships in some instances. And it also means that

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Speaker 3: we're looking to maximize the resilience and optionality of our

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Speaker 3: balance sheet. In other words, we've de levered to a

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Speaker 3: huge extent, so we've got financial leverage of around about

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Speaker 3: one times now, which is great news and We've built

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Speaker 3: quite a lot of cash on our balance sheets, so

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Speaker 3: we're in a position to sort of weather the challenges

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Speaker 3: at the moment and when the time is right, leap

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Speaker 3: on the opportunities, opportunities, whatever those opportunities might be.

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Speaker 1: What's what's that kind of like a high leverage multiple

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Speaker 1: that you guys have had. You know, you mentioned that

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Speaker 1: you're around one time, So where was it?

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Speaker 3: Yeah, that's a that's a very good question. I think

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Speaker 3: at its peak it was probably north of eight times.

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Speaker 3: So one times, particularly when you've got forward visibility on

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Speaker 3: revenues and cash flows of two point three years, we

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Speaker 3: consider to be very modest indeed, right.

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Speaker 1: And you know, obviously your business is very capital intensive,

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Speaker 1: as you alluded to, How do you when you buy

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Speaker 1: a ship? How do you how do you guys finance it?

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Speaker 3: It depends when you buy it. So that the secret

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Speaker 3: in shipping, and this is something that the Greeks have

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Speaker 3: been getting right for generations and making terrific amounts of

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Speaker 3: money for generations on is to be highly disciplined. So

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Speaker 3: you know, you pick the right point in the cycle

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Speaker 3: or the right transaction to get involved with. You are patient,

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Speaker 3: so you wait and when the right opportunities arise. You

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Speaker 3: are nimble, so you move very very quickly, and I

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Speaker 3: think broadly speaking, there are a couple of flavors of

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Speaker 3: transactions that are interesting to us. The first would be

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Speaker 3: countercycle call transactions, so you know, when, effectively, when there's

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Speaker 3: blood in the water and other folk are fearful, you

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Speaker 3: can buy ships in some instances add a small premium

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Speaker 3: to scrap value. So that's an attractive acquisition in a

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Speaker 3: highly cyclical industry, but you've got to be in a

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Speaker 3: position to hold onto that vessel and trade her up

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Speaker 3: when the cycle turns. And the other flavor of transaction

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Speaker 3: is to buy a ship with a charter attached, which

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Speaker 3: could be a sort of a purchase and charter back

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Speaker 3: transaction with one of our customers, which allows you to

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Speaker 3: effectively write down the residual value risk on that ship

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Speaker 3: by the end of the charter to very modest levels,

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Speaker 3: and once again you can then subsequently play the cycle.

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Speaker 3: So the combination of a stable platform with contracted cash flows,

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Speaker 3: which is what we have now going into what could

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Speaker 3: be a very choppy set of waters full of you know, opportunities,

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Speaker 3: purchase opportunities, feels like a good place to be albeit,

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Speaker 3: you know, going back to your original expression, I don't

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Speaker 3: think anyone is necessarily rubbing their hands at the moment.

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Speaker 3: It's such an uncertain time.

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Speaker 1: Yeah, And so you know, I'm just curious because you

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Speaker 1: mentioned how discipline is so important. And listen, I'm an

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Speaker 1: outsider looking in, you know, when I look at the

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Speaker 1: order book and how much supply is coming, and it

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Speaker 1: doesn't seem like the industry itself is very disciplined. So

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Speaker 1: are you saying that most people don't follow that we'll

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Speaker 1: call it the Greek playbook.

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Speaker 3: Well, I think that you have to, first of all,

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Speaker 3: look at the order book not as a homogeneous hole,

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Speaker 3: but one that is sort of chopped up by segments.

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Speaker 3: And I'll come back to that at the moment. And

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Speaker 3: then you also have to look at the different participants

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Speaker 3: in the industry through different lenses. So the shipping lines

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Speaker 3: our customers are effectively logistics service providers. They like the airlines,

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Speaker 3: need to offer high quality, extraordinarily reliable service to their customers,

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Speaker 3: usually on a fixed day sailing basis. So you know,

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Speaker 3: their services need to work like clockwork. Hence having capacity

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Speaker 3: available allows them to build margins of error into their networks.

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Speaker 3: And then on the other side of the coin, you've

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Speaker 3: got tonnage providers like us, and there are one or two,

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Speaker 3: i would say, other Greek minded players in the tonnage

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Speaker 3: provider segment, where the discipline and selecting the right assets

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Speaker 3: at the right times is fundamental to our business. And

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Speaker 3: like us, many of the third party owners tend to

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Speaker 3: be focused upon the midside and smaller tonnage segments. And

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Speaker 3: one implication of that is that comparatively little capital has

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Speaker 3: flowed into the mid size and smaller tonnage segments, which

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Speaker 3: means that when you look at the order book, the

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Speaker 3: overall order book to fleet ratio is between twenty seven

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Speaker 3: and twenty eight percent, which is, you know, obviously something

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Speaker 3: that makes you think twice. However, if you back off

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Speaker 3: or you zoom out and look at the composition of

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Speaker 3: the order book, the order book to fleet ratio for

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Speaker 3: ships of ten thousand tu and smaller is between ten

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Speaker 3: and eleven percent, much more manageable in many ways. And

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Speaker 3: it's also important to think of, you know, an order

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Speaker 3: book as not something that's going to deliver from one

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Speaker 3: day to the next. It's stretched over the course of

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Speaker 3: several years. So if you were to go on order

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Speaker 3: a ship today, the earliest that you would actually yet

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Speaker 3: that ship is probably twenty twenty nine. So there is

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Speaker 3: a lead time on the order book. And I think

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Speaker 3: another thing to keep in mind is you have to

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Speaker 3: have a think about the composition of the fleet into

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Speaker 3: which that order book is delivering, and particularly the age

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Speaker 3: profile of that fleet. And going back to what I

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Speaker 3: was saying earlier, the fact that people haven't been investing

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Speaker 3: in mid size and smaller tonnage certainly speculatively they haven't

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Speaker 3: been ordering. That means that the ten thousand TIU and

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Speaker 3: smaller fleet is aging. And I would say there are

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Speaker 3: quite a lot of ships on the water today that

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Speaker 3: have had their scrapping date deferred by virtue of the

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Speaker 3: fact that they've been enjoying an extraordinary bull market for

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Speaker 3: the last few years. So if you were to run

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Speaker 3: the exercise of scrapping out every ship that turned twenty

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Speaker 3: five years old or older over the course of the

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Speaker 3: next call it three years through to the end of

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Speaker 3: twenty twenty eight, you would actually see the mid size

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Speaker 3: and smaller fleet shrink by roughly six and a half

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Speaker 3: percent over that same time period. So yes, there's a

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Speaker 3: big order book. Yes, it's something to think about, but

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Speaker 3: it is very clearly weighted towards the much bigger ships

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Speaker 3: against which we're not competing. We're competing against a peer

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Speaker 3: group of mid size and smaller ships. Whether the order

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Speaker 3: book is much smaller.

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Speaker 2: Yeah, definitely, that nuance is important, you know.

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Speaker 1: So like when you guys are looking for you know,

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Speaker 1: new capacity or capacity are you how much of it

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Speaker 1: are you doing it on the secondary market versus ordering

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Speaker 1: new ships?

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Speaker 3: Well, that's that's exactly right. I would say since twenty eighteen,

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Speaker 3: which is when we went through a transformative merger with

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Speaker 3: another shipping company, we have only ever acquired ships from

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Speaker 3: the secondhand market. We haven't ordered any new tonnage and

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Speaker 3: we have an order book of zero as things currently stand.

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Speaker 3: But as your as you say, we're not dogmatic about that.

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Speaker 3: We're willing to look at any deal as long as

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Speaker 3: the risk and return metrics work. But certainly, to date,

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Speaker 3: the more favorable returns and certainly the sort of de

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Speaker 3: risked approach has been on the on the side of

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Speaker 3: secondhand ships.

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Speaker 1: You know, we don't know where this is going to land,

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Speaker 1: but you know, in the US, I'm sure you're you're

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Speaker 1: paying attention to the US trade representatives, you know, when

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Speaker 1: they're talking about penalizing Chinese flag or Chinese built ships

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Speaker 1: that call into two US supports. Do you think that's

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Speaker 1: changing the way shipping companies? I mean, maybe not so

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Speaker 1: much yourself, because as you mentioned, you really you don't

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Speaker 1: have any new orders.

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Speaker 2: But like how they're going to order ships.

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Speaker 1: Obviously they're not going to order a US built ship

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Speaker 1: because it's next to impossible to do that. But are

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Speaker 1: they going to go to other countries like South Korea

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Speaker 1: or Japan and that go through China just to kind

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Speaker 1: of hedge themselves.

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Speaker 3: Incredibly difficult to say. I mean, if you look at

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Speaker 3: the order book today, roughly seventy percent actually a little

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Speaker 3: over seventy percent seven zero percent is ordered in China.

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Speaker 3: And as I said to you just now, if you

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Speaker 3: wanted to order a ship today, regardless of geography, you

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Speaker 3: would have to wait until twenty twenty nine or so

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Speaker 3: for that ship to be delivered. So there isn't a

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Speaker 3: huge amount of flex in the system, at least in

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Speaker 3: the near term, to reshape or redirect build location. Frankly speaking,

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Speaker 3: So the other thing is that given the actual implementation

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Speaker 3: or the final shape of the USTR, which is, you

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Speaker 3: know what you've just been referring to is actually going

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Speaker 3: to take I don't think it's going to drive hard

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Speaker 3: decisions one way or the other. What it may do

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Speaker 3: is catalyze something of a break on ordering as people

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Speaker 3: wait for the cards to fall. But if it were

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Speaker 3: to be implemented in its currently mooted form, I think

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Speaker 3: what you would see is liner companies looking to potentially

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Speaker 3: rationalize port calls, because as things are currently structured, the

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Speaker 3: levee would fall on a per pork call basis. So

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Speaker 3: if you're calling at three or four different ports in

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Speaker 3: the US, you'd be pinged three or four different times.

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Speaker 3: It makes no difference whether you're calling with a big

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Speaker 3: ship or a small ship. And given that it applies

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Speaker 3: not only on Chinese built ships, but also on operators

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Speaker 3: who have Chinese built ships within their broader fleet, which

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Speaker 3: frankly is almost everyone, everyone's going to get pinged. So

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Speaker 3: the obvious alternate would be, Okay, do we size up

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Speaker 3: the ships? Do we minimize the port calls and thus

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Speaker 3: ratchet down the levees. Now, it's all very well to

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Speaker 3: say that, but what that has the effect of doing

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Speaker 3: is building up additional congestion, not in the ports. If

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Speaker 3: everyone's rationalizing their port calls building up additional congestion in

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Speaker 3: the shore side infrastructure, so they would be bottlenecks across

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Speaker 3: the railheads and other things flowing out of ports. And

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Speaker 3: as I said, at the very outset, if you're providing

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Speaker 3: capacity to the industry, disruption is good. Congestion is supportive

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Speaker 3: of earnings. So I would say that we at least

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Speaker 3: as providers of tonnage into the space, and we have

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Speaker 3: very few Chinese built ships in our fleet, I would say,

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Speaker 3: as a sort of parenthetical, we're not losing a tremendous

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Speaker 3: amount of sleep over USTR. And we also think it's

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Speaker 3: probably going to go through various different iterations before it

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Speaker 3: hits its final four.

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Speaker 2: Yeah, I would definitely agree with that. I mean, I

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Speaker 2: think there's a.

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Speaker 1: Low probability of it being law as it was originally written,

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Speaker 1: but you know, assuming that it is or it's something similar,

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Speaker 1: it would have a bigger impact per container for the

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Speaker 1: smaller ships, which I guess you play in. As you mentioned,

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Speaker 1: you don't really have that many Chinese built ships, so

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Speaker 1: it's not that much of an issue for you.

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Speaker 2: So would that be a.

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Speaker 1: Competitive advantage versus other fleets that have more Chinese built ships.

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Speaker 3: Possibly, Lee, I mean, it's hard to say. And it

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Speaker 3: flows back into the optionality point, because all of our

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Speaker 3: ships are mid size and smaller and can be moved

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Speaker 3: around the chessboard by the line of operators. They can

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Speaker 3: or or they can at the line of operators, decision

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Speaker 3: discretion be deployed in trades that touch the US or not.

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Speaker 3: So again, it's it's not something that we spend a

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Speaker 3: lot of time thinking about. What we spend a lot

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Speaker 3: more time thinking about is trying to figure out how

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Speaker 3: tariffs are going to sort of change the patterns of

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Speaker 3: global trade. And I mean, as you know, probably better

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Speaker 3: than anyone, it's quite quite difficult to keep up with

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Speaker 3: the various sort of changes in the structures. So I mean,

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Speaker 3: just to provide some more data, if you look at

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Speaker 3: containers flowing into the US as a proportion of global

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Speaker 3: containerized trade volumes, you're looking at somewhere between ten and thirteen,

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Speaker 3: So between ten percent and thirteen, one to three percent

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Speaker 3: of global containerized trade volumes actually flowing into the US.

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Speaker 3: So US demand prompting the transport of those goods, and

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Speaker 3: of that thirteen percent between forty and forty five percent

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Speaker 3: is coming directly from China. So the moment you levy

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Speaker 3: a one hundred and twenty five percent tariff on forty

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Speaker 3: to forty five percent of goods flowing into the US,

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Speaker 3: that's clearly going to be massively disruptive. And the fact

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Speaker 3: that it was it's being rolled out over a matter

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Speaker 3: of days, and given that it takes anywhere between call

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Speaker 3: it eighteen and thirty days for ships to travel from

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Speaker 3: Chinese and Southeast Asian ports to the US, that means

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Speaker 3: there's a lot of cargo that's already a board that

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Speaker 3: is about to be hit by one hundred and twenty

390
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Speaker 3: five percent tariffs upon arrival in the US. Now, because

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Speaker 3: things are moving so fast, there's a bit of a

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Speaker 3: lag time on the data. So what I'm telling you

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Speaker 3: now is based upon anecdotal evidence as opposed to hard data.

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Speaker 3: But we're hearing that containers are being discharged, so you

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Speaker 3: know where it's possible people who are moving cargo from

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Speaker 3: China to the US are looking to discharge some of

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Speaker 3: that cargo and interimports and pay for it to be

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Speaker 3: repatriated to China. Simply because neither they the exporters nor

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Speaker 3: the importers are in a position to absorb one hundred

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Speaker 3: and twenty five percent tariffs. Now, what's going to happen

401
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Speaker 3: when ships over the coming days arrive in calling the

402
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Speaker 3: port of Los Angeles with X thousand number of Chinese

403
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Speaker 3: origin containers aboard. We simply don't know. Are they going

404
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Speaker 3: to be discharged? Are they going to be retained aboard

405
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Speaker 3: and returned? We simply don't know. But disruption is absolutely

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Speaker 3: the name of the game at the moment, an unpredictability,

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Speaker 3: and this is going to choke up as we saw,

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Speaker 3: you know, a single vessel getting stuck in sewers had ramifications.

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Speaker 3: Can you imagine if ten thirteen percent of well of

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Speaker 3: global trade, of which broadly half is of Chinese origin,

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Speaker 3: is going to be caught in this sort of tangle

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Speaker 3: of hold on? Can we accommodate these tariffs?

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Speaker 2: It's also worth noting that tariffs have been a moving

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Speaker 2: target in one hundred and twenty five percent target is

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Speaker 2: at the time of us recording this episode of Talking Transports.

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Speaker 3: So we're waiting to see how trade patterns will will

417
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Speaker 3: reshape in the interim, and there could be opportunities here,

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Speaker 3: So I mean it's it's a very rough proxy to use,

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Speaker 3: but in sort of call it Trump one point zero.

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Speaker 3: When tariffs were imposed upon China, we saw a diversion

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Speaker 3: of cargo, so cargo flowing out of China to Southeast

422
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Speaker 3: Asian locations Vietnam and Indonesia, for example, and then flowing

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Speaker 3: on you know, semi manufactured goods being sent to those locations,

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Speaker 3: finished and then transported to the US. And that actually

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Speaker 3: meant that additional capacity, additional shipping capacity was required to

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Speaker 3: support those longer, more dispersed and complicated supply chains. So

427
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Speaker 3: although you know, the actual total volume of cargo actually

428
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Speaker 3: moving between Asia and the US hadn't changed at all,

429
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Speaker 3: because it was far more complex and dispersed, you needed

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Speaker 3: more ships, and typically mid sized and smaller ships to

431
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Speaker 3: carry that. So weirdly that acted as a stimulant for

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Speaker 3: our business. It's too early in the game to know,

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Speaker 3: you know, if that's going to happen all over again,

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Speaker 3: but I'm just pointing to the fact that there can

435
00:27:48,280 --> 00:27:52,639
Speaker 3: be sort of second and third order implications that can

436
00:27:52,680 --> 00:27:58,600
Speaker 3: actually be supportive to surprisingly supportive to participants earning.

437
00:28:00,080 --> 00:28:02,080
Speaker 1: I don't know if you have this available, But do

438
00:28:02,119 --> 00:28:06,919
Speaker 1: you guys have a rough understanding of or breakout of,

439
00:28:07,240 --> 00:28:09,680
Speaker 1: you know, where your ships, what trades are involved, because

440
00:28:09,680 --> 00:28:14,240
Speaker 1: I'm assuming very little is trans Pacific directly between China

441
00:28:14,280 --> 00:28:16,960
Speaker 1: and the US, just because they, as you mentioned, they're

442
00:28:17,000 --> 00:28:19,199
Speaker 1: small and medium sized ships.

443
00:28:19,359 --> 00:28:20,800
Speaker 2: Did you have that breakout at all?

444
00:28:22,320 --> 00:28:25,639
Speaker 3: I couldn't give you an exact breakout, but what I

445
00:28:25,640 --> 00:28:27,920
Speaker 3: could say to you is that if you look at

446
00:28:27,920 --> 00:28:31,800
Speaker 3: the big East West trades, of which obviously the Transpacific

447
00:28:31,920 --> 00:28:39,040
Speaker 3: is one, collectively Transpacific plus Transatlantic plus Asia Europe represents

448
00:28:39,280 --> 00:28:45,240
Speaker 3: between twenty five and twenty seven percent of global containerized trade,

449
00:28:45,960 --> 00:28:50,240
Speaker 3: which means, you know, roughly seventy three seventy four percent

450
00:28:50,880 --> 00:28:55,400
Speaker 3: of global containerized trades sits outside those main lanes in

451
00:28:55,400 --> 00:28:59,120
Speaker 3: intermediate trades such as intra Asia, which is actually the

452
00:28:59,160 --> 00:29:04,200
Speaker 3: biggest single trade block from a containerized cargo perspective. But

453
00:29:04,240 --> 00:29:07,160
Speaker 3: I'm also talking about the Africa trades, the Latin America trades,

454
00:29:07,200 --> 00:29:09,880
Speaker 3: the intra Europe trades, et cetera, et cetera, et cetera,

455
00:29:10,320 --> 00:29:15,960
Speaker 3: and typically those non mainlane trades representing the seventy three

456
00:29:16,000 --> 00:29:19,440
Speaker 3: to seventy five percent of cargo flows are serviced by

457
00:29:19,840 --> 00:29:24,280
Speaker 3: mid size and smaller ships like ours. So typically I

458
00:29:24,320 --> 00:29:28,240
Speaker 3: mean it changes obviously depending upon liner's discretion, but typically

459
00:29:28,760 --> 00:29:32,200
Speaker 3: the lion's share of our ships would be in those

460
00:29:32,400 --> 00:29:34,160
Speaker 3: non main lane trades at any given time.

461
00:29:35,160 --> 00:29:38,360
Speaker 1: So you know, on the Bloomberg terminal we follow container

462
00:29:38,440 --> 00:29:39,880
Speaker 1: rates that come out weekly.

463
00:29:41,640 --> 00:29:45,480
Speaker 2: How much are your.

464
00:29:44,480 --> 00:29:47,880
Speaker 1: Rates that you set to your customers tied to where

465
00:29:47,880 --> 00:29:50,280
Speaker 1: the spot market is?

466
00:29:50,280 --> 00:29:53,720
Speaker 2: Is it highly correlated over time?

467
00:29:54,160 --> 00:29:58,440
Speaker 3: It tends to be highly correlated. However, at the moment

468
00:29:59,040 --> 00:30:04,440
Speaker 3: there's a curious location. So while freight rates, which are

469
00:30:04,440 --> 00:30:08,080
Speaker 3: the rates you're watching, have been under some downward pressure,

470
00:30:09,160 --> 00:30:12,120
Speaker 3: charter rates, which are the rates that sit at the

471
00:30:12,160 --> 00:30:19,000
Speaker 3: core of my business, have been plateauing at comparatively high levels. Now,

472
00:30:19,040 --> 00:30:21,320
Speaker 3: in part, that's a function of the fact that in

473
00:30:21,360 --> 00:30:27,480
Speaker 3: the charter market, our market, there's comparatively limited liquidity. Why

474
00:30:27,680 --> 00:30:31,400
Speaker 3: because most of the chartered vessels are on comparatively long

475
00:30:31,480 --> 00:30:34,360
Speaker 3: term charters as a result of the bull market that's

476
00:30:34,400 --> 00:30:39,280
Speaker 3: been in place up until this moment. And secondly, some

477
00:30:39,360 --> 00:30:43,120
Speaker 3: of the liner companies have been buying ships second hand

478
00:30:43,160 --> 00:30:46,640
Speaker 3: ships out of the charter market, which has shrunk the

479
00:30:46,680 --> 00:30:49,400
Speaker 3: size of that charter market, which is a result, has

480
00:30:49,440 --> 00:30:55,200
Speaker 3: shrunk both liquidity and availability, meaning that if a liner

481
00:30:55,240 --> 00:30:58,400
Speaker 3: company wants to charter a ship out of our market,

482
00:30:58,480 --> 00:31:00,440
Speaker 3: they have to pay up for it if they want

483
00:31:00,440 --> 00:31:02,760
Speaker 3: to plug holes in their network. So there is a

484
00:31:02,800 --> 00:31:06,719
Speaker 3: curious dislocation at the moment. And I would say, once again,

485
00:31:08,160 --> 00:31:12,000
Speaker 3: it's not just us who are looking to maximize optionality

486
00:31:12,360 --> 00:31:15,160
Speaker 3: in the face of maximal uncertainty. It's also the liner

487
00:31:15,200 --> 00:31:20,120
Speaker 3: operators and for the liners, having capacity is having options.

488
00:31:20,320 --> 00:31:23,120
Speaker 3: Not having capacity is not having options.

489
00:31:24,000 --> 00:31:27,080
Speaker 1: So you know, you guys probably have a pretty good

490
00:31:27,120 --> 00:31:28,840
Speaker 1: idea what your revenues are going to be over the

491
00:31:28,920 --> 00:31:33,120
Speaker 1: next twelve months. I'm guessing do you have a high

492
00:31:33,160 --> 00:31:36,080
Speaker 1: conviction of you know where your margins are going to

493
00:31:36,120 --> 00:31:38,800
Speaker 1: be as well, or are there things throughout the year

494
00:31:38,920 --> 00:31:41,600
Speaker 1: that will affect the margin aspect.

495
00:31:42,760 --> 00:31:46,720
Speaker 3: I think through twenty twenty five at least, our conviction

496
00:31:47,160 --> 00:31:51,520
Speaker 3: is really quite high because pretty much all of our

497
00:31:51,560 --> 00:31:55,520
Speaker 3: positions for twenty twenty five are already closed out, and

498
00:31:55,640 --> 00:31:59,600
Speaker 3: for a very substantial portion of twenty twenty six they're

499
00:31:59,640 --> 00:32:04,040
Speaker 3: also closed out. So there's very good forward visibility, I

500
00:32:04,120 --> 00:32:07,360
Speaker 3: would say, on our earnings at this point in time,

501
00:32:07,400 --> 00:32:11,320
Speaker 3: and Actually that's what prompted us to ratchet up our dividend.

502
00:32:12,200 --> 00:32:14,960
Speaker 3: So you know, we pay a dividend which we're increasing

503
00:32:15,040 --> 00:32:20,600
Speaker 3: to two dollars and ten cents annualized per common share,

504
00:32:21,080 --> 00:32:23,760
Speaker 3: which yesterday's close. Well, I mean, who knows it's going

505
00:32:23,800 --> 00:32:27,920
Speaker 3: to be between ten and eleven percent dividend yield at

506
00:32:27,960 --> 00:32:31,120
Speaker 3: the moment. But we were able to increase the dividends

507
00:32:31,680 --> 00:32:33,920
Speaker 3: in no small part because we have such good forward

508
00:32:34,000 --> 00:32:36,400
Speaker 3: visibility on cash flows.

509
00:32:37,360 --> 00:32:42,200
Speaker 1: And I'm assuming your dividend, you know, can be volatile

510
00:32:42,240 --> 00:32:44,280
Speaker 1: at times. You know, you increase it when times are

511
00:32:44,320 --> 00:32:46,320
Speaker 1: good and sometimes you have to reel it back in

512
00:32:46,400 --> 00:32:47,880
Speaker 1: when when things aren't as good.

513
00:32:48,520 --> 00:32:52,320
Speaker 3: Actually, no, you know we've we've thought about this quite

514
00:32:52,360 --> 00:32:56,280
Speaker 3: a lot, and certainly in our business, where the idea

515
00:32:56,800 --> 00:33:01,840
Speaker 3: is to continue to build out forward visibility on cash flows.

516
00:33:01,840 --> 00:33:04,680
Speaker 3: You know, we're a leasing company, not an asset player.

517
00:33:05,800 --> 00:33:08,280
Speaker 3: We think it makes sense to do whatever we can

518
00:33:08,760 --> 00:33:14,840
Speaker 3: to stabilize the dividend. So we put in place a

519
00:33:14,840 --> 00:33:18,760
Speaker 3: dividend of a dollar fifty with you know, we've been

520
00:33:18,960 --> 00:33:21,800
Speaker 3: been paying i think, once again annualized, but we've been

521
00:33:21,840 --> 00:33:25,560
Speaker 3: paying on a quarterly basis. We ratcheted that up to

522
00:33:25,600 --> 00:33:29,320
Speaker 3: a dollar eighty on the back of the most recent

523
00:33:30,240 --> 00:33:32,760
Speaker 3: sort of ball market, and we ratcheted it up again

524
00:33:33,000 --> 00:33:38,600
Speaker 3: to two dollars and ten cents again because we have

525
00:33:38,760 --> 00:33:44,120
Speaker 3: seen our ability to lock in forward contracts and revenues

526
00:33:44,160 --> 00:33:46,360
Speaker 3: surprising to the upside. So we felt that, you know,

527
00:33:46,400 --> 00:33:50,200
Speaker 3: it made sense to share that with customers, not by well,

528
00:33:50,240 --> 00:33:54,040
Speaker 3: not customers with investors, not by way of you know,

529
00:33:54,080 --> 00:33:57,239
Speaker 3: a special dividend or or something of that nature, but

530
00:33:57,600 --> 00:34:00,959
Speaker 3: by by trying to sort of build this dividend stream

531
00:34:01,880 --> 00:34:04,239
Speaker 3: with a level of confidence interpaired it.

532
00:34:05,400 --> 00:34:10,240
Speaker 1: And you know, speaking of uses of capital, does Global

533
00:34:10,239 --> 00:34:13,120
Speaker 1: ship lease also did you do you are you active

534
00:34:13,120 --> 00:34:13,959
Speaker 1: in buybacks?

535
00:34:14,400 --> 00:34:15,920
Speaker 2: Sare buybacks? Yes?

536
00:34:16,000 --> 00:34:21,040
Speaker 3: We have been active in the past in share buybacks.

537
00:34:22,360 --> 00:34:25,160
Speaker 3: I mean we we've brought back I think, in aggregate,

538
00:34:25,920 --> 00:34:31,239
Speaker 3: roughly fifty seven million dollars worth of shares to date. Now,

539
00:34:31,239 --> 00:34:36,080
Speaker 3: we did a lot of that actually during the COVID

540
00:34:36,200 --> 00:34:41,560
Speaker 3: super cyclical uptick, where because asset values went so high,

541
00:34:42,080 --> 00:34:44,880
Speaker 3: it became clear to us that it wouldn't make sense

542
00:34:44,920 --> 00:34:47,160
Speaker 3: for us to try to buy ships at that point

543
00:34:47,239 --> 00:34:51,080
Speaker 3: in time. So rather than buying ships, we decided to

544
00:34:51,280 --> 00:34:55,960
Speaker 3: return capital to shareholders by way of buybacks. So yes,

545
00:34:56,040 --> 00:34:59,120
Speaker 3: buybacks are very much on the radar. A solid dividend

546
00:34:59,480 --> 00:35:02,440
Speaker 3: is is on the well, I mean it's implemented, not

547
00:35:02,520 --> 00:35:05,480
Speaker 3: just on the radar. In terms of return of capital

548
00:35:05,520 --> 00:35:09,880
Speaker 3: to investors, we always de lever and continue to delever

549
00:35:10,000 --> 00:35:13,239
Speaker 3: to manage balance sheet risk and build equity value that way,

550
00:35:13,680 --> 00:35:17,840
Speaker 3: and of course the idea is to build cash, particularly

551
00:35:17,840 --> 00:35:20,239
Speaker 3: at a time such as this, in order to be

552
00:35:20,239 --> 00:35:23,440
Speaker 3: able to move on on opportunities that the crop up.

553
00:35:24,040 --> 00:35:26,040
Speaker 1: You know, given the visibility you have, do you guys

554
00:35:26,080 --> 00:35:27,919
Speaker 1: provide guidance to the street at all?

555
00:35:30,000 --> 00:35:36,120
Speaker 3: We we do. We provide guidance in our quarterly earnings materials,

556
00:35:36,280 --> 00:35:39,359
Speaker 3: and we try to provide as much granular information there

557
00:35:39,360 --> 00:35:42,879
Speaker 3: to allow people to model out, you know, their own

558
00:35:44,600 --> 00:35:46,799
Speaker 3: ideas of what we're going to generate in terms of

559
00:35:46,880 --> 00:35:48,880
Speaker 3: EBIT DAR et cetera, et cetera, et cetera. So we

560
00:35:48,920 --> 00:35:52,960
Speaker 3: don't provide explicit we expect to hit x ebit DAR

561
00:35:53,440 --> 00:35:55,920
Speaker 3: or net income this year, but we provide all of

562
00:35:55,960 --> 00:35:59,680
Speaker 3: the tools to analysts to model up that out themselves,

563
00:35:59,760 --> 00:36:04,399
Speaker 3: and by and large, when we deliver quarterly result, they're

564
00:36:04,440 --> 00:36:09,520
Speaker 3: either in line with or mudually better than analysts' expectations,

565
00:36:09,520 --> 00:36:13,520
Speaker 3: so that does tend to be fairly good forecasting visibility

566
00:36:13,719 --> 00:36:14,160
Speaker 3: after a.

567
00:36:14,239 --> 00:36:16,120
Speaker 2: Number of you know, good revenue growth.

568
00:36:16,320 --> 00:36:18,880
Speaker 1: Right now, consensus for twenty twenty five is for flat

569
00:36:18,920 --> 00:36:23,239
Speaker 1: revenue growth for growth for you guys, and about three

570
00:36:23,280 --> 00:36:28,320
Speaker 1: percent lower earnings per share at nine dollars and seventy cents.

571
00:36:28,480 --> 00:36:33,280
Speaker 1: So I guess we'll we'll see if with twenty twenty

572
00:36:33,320 --> 00:36:33,920
Speaker 1: five brains.

573
00:36:34,640 --> 00:36:38,640
Speaker 2: Yes, yes, So Tom, how did you get into shipping?

574
00:36:38,840 --> 00:36:40,880
Speaker 1: Because I know some people either born into it or

575
00:36:40,920 --> 00:36:42,400
Speaker 1: they kind of fall into it.

576
00:36:44,000 --> 00:36:46,719
Speaker 3: I'm very much in the second category.

577
00:36:47,000 --> 00:36:47,360
Speaker 2: Lee.

578
00:36:48,600 --> 00:36:51,239
Speaker 3: I came out of university in the early nineties with

579
00:36:51,320 --> 00:36:57,480
Speaker 3: a degree in biological sciences and at that stage the

580
00:36:57,520 --> 00:37:02,320
Speaker 3: market was pretty grim and I thought, okay, well, nothing

581
00:37:02,320 --> 00:37:04,160
Speaker 3: to lose in a bit of adventure. So I managed

582
00:37:04,200 --> 00:37:06,160
Speaker 3: to talk my way aboard a containership and did a

583
00:37:06,200 --> 00:37:11,960
Speaker 3: working A working passage which started in Liverpool, went all

584
00:37:12,000 --> 00:37:15,200
Speaker 3: around Northern Europe, across the Atlantic, through the Panama Canal,

585
00:37:15,760 --> 00:37:20,160
Speaker 3: down the west coast of South America to Chile to Valpreiso,

586
00:37:20,200 --> 00:37:23,839
Speaker 3: where I eventually got off and then got a job

587
00:37:24,239 --> 00:37:28,120
Speaker 3: with a liner company there. Hamburg, sud which is one

588
00:37:28,120 --> 00:37:31,279
Speaker 3: of the liner companies which has subsequently been purchased by

589
00:37:31,440 --> 00:37:36,640
Speaker 3: MRSK and to their immense credits, at least in my view,

590
00:37:37,320 --> 00:37:40,399
Speaker 3: they took a punt on me and so that's how

591
00:37:40,440 --> 00:37:43,760
Speaker 3: my career in shipping began. So it was liner shipping

592
00:37:44,120 --> 00:37:49,280
Speaker 3: for the first ten years of my life in Latin

593
00:37:49,320 --> 00:37:54,960
Speaker 3: America and the US. Then it was I took an

594
00:37:55,040 --> 00:38:01,960
Speaker 3: MBA at INCIAD and from their move into more the

595
00:38:02,040 --> 00:38:08,160
Speaker 3: ship owning asset finance side of things. So it's it's

596
00:38:08,200 --> 00:38:12,440
Speaker 3: been a career of two halves. And here I am

597
00:38:13,160 --> 00:38:17,799
Speaker 3: as CEO of a publicly listed containership owner, so it's

598
00:38:17,840 --> 00:38:21,240
Speaker 3: been a it's been a fun ride.

599
00:38:20,520 --> 00:38:21,080
Speaker 2: That's great.

600
00:38:22,960 --> 00:38:25,319
Speaker 1: I was down at the Panama Canal once like ten

601
00:38:25,400 --> 00:38:27,400
Speaker 1: years ago, and I saw the ships you know in

602
00:38:27,440 --> 00:38:29,160
Speaker 1: the canals, you know.

603
00:38:29,239 --> 00:38:31,440
Speaker 2: From Afar, and it's one of the things I want

604
00:38:31,440 --> 00:38:31,600
Speaker 2: to do.

605
00:38:31,680 --> 00:38:33,799
Speaker 1: I want to talk my way onto a ship through

606
00:38:34,480 --> 00:38:38,040
Speaker 1: uh uh, through through the through the canal.

607
00:38:38,880 --> 00:38:41,120
Speaker 3: So sure, I mean, sadly, it's much more difficult to

608
00:38:41,120 --> 00:38:43,200
Speaker 3: do than it was thirty years ago.

609
00:38:43,719 --> 00:38:45,080
Speaker 2: So I guess you know.

610
00:38:45,120 --> 00:38:47,640
Speaker 1: I like to ask all my guests this, like is

611
00:38:47,680 --> 00:38:50,800
Speaker 1: there a book, whether it's on leadership or the industry

612
00:38:50,880 --> 00:38:52,920
Speaker 1: that's kind of close to your heart that you know,

613
00:38:53,320 --> 00:38:55,960
Speaker 1: you would recommend for people to take a look at.

614
00:38:58,440 --> 00:39:04,680
Speaker 3: Yes, it's actually a book called ninety Percent of Everything,

615
00:39:05,040 --> 00:39:08,680
Speaker 3: and the subtitle to that book is Inside Shipping, the

616
00:39:08,760 --> 00:39:11,840
Speaker 3: invisible industry that puts clothes on your back, gas in

617
00:39:11,920 --> 00:39:15,880
Speaker 3: your car, and food on your plate. And it's and

618
00:39:16,320 --> 00:39:21,399
Speaker 3: it was written by Rose George about ten to twelve

619
00:39:21,520 --> 00:39:25,480
Speaker 3: years ago, I think now. And it's an interesting sort

620
00:39:25,480 --> 00:39:30,960
Speaker 3: of warts and all examination of the industry and certainly,

621
00:39:31,040 --> 00:39:33,319
Speaker 3: you know, things to learn from it that we need

622
00:39:33,360 --> 00:39:37,160
Speaker 3: to do better. And it also, i think, just says

623
00:39:37,200 --> 00:39:40,439
Speaker 3: exactly what or does exactly what it says on the tin.

624
00:39:40,520 --> 00:39:42,839
Speaker 3: It talks about an industry that really no one thinks

625
00:39:42,880 --> 00:39:45,960
Speaker 3: about as long as everything's going well, so it is

626
00:39:46,040 --> 00:39:49,880
Speaker 3: genuinely invisible. But as soon as things start going wrong,

627
00:39:50,040 --> 00:39:54,480
Speaker 3: COVID being an example, you know, people suddenly see that

628
00:39:54,680 --> 00:39:59,640
Speaker 3: supply chains are more complex and more vulnerable than perhaps

629
00:39:59,760 --> 00:40:00,719
Speaker 3: the a thought.

630
00:40:01,560 --> 00:40:03,440
Speaker 2: They certainly are. I haven't heard that one. I got

631
00:40:03,440 --> 00:40:04,440
Speaker 2: to check that one out.

632
00:40:04,760 --> 00:40:07,680
Speaker 1: And just to close out, you know, is there anything

633
00:40:07,800 --> 00:40:12,200
Speaker 1: you know that keeps you up at night running GSL?

634
00:40:13,880 --> 00:40:16,440
Speaker 3: I'm a warrior by nature, Lee, So everything keeps me

635
00:40:16,520 --> 00:40:18,759
Speaker 3: up at night. But no, I would say that as

636
00:40:18,760 --> 00:40:22,640
Speaker 3: far as the business is concerned, you know, the sort

637
00:40:22,640 --> 00:40:25,239
Speaker 3: of the business model, the structure, the forward visibility on

638
00:40:25,680 --> 00:40:29,000
Speaker 3: cash flows, great counterparties, et cetera, et cetera. I think

639
00:40:29,239 --> 00:40:32,120
Speaker 3: I'm sleeping as well as I possibly could in these

640
00:40:32,200 --> 00:40:33,120
Speaker 3: uncertain times.

641
00:40:33,760 --> 00:40:36,160
Speaker 1: Well, I'm very glad to hear that, and Tom, I

642
00:40:36,200 --> 00:40:38,640
Speaker 1: really want to thank you for your time and insights.

643
00:40:38,800 --> 00:40:40,239
Speaker 2: This is a delightful conversation.

644
00:40:41,200 --> 00:40:43,719
Speaker 3: Well, thank you very much for having me on all right, and.

645
00:40:43,719 --> 00:40:45,520
Speaker 1: I also want to thank you for tuning in. If

646
00:40:45,560 --> 00:40:48,120
Speaker 1: you liked the episode, please subscribe and leave a review.

647
00:40:48,480 --> 00:40:50,880
Speaker 1: We've lined up a number of great guests for the podcast,

648
00:40:50,920 --> 00:40:55,799
Speaker 1: so please check back to hear conversations with C suite executives, shippers, regulators,

649
00:40:55,920 --> 00:40:59,080
Speaker 1: and decision makers within the freight markets. Also, if you

650
00:40:59,120 --> 00:41:02,120
Speaker 1: want to learn more about the free transportation market, please

651
00:41:02,200 --> 00:41:06,600
Speaker 1: check out our work on the Bloomberg terminal at BIGO.

652
00:41:06,120 --> 00:41:07,160
Speaker 2: Or on social media.

653
00:41:08,160 --> 00:41:10,880
Speaker 1: This is Lee Klascau signing off and thanks for talking

654
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Speaker 1: transports with me.

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Speaker 2: Take care,