Polys Hajioannou: Shipping should not be approached through shifting political positions and views

“A ship in a harbour is safe but that is not what ships are built for.” This 1928 quotation by John A. Shedd describes perfectly the position in which the shipping industry finds itself today: with geopolitical tensions on the rise, the green transition well underway and the future looking uncertain, the industry needs to keep on navigating these stormy seas.

Below, Polys Hajioannou, CEO of Safe Bulkers, Inc, talks about the importance of adapting to change, tackling challenges and fortifying the industry to face future crises.

The latest conflict in the Middle East has replaced the war in Ukraine as the big global news story in recent weeks. Has the situation in Israel and Gaza affected Cyprus’ maritime industry and your operations?

The conflict in the Middle East, like the war in Ukraine, is first and foremost a human tragedy involving an extraordinary amount of suffering and loss of life. The extent of its impact is still unknown and the broader economic consequences are highly uncertain, since they depend on how it evolves. A sharper escalation of the conflict across the Middle East is likely to have a wider range of disruptive effects on the global economy and markets, such as energy prices and trade volumes. The overall macroeconomic effects would be felt through higher commodity prices, potentially leading to renewed inflationary pressures and a substantial blow to the global growth outlook. As past crises have shown, the shipping industry is not immune to geopolitics. Amid the heightened volatility of recent years, our ability to remain resilient and rapidly adapt to this challenging environment has become more important than ever. With a history of more than 60 years in the dry bulk sector, we, at Safe Bulkers, have navigated many challenges with success. In these uncertain and turbulent times, we are learning the importance of being adaptive and forward-thinking, responding to changes and taking proactive steps to protect and better position our company ahead of future crises.

You have invested in ‘greener’ ships through your fleet renewal programme, selling older and less efficient vessels and investing in more modern and efficient second-hand vessels and state-of-the-art Japanese newbuilds. What role does green investment play in the company’s long-term viability?

At Safe Bulkers, we have made timely investments in building a resilient, sustainable, growing company. We believe that making the right long-term investments that meet the future climate targets of our industry will allow us to secure a stronger position in the years to come, as well as continuing to enjoy the trust of our investors and all stakeholders. Ahead of increasingly stringent environmental regulations, including the IMO’s GHG reduction targets for international shipping, we have been working actively on reducing the environmental footprint of our fleet, carefully monitoring developments while extensively evaluating the use of technologies leading to net-zero GHG emissions. In 2022, we made significant progress in improving our fleet’s emissions profile, achieving a 5.8% annual reduction in its carbon intensity based on the Annual Efficiency Ratio (AER) compared to 2021. As part of our fleet renewal programme, we signed contracts for the acquisition of two dual-fuel newbuilding Kamsarmax dry-bulk vessels, capable of operating with methanol and fuel. These vessels, when powered by green methanol, can produce close to zero GHG emissions based on the life cycle assessment (LCA) methodology well-to-propeller (WTP). Like all our newbuilds, these dual-fuel vessels are designed to meet the future requirements of the IMO regulations and especially those relating to the reduction of greenhouse gas emissions (EEDI - Phase 3), as well as those related to nitrogen oxide emissions (NOx-Tier III). Following the recent deliveries of our first six Phase 3 newbuilds – MV “Vassos”, MV “Climate Respect” MV “Climate Ethics”, MV “Climate Justice”, MV “Pedhoulas Trader” and MV “Morphou” – Safe Bulkers has an outstanding orderbook for eight newbuild dry bulk vessels (EEDI - Phase 3, NOx-Tier III), including the aforementioned dual-fuel vessels, with prompt scheduled delivery dates: one in 2023, three in 2024, two in 2025, one in 2026 and one in the first quarter of 2027. Like the first six newbuilds, all will fly the quality Cyprus flag, enhancing the Cypriot Registry with the most advanced green ships in the global market.

The IMO has elected Arsenio Dominguez of Panama as its new Secretary-General but during the campaign there was some controversy over Greek support for the Turkish candidate and the fact that Cyprus’ former Deputy Minister of Shipping, Vassilios Demetriades, was not proposed for the post. Does politics play a significant role in the global maritime industry or do some people wrongly believe that it does?

Shipping is an international industry and should not be approached on the basis of shifting political positions and views. Greece’s decision to support the Turkish IMO candidacy, which on a diplomatic level was a very progressive and welcome gesture, should, I believe, have been accompanied by a commitment by Turkey’s candidate to support the opening of Turkish ports to Cyprus-flagged ships in line with the IMO’s aim, which is to encourage the removal of discriminatory action and unnecessary restrictions by governments affecting shipping engaged in international trade. Today, the international shipping industry faces unprecedented challenges in light of the ambitious decarbonisation goals set; to deal with them, we must understand the importance of working together with common goals, disregarding borders and politics.

Are Europe’s ports ready and fully equipped with the necessary tools and infrastructure to deal with sustainable ships and practices?

To ensure the European maritime industry’s green transition, ports across Europe are transforming, investing heavily in green infrastructure, clean energy technologies and eco-friendly practices, building on sustainable development while still maintaining their economic efficiency. At an international level, green efforts by ports are growing. However, decarbonising shipping requires much more: cross-sector collaboration, strong regulatory alignment and technological breakthroughs, as well as massive global investment to provide new types of fuel to support the net-zero emissions future.

Do you feel that the Government in Cyprus is doing enough to support the maritime sector? Is there a specific initiative that you believe would further enhance the sector?

We are proud that, in a challenging global environment of increasing international competition, Cyprus has successfully developed into a leading global maritime centre, attracting key industry players and generating significant investment opportunities. The Cyprus-flagged fleet ranks third in Europe and 11th globally, while the Cyprus flag is ranked 8th on the White List of the Paris MoU. This accomplishment is a function of the strong efforts by the Deputy Ministry of Shipping and the Cyprus shipping community towards further strengthening the competitiveness and attractiveness of the Cyprus Registry and continuously upgrading and modernising the island’s infrastructure and services. Professional expertise, high quality administrative assistance and technical support and, of course, investment in new and advancing technologies, are just some of the major advantages of the Cyprus Registry and main contributors to the steady growth of Cyprus shipping in recent years. As the largest shipowner under the Cyprus Registry, with 44 of our Company’s 46 vessels flying the Cyprus flag, we are convinced of the quality, dynamism and the business-friendliness of the island’s Registry. We need a strong Registry to have a stronger voice in Europe and it will not be enough if not backed up by more Cyprus-flagged ships. Finally, I strongly believe that the foundation of Cyprus shipping rests with its people. At Safe Bulkers, we recognize that cultivating highly educated young talent, equipped with the academic skills necessary to join Cyprus’ workforce of the future, is both a strategic priority and a competitive advantage to further attract international shipping business to Cyprus and expand the country’s maritime cluster. To this end, in 2021 we introduced our annual scholarship programme for Cypriot or Greek students in Cyprus who wish to pursue a professional career in the maritime industry. For the 2023-2024 academic year, we awarded a total of ten scholarships of €10,000 each to undergraduate and postgraduate students, based on academic merit and social criteria, for studies that are relevant to the maritime industry’s needs.

How do you envision Safe Bulkers developing over the next decade?

As we continue to grow, I am confident about the prospects of our company. Safe Bulkers has a strong foundation that combines a great team of people, a modern fleet with high specifications, and long-lasting, world-class partnerships, as well as a solid corporate strategy, on which we can build further and evolve, capitalizing on new opportunities and delivering profitability even in volatile markets. Safe Bulkers has invested – and will continue to invest – in its environmental agenda, taking sustainable, long-term investment decisions that will help us ensure our business resilience and competitiveness for decades to come. To deliver on this, we are focusing on our comprehensive fleet renewal programme – ordering modern new vessels while acquiring younger secondhand vessels and selling some older ones – and on our ongoing programme for the environmental upgrading of our existing vessels with newer eco-efficient technologies during their dry-dockings. At the same time, we aim to maintain a comfortable leveraged balance sheet with strong liquidity, directing our free cash flows to our investment programme and also to reward our shareholders. From a position of stability with low leverage, substantial liquidity and hands-on operational efficiency, we are prepared even for uncertain future market conditions and ready not only to address future challenges but to capitalize on new opportunities that may arise.

This interview first appeared in the November edition of GOLD magazine. Click here to view it.