Latest / UnDocked: The Maritime Transformation Show / Leading a Publicly Traded Shipping Company Through Turbulent Times with Tom Lister
Transcript
- Raal: Hello everybody and welcome to this episode of Undocked. Hello Nick. Nick Chubb: Hi Raul, how are you? Raal: I'm doing very well and hello to you Tom, very special guest today, Tom Lister from Global Ship Lease. Hi Tom. Tom Lister: Hi, Raoul. Thank you very much for having me on. Raal: Now how do you you two know each other Nick so perhaps you can explain the connection you don't ⁓ Nick Chubb: We don't actually. way we started this, Tom, we started by speaking to and friends of ours in the industry. And then we very quickly ran out of friends. ⁓ So you're actually first interviewee. Tom Lister: Non-friend. Nick Chubb: who neither one of us has met before. So it's actually a real pleasure to meet you and be speaking to you. We're really excited to a bit about you and about Global Ship Lease. But maybe the sake of us and the audience, could you just explain a bit about who you are and also about Global Ship Lease? This episode of Undocked is brought to you by Lloyd's Maritime Academy. Let's face it, traditional learning does not fit maritime life. Unpredictable schedules, time at sea, limited connectivity, that's why Lloyd's Maritime Academy is built differently. Their courses are 100 % online and self-paced, so you can study when it works for you, wherever you are in the world. Tom Lister: happy to and I feel very privileged to be the first non-friend invited on the show. Thank you very much. I'm ⁓ Lister. I am the CEO of Global Ship Lease, which is a US listed... ⁓ Nick Chubb: Hahaha No classrooms, no disruption to your career, just practical, industry-relevant learning designed around real maritime professionals. If you're ready to upskill without putting your career on hold, you can download a prospectus today by searching for Lloyd's Maritime Academy. Tom Lister: owner and lessor of container ships. We've got a little over 70 ships in our fleet. They're mid-size and smaller, meaning in container shipping terms they range from roughly 2,000 TU at the bottom end up to 10,000 TU, 10,000 containers effectively at the top end. They are the of the backbone of global trade. They typically are deployed on intermediate trades, north-south trades, intra-regional trades. They're super-operational. operationally flexible and as a result tremendously commercially flexible. And they're not competing on the big main lane east-west trades against the really giant ships that tend to garner a of the headlines. So they're not competing against the of 24,000 TEU ships that are deployed between, I don't know, Shanghai and Rotterdam, for example, or into Long Beach. They're tactical vessels really for the shipping lines themselves. our customers are the big shipping lines, the likes of MSC, Maersk, Hapag Lloyd, CMA, CGM, et cetera, et cetera, et cetera. And them, the having ⁓ operationally flexible ⁓ effectively optionality. They're optionality. And at a time when it's tremendously uncertain, the world there, as I'm sure we'll talk about later in this ⁓ podcast, optionality has value. So a of appetite from the lines to take ships of the sort in our fleet And as a result, we've got almost % of our positions covered for 2026 and over % of our positions covered for 2027. So the appetite to take ships on both off current positions off forward positions remains very strong. I'll there. Nick Chubb: Thank you. First off, that was a really helpful explanation. the sake of our audience, I think many people, when they hear the container chip market, they think about your customers. So they think about Merse, CMA, CGM, Hapagloid, those types of companies. And think there's probably an assumption that those companies own all of their own fleets. But there is this whole world of container lessors that actually I don't think people really know about. So could just explain a little bit about how the container lesser market works how you support those ⁓ Tom Lister: sure. So classically, and I'll explain why I start ⁓ sentence with classically, classically, roughly half the ships on the water are chartered in ⁓ by the companies, the CMAs and of this world, ⁓ and roughly half are owned by ⁓ directly. Now, the lines themselves tend put their balance sheets to work in owning the bigger ships, what they consider to be ⁓ strategic assets. they will be putting their money typically into the really big ships and will be leaning into people like who provide charter tonnage, ⁓ leased tonnage to cover more tactical. tonnage at the sort of the mid size and smaller of the spectrum. Now, the reason I said classically at the outset that it was a 50 50 split is that's actually changed in the years since Covid. And the reason that is that a number of the shipping lines, MSC being the classic example, have been busy buying secondhand tonnage out of charter market ⁓ from owners ⁓ like us, in these of last years, there has been ⁓ such tight market on charter market front that it's actually been cheaper in many instances ⁓ for lines to own ships than to them in. Obviously the flip side to that is if we're in position to hold on to our ships, it's very lucrative for to charter the ships to the shipping lines. But any case, a number of owners have decided to sell rather than staying in the space, which means that if you look the balance of chartered tonnage versus tonnage that's owned by the shipping lines today, ⁓ more of a 60 % owned versus 40 % chartered split as a result of that ⁓ Raal: Yeah, was statistics that certainly surprised me because I think I've been obviously working with last 20 years, have been a big part of it, but the actual ownership structures and the way that because it's a classic market, cyclical markets, probably the most cyclical market I can think supply, under supply and all this kind of thing. And it's been even more ⁓ You mentioned the global situation and we'll definitely get into that. that statistic about the ownership level there, said 50, 60%. It was a surprise to me. And we did cover this a little bit in an episode with Torsten Pedersen of C-SPAN where he was talking about that. But I think gives us a bit more of an opportunity to get into the real mechanics of the container market, which should be. definitely worth looking into. But before we do, think one of the things that's always interested in is your CV looking at it. And I wasn't sure having not met you before, wasn't entirely sure whether you were going to be British, Greek, raised where, know, tell us a bit more about yourself. How did you end up in container shipping? Tom Lister: you Sure, short answer is by accident, Raoul, which I think probably from what Nick was saying earlier when we were talking offline, roughly 50 % of the answers you get are ⁓ by accident. So I'm... Raal: Yeah, exactly. Nick Chubb: you Tom Lister: By accident, am a Brit, I grew up in the UK, went university in the UK, studied sciences university, so that was hardly an obvious stepping stone into But then followed this rather romantic of ⁓ doing a working passage on a container so I managed to get myself on a container ship in Liverpool. ⁓ She steamed around Northern Europe, the through Caribbean. in Panama Canal down the west coast of South America. I got off in in Chile and went and knocked on the door of the owners ⁓ of ship there and said, any chance of a job? ⁓ And to surprise and very good fortune, they said, sure, take you on a probationary. basis and if you prove to be useless, hope you understand if we bid you farewell after months. But ⁓ if of any use to us whatsoever, then we can come terms. And fortunately, the three months went well. They took me ⁓ And that's where began career in shipping. So first 10 years, ⁓ I say liner shipping, divided between spending time in South America and actually in the US. then I did an MBA in France and from went into the ⁓ sort of ship owning side, went and worked in the German KG environment, which or may not mean anything to your listeners, but was a big of capital, particularly ⁓ for the container shipping for charter owners of container ships, which blew itself up with the global crisis. But anyway, that's I began. by my experience within owning. And there, went and worked for a bank, DVB Bank, which a of specialized transport asset financier of Singapore. And from moved to GSL in the rather times of 2007 ⁓ eight. And we just managed to take company about three weeks before Lehman Brothers went bust. ⁓ So thereafter came a fairly challenging years of keeping creditors at bay, keeping the enterprise going. then in Raal: Yeah. Tom Lister: I think I've got that right. Yeah, 2018, we merged with a company called Poseidon Container Ships, which was a fleet of ships that had been built up by our now executive chairman, George Yeroukos, together with the backing of a large private equity company. And the private equity company was looking for an exit. They couldn't sell the vessels, or didn't want to sell the vessels piecemeal. they couldn't, it was such a large fleet, they couldn't find a buyer take the whole thing on acceptable terms. So they merged into us, ⁓ provided the private equity company with a publicly listed platform through which they could sell down their position over And so that's what's subsequently brought to Athens, to Greece, which where I'm based now. Raal: Yeah, what a journey. you said like, yeah, roughly 50 % of people, people who either normally related to someone or they come into shipping by accident. But I think you've won the prize for the most romantic kind of, know, random jumping on the queso. A lot of people won't know this, but it's something worth knowing, particularly if you have a spirit of adventure and time on your hands, you can actually get as... Tom Lister: been fun, yeah. Nick Chubb: Yeah. Tom Lister: I'm sorry. Raal: accommodation on some container ships and that's what you're referring to there that you can, they're sort of doing their container business but there are a few berths or at least a friend of mine recently got one in Italy I think, you can do it can't you? Tom Lister: Well, it to be easier. Raoul, I'm impressed that your friend has managed to do it comparatively recently because now, unfortunately, the of liability insurances and et cetera, et cetera, et cetera, it's far less straightforward than it used be, but I'm delighted that your friend has managed to do much the same. Raal: Mm. Yeah, was, I think, Sicily to Naples or something crazy like that. yeah, but that's incredible. So you literally went down on the, did you, and when you did voyage, did you already have it in your mind that you were, ⁓ did kind of get on the ship because you were interested in shipping or was it getting on the ship that got you interested? Tom Lister: It was getting on the ship, so I'd always had this slightly lunatic, notion that it would be nice to cross one of the great oceans by sea, and opportunity arose, and fantastic. So was that really that led into everything else. Raal: Yeah, yeah. again, the journey that you mentioned there, seem to be sort of, it would be hard to think of being to do the job you do without that diverse kind of background that you had in the mixtures between financing and ship owning and... Tom Lister: I know, I mean it's been helpful, ⁓ would say. mean, there are lots of people ⁓ in industry and everyone's got a very different story, but it been helpful, I think, at least for me. And actually also having, terribly easy when you're at your desk forget that there are people at actually making the whole industry. I think having started aboard a ship, albeit obviously as a not a joy rider, but certainly not a serious person aboard a ship. Let's put it that way. Yeah, that's probably the more elegant way of putting it. But ⁓ it at did give me a sense of how on the hand the ship is your home, but at the same you don't want to be on it. Raal: A supernumerary, I think is enough. Tom Lister: and you do feel distance from your friends and family. I think that's been useful, particularly the days COVID, where the industry seems have been buffeted by one strange event after another. ⁓ Nick Chubb: Just on that topic of strange event after another, mean, the theme of the show is transformation. And it me that you've had a front seat at probably, by the of all this century's strange events going all the way back to the financial crisis. And I'd just be interested to know your perspective, someone who's leading a publicly listed organization. those that are outside of your control like the financial crisis, like a war come along could ⁓ buffet you, how you go sort of handling that and making sure the organization is sort of resilient to those kind of big shifts that you really can't do much Tom Lister: Yeah, well I think the first thing is you learn, you learn from your experiences. So if I go back to 2008 where we did take the company public, but we had a lot of leverage in the mix, we survived the crisis, but my goodness, was a white knuckle. ride least initially. I think one of the to take away from that is, and this back to an earlier point I think you made, Raoul, this is a highly cyclical industry. So you've got ⁓ build your organization your balance sheet and your operation for that cycle. And cycle which is also overlaid with volatility. So you've got the underlying cyclicality, but then you've got spikes and troughs that arise from externalities in the middle. And you've got to build your business to ⁓ manage So first of all, the whole reason as an to go into shipping is the cycle. If you don't the cycle, you shouldn't be investing in shipping. But if you are in the cycle, then you want either, yourself if you're a private investor and ship owner or on behalf of others if you're us, want to build your organization to be able to weather the downturns, manage risks, but crucially be in a position to really capitalize and pounce on the opportunities when they present and typically in shipping the real value accretive are to be made when there's blood in the water, when you're at the bottom of the cycle and everyone's feeling grim about acquisitions are to be made when there's blood in the water, when you're at the bottom of cycle and everyone's feeling grim about Raal: Mmm. Mmm. Tom Lister: a near term that's when you need to have capital a near term that's when you need to have capital because that's when you can buy ships ⁓ very cheaply. And we've done this in the past. We've bought container at a comparatively small premium to scrap because everyone's feeling panicked at that point in time. But you can only do that ⁓ if got cash on your balance sheet available to move very, very fast when those arise. Because when you're at bottom of the cycle, no one wants to give you money. Or if they do, they want to give it to you on very punitive So you've really got to manage cash liquidity ⁓ ideally low leverage so you can move fast once the opportunities present themselves. Nick Chubb: Can I read in your balance as it is today? You look very, very, very unleveraged ⁓ and looks like you've got a lot of cash sat waiting an opportunity. So am I right in thinking you kind of in that position, feeling like the may be frothy for those opportunities come That take quite a lot of patience because you've also got a fleet that exists that is going to go a life cycle that needs to be replaced as well. ⁓ Tom Lister: Yeah. Yeah, and you're right. I mean you've touched upon really the two I don't know if they're competing or actually a complementary dynamics there and you add a third ingredient which is We have public investors and public investors. There are some who are you know Looking through the cycle and are thinking long term about the business building value through the cycle. And there are others who tend to have a shorter time horizon their focus. And so no one wants to see you sitting on cash ad So ⁓ worked on. explaining our strategy to investors, explaining how we see the cycle, explaining why we think that there's actually value for them, ultimately, building up cash and simultaneously delevering, to your observation, I mean, we've got financial leverage of under 0.5 times at the moment. So we are very low-leveled. We've got, you know, half a billion of cash on our balance sheet at the moment. So we are in a position to move fast, but at the same time to your other point fleet renewal We've got a fleet which has an average age of I think it's 19 years or so So, you know you The whole that we're in is making sure that we acquire cash generating assets at the right time in the cycle in to continue to generate value for shareholders going forward, ⁓ which you do have to have a rainy fund, or not even a rainy day fund, a fleet renewal fund to replace ⁓ the cash as they age out. it's choosing the moment to put those funds to work. ⁓ And you can do that by ⁓ waiting until there's blood in the water using the analogy I before. So ⁓ ships at the bottom of the cycle and ⁓ holding them and trading them into the up cycle, locking them into lucrative charters when the market firms again, which it always will. Or you buy ships ⁓ with charters So in other words, lot of our bread and butter business involves going to the shipping lines and saying, listen, we're in a position take some of your chips off your hands and chart them back to you, which will help you. build your balance sheets while at the same time also giving you some subsequent operating flexibility by passing ships that you need in the near term but you have a question mark in your mind as to whether you'll need them for the rest of their working lives. We'll take them back, charter them back to you, de-risk them ourselves. And then once we get to the end of that initial charter, we're in a position to re-charter them elsewhere. And then the other alternative is to go for new buildings. And again, it is a Nick Chubb: Mm. Tom Lister: a of a frothy market at the moment, but if you can acquire new buildings with charters attached to them to de-risk them out of yard, then that's another way of doing it. So there are different ways in you can skin this camp. Raal: I we've got a pretty educated audience, but I think there are some things we should zoom in on. think one of the things you there, we talked about the cycles and ⁓ it's simple this, it? Like typically when the market's really good, people start building container ships. Then when all those container ships start to arrive and there's over capacity and the rates go down, I mean, it sounds crazy that it's that simple, but that has traditionally kind been the way that the markets typically work. but we're in an interesting mean, because, we must into this, the sort of things that are changing that you mentioned 18 years, 19 years, I think you said, sorry, on your fleet. Normally you'd be looking for an asset to be what 25 years? Is that normally a reasonable? Tom Lister: 25, I mean... Unlike the other shipping sectors if we park the sort fuel and propulsion ⁓ which is a conversation in itself, but if we park that aspect for one moment, container don't tend to physically obsolesce ⁓ in same way ⁓ as at least at the same speed as bulkers tankers. Why? Because with fully cellular container ships, you've got cell guides, which mean that the containers, the never actually touch the Nick Chubb: Hmm. Tom Lister: all the surfaces of the container ships. So you're not putting the same stresses on container ships as you are on bulkers particularly and to a lesser degree tankers, which is what explains why there are a lot of Jones Act container ships, know, ships operated in the US flag trades, which are 30, 35, even older. So it's not physical obsolescence or deterioration which will drive Raal: Interesting. Tom Lister: a container ship out of circulation, tends to be economic obsolescence. So other words, if there is a an excess of supply and owners are having to decide, does it make sense to hold onto a ship which is 20 years old, put her through another survey and dry docking, which is going to be another two, three million. Does make sense to do that or would I be better off actually removing this tonnage from the scrapping it out? yeah, and the I say is because if you talked about a or tanker fleet, with an average age of 19 years, would scratch your chin a bit and say, hmm, is a little bit troubling. In the case of container ships, it's not At least it's not troubling from a physical perspective. And given the mid-size and smaller container ships have effectively been structurally for the last 10 or years, that's another thing to keep in mind. If you've got an old ship ⁓ competing against an old peer group, a bit like a vet. If you've got someone of my age competing against, I don't know, a 20-year-old sprinter, there's only going be one outcome, but if I'm running against another 55, 56-year-old bloke like me, it doesn't really matter. So if you've got an old ship in an aging peer group, so what, to a degree? And that's precisely what the dynamic within the mid-size and smaller container ships. Most of the new money has gone into the really big ships, so you've got this bifurcation got the bigger ships, super latest technology, and then you've got the mid-size and smaller ships, which is largely, quote conventional older generation. That's beginning to change, it's still broadly, I say, accurate. Raal: Yeah, that's very, very good to know and understand. But one point I would like to sort of close out. with age of fleet as well, one of the other things that of course is changing that is, and we'll get to that, is decarbonisation and looking at what makes sense. I think that's a big discussion. So let's park that for a minute. The other thing ⁓ is, course, maybe distorting the market a little bit has been Obviously with the geopolitical situation with the, I'm thinking now not the most recent events, but more towards the Red Sea side of things and with ships having to take that longer route around the Cape. That has also had a big effect on supply and demand, right? Because obviously longer voyages means that it's taking capacity out of the market. So for one, I'm not really sure where we talked about cycles. Where are we in the cycle in your view at the moment? Tom Lister: Very good question indeed. Yeah, so let's try and sort of deconstruct this. You mentioned the Red Sea. Under normal conditions, when the Red Sea is open and when Suez is open, roughly 20 % of... cargo volumes, containerized cargo volumes, the boxes themselves flow through the Red Sea and Suez, you know, in both directions. Now, they tend to be... longer haul trades typically. takes roughly 33%, so a third of the global fleet, the ships themselves, to carry those 20 % of boxes. So moment you put a cork that particular bottleneck, the effect is considerable. So at moment we have... less than 1 % idle capacity in the global fleet. So you're looking at a situation of pretty much total utilization of the global fleet. However, this has been propped up by the fact that, to your point, cargoes and ships that would typically transit through Red Sea and Suez are now going through or around the Cape of Good Hope. best estimate is that that is absorbing roughly 10 to 11 % of global effective capacity. So if you were to reopen Red Sea and Suez from one day to the next, theoretically would have an additional 10 or 11 % of effective capacity into the market. However, as with in life, there are ⁓ nuances to that argument. One of which is the was already close to total utilization before Suez and the Red Sea became problematic, the fleet had to speed up in order to maintain the network of the lines while going the long way around. So if... So as we're to open up again, think almost instantaneous effect would be the lines would start slowing ⁓ And you slow the global down, by one or two knots, it's the same as taking five or 10 % of capacity out of the fleet again. So there is simply by controlling the speed at which ships are navigating, there is a sort of safety valve or on effective So that's one thing. And the second is it's very asymmetric, the impact of the Red Sea and sewers diversions on the fleet. predominantly really big ships, the long haul ships, the main lane ships were flowing through the Red Sea and sewers before it got stopped up. there wasn't really all that much of the mid-size and smaller ships, the tactical ships that were actually diverted as a result the Cape of Good Hope diversion. So again, were to open up, I would that the impact on the global fleet would once again be asymmetric. It would be principally the big ships that would be and the mid-size and smaller ships would be impacted, but to I think a lesser degree. I know if that comes even close Raal: Yeah, it does. It does. And I think what it brings home to me is the sort of markets within markets. You know, we talk about it's bad enough that we talk about this as being one industry, but it's actually, you know, and it's often the case that isn't it that different opportunities arise from different of the market and to your point about having the ability to move quickly and to see and to act on those opportunities is really important as well. So ⁓ Tom Lister: addressing your question. Yes. Raal: So would you say then it's a fair reflection to say that have such an extraordinary place ⁓ that actually even difficult to know where we are in ⁓ the sort of cycles? Is that? Tom Lister: Yeah, I think it probably is. I mean, I certainly I ⁓ come up with a neat answer you. I think I can't come up with a neat answer you on that question, it's very to come with the, what happens next? ⁓ Raal: Yeah. Yeah. Yeah. Tom Lister: Answers if you can't answer those questions if you've got a state of pretty much maximum uncertainty which I think pretty much we are in from both a macro and geopolitical and perspective then there's a lot of value to having optionality and that's what we're seeing You know, we're providing optionality to the shipping lines with mid-size and smaller ships that can be you know They're of the chessboard that can be moved around by the liner operators within their networks and that's valuable to and as a result a we're seeing still appetite in the market to fix charters for the right ships, not off just 2026 positions, but also 2027. That shows the value our customers are attributing to flexible tonnage, which, going to my earlier point, has been underbuilt ever since really the German KG environment blew itself That was the principal provider of tactical tonnage the industry for years and years years and then all of a sudden in the wake of the global financial crisis it ⁓ I it took a few years for it to disappear but there hasn't really been a source of capital that has come in to replace it and as a result you've got an aging peer group for tactical tonnage. Nick Chubb: Could you just explain the KG environment to listener and then, yeah, kind of implications of it not available to ⁓ owners like Tom Lister: well I mean it was, so KG environment was set in Germany it was fairly sort of simple concept. There was a favorable tax scheme in place such that made sense for ⁓ comparatively high net worth individuals, so and dentists, to invest in funds, KG funds, and those KG funds in turn would buy a ship. And ship would be put on charter to the shipping themselves. And classically, would a one for one ship. structure which the beauty of simplicity on one hand but on the other hand ⁓ also meant that if you didn't have employment for that one ship it hurt the ⁓ in that fund. And that all well and good ⁓ while we were through the sort of the China driven containerization boom at the beginning of this century, which essentially ran from whenever it was that China entered the WTO, call it 2002, 2003, up until the global financial crisis. Then there was never a moment of unemployment for such ships. If you could build it, it would be employed. And I think investors got into that expectation. And as a result, I think by the time we got to call it 2008, roughly 50 % of the global fleet charted in by the liner operators, going back to the original statistic. And of that 50%, two-thirds was provided by the German KG themselves, collectively. And given ⁓ that two-thirds concentrated in the tactical tonnage segments, the mid-size and smaller ⁓ segments, the that the German KG environment blew itself up, which it did, because these fund structures. were not robust enough really to survive the challenges of the global financial crisis when there was sustained oversupply the sector. There was no massive alternative source of capital that came in to take their place. And that's precisely why the tonnage we're competing in, mid-size and smaller, have been under-invested a protracted period of time, which is precisely why it doesn't really matter to have older ships competing in those segments The whole segment is There is new tonnage coming online, but ⁓ lion's share of it is still older tonnage. Nick Chubb: fascinating because I think people think of ⁓ shipping as number of 6,000 ships, but actually it's a number of ⁓ of a certain And so you've got overall slot capacity, but then you also have speed of those ships in network and all of these things actually affect the real world supply of container ⁓ for want of a word. ⁓ so supply of Containerships is not necessarily a fixed thing. The supply, to a certain extent, can fluctuate on reactions to market conditions. And I think just ⁓ an interesting thing hadn't really given a great deal of thought to, but ⁓ that probably applies a lot of different segments. Tom Lister: I think that's right, I mean, I suppose combining two remarks that both you and have made, Nick, it vital. I know the other segments well enough to know whether or not this also applies there, but certainly within container shipping. The gravest mistake you can make is assuming that the container ship fleet is a homogenous whole. It's not. It's at very simplest bifurcated into the really big ships for the big East-West trades where you've got to have hugely developed port side deep water ports, long terminals to accommodate these giants. So the 24,000 TU ⁓ container ships, a quarter of mile long. They're just vast, these things. to have infrastructure to accommodate them, which have in huge ports like Shanghai, Singapore, Rotterdam. But you've got to have the cargo volumes to fill them, because it's all very well having this giant ship. But it starts render economies of scale if you can fill the giant ship. And if you have the infrastructure, the railheads, the trucking, the et cetera, et cetera, et cetera, to accommodate these great... volumes of cargo first being accumulated to be loaded aboard the ship and then being discharged and distributed into the hinterland. you know, a lot of things have to work right ⁓ the big ships to the economies of scale and the efficiencies that they've envisaged ⁓ to Scrolling back, know two or three years when supply chain was was fairly predictable. It worked It worked perfectly, you know, you had a high efficiency high of supply everything was into these big fat pipelines of cargo flowing from China to Europe or to the US and then the rest ⁓ was you know, sort trimmings in a way ⁓ all of a sudden a curveball has been thrown at this and thrown it into disarray So all of a sudden China is thinking, huh, we ought to actively diversify away from the US. We need to alternate markets ⁓ which we can continue to flow our volumes. And they've done precisely that. If you look at cargo volumes into Africa, Latin America, essentially global South has become a much important part of the Chinese export phenomenon. you know, Europe remains important. The US obviously a much more complex dynamic, but certainly the Chinese exporters are reducing exposure to the US market for obvious reasons. And at the same time, you've got ⁓ the trying to diversify away from China, which means have also got to diversify their supply chain. So instead of having a nice simple model of cargo bank backwards and forwards, now got an immensely complicated web. of cargo flows and if you've got an immensely complicated web, more challenging to capture the economies of scale of the really big ships and you need much more in the way of flexible ships can be applied regionally and an intra-regional basis and north-south basis and into the Africa trades to accommodate these cargo Now this is music of course to the ears of ⁓ company that is providing and smaller container ships and again explains why we've got the whole of 2026 covered and most of 2027 covered too. It's just because the rules of the game have changed. Raal: But how much of that was sort of the plan when Global Ship Lease was put together? Was it already thinking around those sorts of things, or is it just that it's kind of evolved and adapted as time has gone on? What do you think? Tom Lister: I mean, I'd love to say that we've been brilliant from the outset, Raoul, but you may see through that. think from get-go, we tried build our portfolio, and from the get-go I'm talking about back in 2007, 2008, we tried to build a portfolio of that was broadly representative of the global So we weren't going long short in any particular position. We were just trying to take a sort Raal: Ha Nick Chubb: you Tom Lister: sort of a fairly holistic approach. think in the meantime, we learned that mid-size smaller container ships is where it makes to focus for all of the points that we've discussed ⁓ today. So I think grown into a more thoughtful position ⁓ and a more thoughtful positioning time. And big part of is, ⁓ know, if you're... If you're going for the really big ships, which the lines ⁓ themselves also going, it's a of capital game. If you've got ⁓ very rich lines with to a lot of capital, which is what is the case the moment. All of these guys have made a tremendous amount of money. Over the course of the last few years, they've all got big balance sheets. They can all go and order ships they want from the yards, and probably they're going to do so at a cost of capital which is lower than ours, means you've got to be cheaper or you've got to take on more risk than they're willing to take on. Or alternatively, you say actually that's not the part of the market that best positioned to chase. We're off going for mid-size and smaller container ships, ⁓ where much by definition, you're having take a nearer term view on charters, means that anyone in that space is having to take a view on risk. ⁓ becomes, if you play cards right and ⁓ touch wood, so far we've managed you can, you can take without having to take an excess of risk on those ships. So we try to structure transactions such that when we take a ship, we're either buying it at a point in time where ⁓ downside risk is largely covered by the scrap value of that ship. So if we've got it wrong, well, never mind. ⁓ more or less covered, not end of the world, and it's just lots of upside potential. Or you buy ships with charters attached, which by the end of that charter, you're down at a residual value level, is digestible, which essentially de-risks you ⁓ that point in time. So everything do, we think about risk first and potential after. Otherwise it's dangerous. get into the position of your lips at ⁓ prospect of juicy returns that convince you to take decisions that burn your fingers, you know, if the market doesn't evolve in the ⁓ you're expecting. So very much risk first, return later. And shipping's about the cycle, so it's all about optionality, having the asset at the right time in the cycle and being able to make money off that asset at the right in the cycle. Raal: mentioned risk. We into disruption, which about that being the new normal. can't not about the in Iran and what's the risk that that puts on the shipping. And we talked about this, obviously, a massive route for tankers. So that tends to be where a lot the discussion is. But of course, it's also a busy route for container ships and bolt cargos as well. mean, how do you even start to think about the sort of disruption something of that magnitude that's going on ⁓ now? Tom Lister: Yeah, mean, that is a very tricky situation. I let's put it in context first from a sort of coldly economic perspective and then let's move on to the much more important side of things, which is the seafarers. So from an economic perspective, roughly 3.5 % of global containerized volumes flow into and out of the Persian Gulf. But having said that, it's also a big transshipment. area. So I think Jebel Ali is either the ninth or tenth busiest port in the world, primarily because of trans-shipment volumes. So although in overall import and export volume terms, three and a half percent doesn't sound massive, the disruption to shipping and to liner shipping networks is enormous, just by closing off the Gulf. So there are roughly, I think, 140 container ships stuck there, 400,000 containers, boxes. stuck there crucially an lot of fuel so I was listening to I think it was the masks here the other day saying that masks is having to Employ their tankers to make sure that they have bunker fuel for their vessels in the right in the world at the right time because ⁓ the bunker networks now being disrupted so the ramifications of this ⁓ for the liner and the economics of all of this are enormous despite the comparatively small slice of volumes that flow into and of the region. So that's an economic perspective, massive disruption, ⁓ massive need more ships, massive need to have in the right place at the right time, and the list goes on. not a wrinkle, it's real turbulence that this is generating. ⁓ Nick Chubb: was just going say it's worth saying on that transshipment point as well that there isn't another Jebel Ali on the other side of Hormuz. They're the nearest major transshipment hubs. You near enough have to go through the Suez and get into Europe or you have to be on the other side, sort of around Singapore. So there's a big gap in the middle of the world, if you like, that is very difficult to plug if you can't transship through those kind of major Middle East hubs. Tom Lister: Yeah, no, I agree 100%, which then brings us to the seafarer and you It's not talked about enough. mean, I know like yours and various others are trying very actively to. to raise the profile of seafarers. But if I go back to the Somali piracy crisis when it was at its peak, think there was something like 1,500 seafarers being held by Somali pirates, and nobody ever talked about that. Likewise, COVID, everyone was focused upon the fact that they were locked down at home. but no one, and busily ordering goods from Amazon and being a little frustrated if they took slightly longer than usual to appear at their doors, didn't really consider that there were tens or in fact potentially hundreds of thousands of seafarers locked in their ships because no one was willing to allow to disembark and change And I think the Gulf situation is ⁓ another. where we have to keep at the front of all of our minds, not just as an industry, more broadly than that, fact that, I don't know what the exact numbers are, but the latest I saw is 20,000, 20,000 seafarers ⁓ stuck aboard ships in the Persian Gulf. at the moment, that's a tremendous number of people and think of their families, et cetera, et cetera. what you can do about that, it's hard to say, I'm afraid, at the moment, but it's a fact that we need to have at the front of our minds. Raal: And And I think just to make the point, because I think the way we've been discussing your supply of ships and stuff, that people may not realize that you're actually, it's not just that you're not just handing over the steel, right? You've actually got those vessels are under technical management as well, right? You're providing the whole service. Tom Lister: Right. Yeah. That's right, yeah, yeah. No, that's a good point, Raoul. So they're under what are called time charters, which means that we, as the Lesor, provide not just the ship, not just the steel, but also the crew. And we look after the maintenance of the ship and we respond to the operating instructions of the charterer. So we're the taxi driver. effectively, ⁓ one distinction in that our customer is paying for the fuel unlike a taxi. So we provide the ship, we provide the people, we provide the maintenance, ⁓ but fuel is for account and responsibility of the charterer. Raal: And so, you know, your point just now, you are in that invidious position of having to have crew that potentially affected by this and having to, I work out how to try and keep their spirits and keep them kind of feeling sort of, how can we put it? mean, ⁓ it's not just about the ⁓ need of safety is one thing, but of course, this is also their livelihood and their ability to kind of work is affected. So you've got those onboard vessels, but then you've also got those who is, this was one of the stories in COVID that I think was missed because everyone's heart, of course, immediately went out to everybody that was trapped onboard a vessel for 13 months and these kind of incredible that they had to show to do that. Tom Lister: Yeah, yeah. Raal: But there was also a cohort that couldn't work that were stuck at home and unable to work. So there's a lot of things to juggle there in terms of keeping crews safe, keeping the business running and all that sort of stuff. yeah, I don't envy you. Tom Lister: Yeah, yeah And there's another, adding to your sort of litany of to think about. The of the Ukraine War, that was something that I think many of us completely by surprise, or at least the ramifications of it did. So we have a lot of ⁓ Ukrainian seafarers our ships did at the beginning the crisis. ⁓ Now, our first concern to keep them safe and Not to your point, that has to be the first thing to people out of harm's way to the extent you can. But then we realized that principal concern was not for themselves, it was for their families ⁓ in Ukraine. ⁓ a of guys were completely distracted the fact that they didn't know whether or not their families were safe. there we set up a safe haven to bring Ukrainian families our seafarers to Greece. And we arranged accommodation and arranged for their lives here so that Nick Chubb: Wow. Tom Lister: to keep the family safe, which meant that the guys who were aboard could continue that knowledge to and feel comfortable that the people cared most about were not in harm's way themselves. So you're absolutely right. mean, there are so many different angles to each of these. weird events that can continue to befall world and the industry. And the have to, I think, be at the heart of our Raal: you Nick Chubb: Can I ask, Tom, how do you ⁓ these ⁓ of Because I think you said at the top, your turnage is 100 % committed this year, 80 % committed next year. So are you to think sort of three years ahead in this really complex picture of ⁓ so many different And then you've also the kind of day-to-day reality of these incidents that unfold real time. It just seems like something that... Tom Lister: Yeah. Nick Chubb: trying to get my head around how you even thinking about the term and the short term together if that makes sense. Tom Lister: Sure. we used to spend rather a lot of time doing scenario analyses. And when the Black Swan hit, we decided, OK, this is absurd. cannot model for these things. So you've ⁓ really got to things down to their simplest elements. And that comes back the optionality point. We're providing optionality to our customers, but we also need to maximize our own optionality. we think means from an operating and commercial perspective, having ships that are tremendously operationally flexible. And actually one element of that we haven't touched on yet is the fact that if look at the cyclicality of the freight markets, and the that containerized trade now, a comparatively mature industry. You're looking at on year growth broadly in with GDP. global GDP growing at and a to three percent, it's likely that you're going to see global volumes grow at two and a half to three percent. But if you look a little bit closer, refrigerated cargo is faster than ⁓ the container ship market. that's one thing to keep in mind. And the thing to keep in mind is that containerized freight tends to be the most ⁓ lucrative freight the liner companies themselves. So at the time as focusing upon operationally flexible tonnage, mid-size and smaller, we also have been very hard on making sure that we have high refa capacity tonnage. So ships which have sufficient installed power to carry as many reefers, refrigerated containers as possible. And each refrigerated container is like an enormous sort of 40 foot long fridge that you're having to plug in to the supply on the vessel. So if you can imagine that you've got, you know, a thousand or 1500 of these fridges plugged into the ship at any one time, you've got to have a tremendous ability to generate power aboard the vessel. So installed power. and, reefer plugs and ventilated holds, etc., etc., etc. That's other thing that we focused upon, you know, very, very deeply. Operationally flexible, highly efficient to the extent possible, ⁓ and high ships. Nick Chubb: again, it's kind of markets within markets. so much nuance and complexity to the space that you just, you know. Tom Lister: it's markets here right, you're right, it's markets within markets, but if you again try to distill it down to ⁓ simple bits, okay, need flexible ships, great, and you need ships that are attractive to the lines through the cycle. So pick a part of the business, refrigerated cargo, which is growing faster and is sustainable, or is constantly profitable the lines. And as like as not, even when you're in down market, there's going to be a demand for your ship. First. Second, not to be greedy. So, you know, rather than waiting for the tip top of the cycle. lock charters in rates ⁓ will run for various years at that never be a thorn in the side of the shipping lines themselves. So go for mid-cycle rates or maybe slightly above mid-cycle rates for longer so got forward visibility on your contracted cash flows and try to stagger charter terms so you don't have your entire fleet coming back into the market at the wrong time in the cycle. Attractive assets and then try and build out your contract cover. So we've got I think it's 2.7 years weighted average Forward cover at the moment, which is ⁓ two a quarter billion of contracted revenues it comes back to think about the risk first, I think Nick Chubb: Pretty interesting. Raal: But when you mentioned there and power and all those kind of things, this is the second thing I wanted to kind of get to because we've got disruption in geopolitical sense, which is obviously getting all the headlines. But of course, before that, there was whole kind of disruption of decarbonisation in the sense that we already had this hugely complex task ahead of us. And from your point of view, looking at that, you're sort Tom Lister: Yeah. Yeah. Raal: I guess you talked about sort of 19 years old and that's fine for vessels, but there will come a point where you've got to be thinking about those new builds and the ships that you want to acquire. And I think the container market is even more exposed in a sense to the consumer market ⁓ terms of, and on my mind there are things like, I remember hearing, I can't remember who it was in North shipping couple of years ago, one of the big... retail firms saying they would have no carbon in their supply chain by 2030. I think maybe they've had to revise that now, I don't know. But like it's a big consideration, right? And you're obviously looking at that and reading that market. And from a, I'd just love to get your take on how are you thinking more broadly around how you need to change your thinking or how do you see the container market evolving in the context of Tom Lister: Yeah Yeah, it's a very tricky ⁓ is you pose it. I think that obviously there's been a collision, not just within shipping, more broadly between the mission to decarbonize and cost of living crisis. And we're seeing that in various of geographies and jurisdiction where if struggling to survive the day to day, decarbonization, there's a risk that decarbonization is seen as a nicety rather than a need. So a challenge there, first. Secondly, if narrow it down ⁓ to the I think there hope that IMO ⁓ would roll out regulations that would provide absolute clarity over the long term on where things were going from a ⁓ regulatory perspective for because in order to invest, know, a ship is an expensive asset and it lives for 25 to 30 years. You've got to take a 25 to 30 year view on the ship and on its fuel and propulsion. But that's only a fraction of the problem. You've also got to encourage people to invest trillions of dollars in the shoreside infrastructure to produce and then supply globally. green fuels of the future. And the debate is still out on which are those green fuels gonna be? There's ammonia camp, there's the methanol camp, there's hydrogen, ⁓ and increasingly the sort of the notion that nuclear power is... probably in real terms going to be the way forward. Now, had I talked about nuclear power two or three years ago, you guys would have nodded your heads politely and thought this guy's a lunatic. But I think now it's which has become increasingly mainstream, not just because of the technology, but acknowledging the challenges facing space. Where it goes, I don't know, but I do think that the lines themselves, and they've already shown this in investing in dual vessels where they're trying to hedge their bets a little bit, they are already investing in methanol dual fuel, ammonia dual fuel to a much lesser extent, ⁓ but crucially a transition fuel, LNG. ⁓ Raal: Yeah. Tom Lister: doable fuel. So I think that seems to be a course that's going on. then again, markets within markets. If look at container shipping, you have the lines themselves who can determine where they deploy the ships how they fuel the ships. So can theoretically establish corridors and know in hearts, okay, I'm gonna have ⁓ this string of operating in this particular trade lane ⁓ for this period time. And they can manage their risks that way. If on the other you're people like us ⁓ who are providing tactical okay, we provide you with crew and we provide you with the ship. you control where that ship is deployed. So do we take a view ammonia methanol or LNG or conventional or do try to stretch the elastic on the optionality which is what we've done so far and said look. We'll let our vessels age until we all have collectively a clearer view of what the future will be. will retrofit those vessels ⁓ make them more efficient, and we've co-invested in doing that with the charterers. So we've changed bow and done all sorts of bells and whistles to enhance the hydrodynamics and the energy efficiency the ships themselves. One. Two. comparatively limited expense, can make a conventionally fueled vessel run on to give the charterers that option. Three, ⁓ you capture operating data from the ship. So we've done that for our entire fleet so that we can feed not only our own systems, those of the charterers ⁓ with live operating data so as in close touch with the ship as we are in order to drive operating efficiencies and collaboration. And then finally, this was a bit of a... Well, the hope was it would be a Hail Mary pass, but I think it's been a bit of a disappointment. We invested in a carbon capture and storage a years back thinking, you know, rather than the world gear up to fuel ammonia, methanol, LNG, conventional fuel, cetera, et cetera, et cetera, in parallel, ⁓ wouldn't it be easier if just standardized the offtake through carbon capture and storage? Then you're only having to fix one problem which would apply across the industry and across not only this industry but other industries. But it's been very challenging to make it work, either economically or technologically in a way where you're not trying to sort of pull yourself up by your bootstraps. In other words, you're burning a lot of additional energy in order to capture the CO2 that you're burning. And if you're burning more energy to capture the CO2, it becomes a of a vicious cycle. Raal: Really? Yeah. But conceptually, I mean, in terms of the way you've set the business up, that's where I thought we were neatly going to get to the, and the answer is carbon capture. you, from what you're saying, because that seems that that was the point really that you made, like the line of trades having that control, but everything you've described about way you're set up, the more tactical need the North trade, carbon capture would fantastic solution, but you and you've found that it's, it's Tom Lister: Theoretically, yeah. But it's been very difficult to turn the theoretically great idea into which is ⁓ ⁓ commercially practical because it's all very well capturing the But then what do do with it? Where do you offload it? You've got to have the facility to actually offload the captured carbon. ⁓ given that you burn a ton of fuel, you're putting out three tons of carbon dioxide, that's an awful lot of carbon. Raal: Right. Yeah. Yeah. Tom Lister: to capture I know, maybe this is something that... will be a nut that's cracked by the industry in due course. If it is, fantastic. They would be a genuine changer. But in the meantime, if you look at the composition ⁓ the building of the order book, for the bigger container ships, strategic vessels, it's very leaning into LNG dual fuel and to a lesser extent, methanol dual fuel, and to very small extent, ammonia. And there are one or two sort of battery hybrids and blah, ⁓ the margins, but the tactical tonnage it's still primarily ⁓ conventional Why? Because ⁓ one whether the tactical tonnage going be deployed ⁓ and the only thing can rely on at the moment globally is infrastructure to provide fuel a conventional basis. Raal: Plus, it's worth noting as well that container fleets are a lot of those kind of energy efficiency measures. You mentioned the bulbous bow and things like that, but I would imagine like wind assisted propulsion is getting some traction, but it takes up deck space from a container perspective. It just makes it unviable, I guess, right? Tom Lister: That's right. Well, I mean, that's been the conclusion so far. Who knows where it will lead. But the only projects where I've seen ⁓ assist technology successfully deployed have been, as you say, in the of the bulker. And I'm not even sure in the tanker space, but in ships that have a lot of available deck space, whereas if look at a container ship, everyone can picture one. It's piled with containers, not only within the hold, but visibly on the hatch covers on deck. So it's much more difficult. ⁓ Nick Chubb: We've done quite a lot of work on ⁓ capture in the container space. ⁓ came to similar conclusion that basically the only way to make it work is you take a of boxes off the deck and then whole thing becomes commercially just a total non-starter. But your points actually of bring me back the IMO because I can see for you, you've really got to your instruction the market. It would be commercially... not a very clever thing to do to turn around and say we are now going to go methanol, methanol is our thing because you may end up buying, we're building ships that actually no one's going to buy. And this really comes back to the IMO taking a lead here and saying this is what the standard is going to look like for the next 10, 15, 20, 25 years. Because without that... you will just be waiting for the market if that makes sense. really plan, ⁓ I understand it, for what market may or may not want in the next five, ten years unless that standard's put in place. Is that Tom Lister: Thank you for watching! think that's fair. mean, certainly on a speculative basis, it's very I think, you know, there's way where can ⁓ take a view, which if you pass the risk. to someone else that someone else would have to be the charterer. you know, I think, you know, if you were to go for methanol, say methanol dual fuel, you would want an initial right out of the yard, which would allow you to effectively de-risk that position from outset. So the time you got to the end of the 10 or 12 or however many year charter, you're left with an asset okay, if you've got it right, good for you. And if you've it wrong, never mind, you've already made a reasonable ⁓ return on asset. But otherwise, yes, we're entirely upon forward visibility regulations. forward visibility regulations. These are big ticket items and they live for a long time. Or should. Raal: Yeah, you mentioned, we kind of glossed over it, but I think particularly for this show, it's interesting. You talked about the data, the operational data you're collecting at the moment. And when you're looking at that, in that uncertainty, and you're looking at the multiple scenarios that you're having to factor in, how much is data affecting your ability to be able to forecast and simulate things? And how much is it kind of becoming core to your operations. Tom Lister: Hmm, I mean again, I don't think it's way in which we're using the data is operational than predictive or or modeling in Obviously hoping to get towards predictive maintenance and things of that nature. It's more focused upon trying to drive operational efficiencies the equation where you've got ⁓ an owner one hand, us, and a lessee the hand, the shipping line, and making sure that we're all marching in lockstep and avoiding to the extent possible know, speeding up, slowing down, speeding up, slowing down, and smoothing out the operational profile of vessels and saving money and reducing emissions, etc., etc., that way. we... I'm a bit of an AI evangelist, or at least I was, but I have to say that so far at least, we have been unable to get AI to add meaningfully, and by meaningfully I mean in dollar terms, to what we're doing with that data. But that's something that, you know, obviously we're... We're at the beginning of a steep learning here. So there we will continue to stay on top of things. And when time right, as surely it will be in due course, we'll in a position to unlock the value from AI when it's available there for Again, our view is in order to have the option unlock that value, you first got to have the data. So if we collect the data and it on our platforms, and when the AI technology is there to hours maybe in surprising ways to unlock value from it, great, we can do that. But what you need first is the data. And that's what we're having. Raal: And the size of the fleet that you have, that's where you can start to get that commercial advantage, I think, from being able to observe patterns and that kind of stuff. Tom Lister: I mean, that's the hope, Raoul. Yeah. And ⁓ again, depends upon your customer. Some lines very much have data front and in their and others are ⁓ data oriented. But again, ⁓ you have the data, you have the option to share it, and you don't have the option to analyze it. So we think it makes sense to have that option. Nick Chubb: So I'm conscious of your time I I'd give you time for a coffee in between this and your next thing. don't think I've now taken, we've now taken that time, so my apologies. ⁓ Can ask you ⁓ one question as a way of wrapping up? ⁓ I am I right in saying you're about two years into your tenure as CEO, ⁓ before you were CFO, I'd just be really interested. Tom Lister: We're not. Sure. Yeah. Actually before that I was Commercial Officer and I was also the ESG guy within organization and before that I was CFO. Before the merger I was CFO. Nick Chubb: CFO. What would you say is the difference those C-suite positions, Chief Commercial Officer, Chief Financial Officer, and then stepping up to the kind of Chief Executive Officer role? What some of the things you kind of wish you knew going in or that you've along the way that actually there's a big difference between those two seats? And maybe there aren't, but I'm just curious. Tom Lister: I think more sleepless nights, more things to about. Other than I mean, we're a very small team. So yes, we've got 70 ships, ⁓ a management team, we're small, always have been very small and we've all shared the is some, know, okay, there are the but broadly speaking, we as a very tightly as team and ⁓ share the responsibilities to the possible. But ⁓ yeah, I think it's more question of more sleepless nights. and it gets ever more complex. So I guess I have to think about complexities as they feed into every aspect of the business rather than them being a particular area ⁓ expertise or responsibility. Sorry, not very imaginative response. ⁓ Nick Chubb: No, but a very honest one. And would say, you our kind of ⁓ playbook this podcast so far is get people much smarter than ourselves on and ask them lots of questions. And you've given us a bit of a masterclass in there ⁓ dealing that complexity. I've learned huge amount. So thank you so much for taking the time out of your day to speak to us. And I hope, I'm sure, our audience will a lot of value from it as well. Raal: you Tom Lister: Well, thank you very much for having me on and super interesting questions. I'm sorry I wasn't able to address them succinctly in some cases, but thank you very much. Raal: I don't No, so it's been real education and a real pleasure. So thank you from me as well, Tom.