June 5, 2008 3:00 am

Taiwan's Mr Controversy runs a tight and very private ship at TMT

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

Taiwan's Nobu Su - an unassuming-looking man who one rival describes as having an "enormous appetite for risk" - would have stood out in any era of shipping.

An adroit player of the volatile, relatively new paper market in freight futures, Mr Su has also turned TMT, his company, into a leading operator of real tankers and dry bulk ships. He has done so in just six years since taking over control of TMT - originally called Taiwan Maritime Transportation, now renamed Today Makes Tomorrow - on his father's death in 2002.

"He's the coming man," one shipbroker says of the one leading world shipowner who would have been largely unknown five years ago.

Mr Su, 49, is still more extraordinary in an era when most shipping companies are growing more transparent and acting more like normal corporations.

Privately held TMT has never published financial figures; Mr Su gave his first media interviews only last autumn and he is vague about how many ships TMT operates.

"It's always up and down, between about 90 and 150," he says. "Somebody said 130, I think."

However, it is the relationship between TMT's fleet and its activities buying and selling financial products based on future shipping costs that have made Mr Su one of world shipping's most controversial individuals.

Many rivals believe TMT's trading strategy for its physical vessels is driven partly by efforts to push ship charter rates in the direction of its large, high-risk bets on the market in Forward Freight Agreements (FFA). Rivals claim that the vessels are often chartered out at lower-than-market rates when TMT is betting on FFA prices to fall. They are then withdrawn from the market - reducing capacity and pushing up prices - when he is betting on an increase, they say.

Such practices are not improper, but would go far beyond the limited use most shipping companies make of the paper market to hedge market risk.

Mr Su plays down TMT's role in the paper market, saying only that it is "a major player". People connected with the company have previously claimed it accounts for 30 per cent of all global FFA trading, however.

Mr Su says traders try to disguise their own trading as his. "People use my name a lot," he says. "I'm a kind of scapegoat. It's impossible as far as I believe for one company to influence such a big, big market."

TMT began in conventional enough fashion. In 1958, Mr Su's father - originally a scrap metal dealer - ordered a new ship, called the Taiwan Banana in Chinese, and entered Taiwan's then-thriving banana export trade. The company later branched out into other areas - at one point it had 10 per cent of the world fleet of vessels carrying wood chip for turning into paper.

Mr Su started with the family company then left, spending 15 years in the cement industry. He return- ed only after his father's death and immediately initiated sweeping changes, ordering 10 dry bulk vessels.

"We saw that after China joined the World Trade Organisation the whole world would change," he says. "But we were a very small company, so we had to grow."

The company subsequently ordered car-carrying ro-ro ships in 2003; very large crude carriers in 2004; Capesize bulk carriers - the largest kind - in 2005 and a liquefied natural gas carrier in 2006.

The company now directly owns 60 ships, has 90 on order and charters in a constantly varying fleet of other vessels.

"Mostly, timing was always right," Mr Su says of the investments.

The company started participating in the FFA market at the end of 2004, Mr Su says, after brokers regularly called him pointing out trading opportunities.

However, he says it would be very expensive to lay up ships or accept lower-than-market prices for charters to back up the company's FFA market bets, as his rivals claim he does. The market in moving physical goods on real ships is also more important to TMT than its dealings on the FFA market, he insists.

He admits that there is a link between the company's shipping activities and its position in the paper market. But he insists it is simply that he understands market conditions better than most traders because he works so closely with customers for his fleet of ships.

"We have very good clients, with whom we have developed good relationships," he says.

"We have to understand their needs - so that probably will give us more insight about the market."

In understanding the complex dynamics driving shipping market rates, such detailed intelligence can make a vital difference.

"There's no school teaching this, no doctorate degrees," Mr Su says.

"So you have to think."

Su's simple trading strategy

Nobu Su says his approach to trading in the forward freight agreements market is very simple, writes Robert Wright .

"When the market is going up, you invest earlier than other people," he says. "When you think the market is going down, you sell earlier than other people. There's no secret in this."

Yet the level of risk involved in making TMT's large bets in the volatile, unpredictable freight futures markets means a large measure of courage and deep pockets to fund losses are also vital.

For much of 2007, TMT was betting on increases in freight rates for dry bulk ships - a position that was justified by the market's reaching almost unprecedented rates of about $120,000 a day to charter Capesize ships, the largest kind. However, towards the end of the year, TMT, based on Mr Su's conviction that iron ore consumption was falling and ships were in oversupply, started betting on a downturn. Capesize rates then went still higher, to reach record peaks just short of $190,000 a day.

Many observers believe the wrong bet cost TMT hundreds of millions of dollars, but Mr Su says he broke even for the second part of 2007. He was betting - correctly - on rates for oil tankers to rise at the same time as betting on falling bulk rates. Just before Christmas, rates for very large crude carriers - the largest kind - reached a record level of about $270,000 a day.

The dry bulk market seems to have continued to run against him this year. He profited from a sharp fall in dry bulk markets early this year, but markets have since rebounded to new record levels. Average Capesize rates set a new record yesterday of $231,593 a day.

Mr Su nevertheless insists there is a fundamental oversupply of dry bulk ships. He also insists the likely phasing-out of single-hull crude oil tankers will drive rates for oil tankers up - even though rates for very large crude carriers have weakened in recent weeks to about $150,000 a day.

"We are still short on dry and long on tankers," he says in summarising TMT's position.

Few of his peers take such public pronouncements at face value, however, and see them as another effort to move freight markets in his bets' direction.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments
SHARE THIS QUOTE