The commitment to make "investments of an immense size in order to enhance their position, competitiveness and continuous investment in staff and systems”, is required said Petrofin, “as the finance and capital aspects of shipping are becoming ever more complex”.
"The changing prospects among shipping sectors are addressed by timely and sector investments and diversification, in which Greeks excel," said Ted Petropoulos, head of Petrofin Research.
Petropoulos noted that in 2018, only $7.9bn was raised globally by shipping through the capital markets, in shares and bonds, which is hardly sufficient to support the Greek growth story. This represents approximately 1% of the global shipping fleet value.
Drawing on Petrofin Bank Research's latest survey, it is noted traditional bank finance has been either contracting or stable over the last 10 years and as such, cannot be said to provide the stimulus towards investments.
"What provides the necessary finance balance is the availability of non-banking finance via leasing, private equity funds and export finance, as well as increased capital committed by owners themselves and numerous investment funds," said Petropoulos.
"It should be noted that in Germany, for example, Cerberus is on their way to owning over 1,000 vessels, mainly acquired from German banks, which have been clearing their decks from non-performing loans. In Greek shipping, there are no similar examples, save to say that interest in joint investments by funds has grown and these funds now consist of knowledgeable ex-shipping bankers and analysts, who also have a keen eye to market opportunities."
Petropoulos said private equity funds aim to generate investment returns of over 15% p.a. He goes on: "Their investments require such returns, but it is doubtful if shipping can continue to provide them on a sustained basis at all times, as such high cost does increase the required breakeven rate per vessel. This is compounded by an increase in US interest rates.
"There appears to be a mismatch between the required investment, or finance, returns for vessels acquired by or in conjunction with private equity funds and what the market may generate. Joint ventures do possess inherent risks of failure, especially in markets that fail, as history has shown. In addition, the higher cost of finance does inherently put shipping at risk. It will be interesting to see how private equity related transactions fare in the future.”
However, he concludes: “Short of a market or financial collapse, Greek shipping is expected to continue its growth and penetration across all shipping sectors in the drive towards larger fleet size, diversity and economies of scale.”