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Live from Marintec China

Chinese banks to continue enlarging ship lending

Chinese banks to continue enlarging ship lending
Chinese banks will continue to enlarge its shipping loans portfolio, driven by demand from the domestic market and the retreat of European banks, industry players observed.

“It is inevitable that Chinese banks will come in mainly to serve their customers in their home market, driven by demand from the large shipping market of China,” said Russell Beardmore, head of ship finance North East Asia, Standard Chartered Bank.

“But European banks are not exiting the ship finance market totally,” Beardmore said, adding that they are very cautious about injecting fresh funds into the sector.

George Xiradakis, managing director of XRTC Business Consultants, believed that the stepping up of Chinese banks into ship financing will soon give them a stronger presence in the international stage.

“The color of money is changing. Chinese banks are very focused on serving the international transport chain which includes shipping, aviation and railways, while the market in Europe has been difficult,” Xiradakis told delegates at the Marintec China 2013 conference in Shanghai on Thursday.

“European banks still have a very good understanding of the shipping market. They may have no fresh funds but they will maintain their portfolio for their existing clients,” he explained.

He highlighted that Greek banks have reduced their lendings into shipping from an average of $12bn a year between 2003 to 2008 to about $1.5bn a year at present.

Lee Mun Keng, head of shipping Asia at HSH Nordbank, said: “Compared to the height of the shipping market, admittedly the numbers are very different. Chinese banks are definitely stepping up which I think it is great.”

The global shipping market has plunged into a prolonged recession since the 2008 global financial crisis, as it is inundated by severe oversupply of ships, low freight rates, tight cashflow and higher counterparty risks.

The lack of funds from European banks, in fact, has been seen by industry players as a good sign so as to curb the number of new shipbuilding orders and reduce the overcapacity problem.

“The banks are doing the right thing now – we shouldn't finance too much,” said Logan Chong, managing director, transportation group – shipping & offshore Asia, BNP Paribas.

However, Xiradakis believed that the shipping market's light can already be seen at the end of the tunnel, and the current market conditions present a “good opportunity for bank to invest in ships”, due chiefly to bottomed out newbuilding prices.