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Live From Sea Asia 2013
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Owners hit out at shipping banks

Singapore: Numbers do not lie and a quick look at some statistics from the dry bulk market for the period 1985-1987 and 2010-2012 tell a story of an acute oversupply problem which shipping players should listen to and understand, said Precious Shipping managing director Khalid Hashim.

Speaking at the shipping finance session of the Sea Asia 2013 conference, and comparing the current downturn with the previous major downturn in the dry bulk market, he pointed out that while the growth of new tonnage in the earlier period was almost flat, it was growing at 9% per year in the most recent period from 2010 - 2012.

Further, with total orderbook growth at 6.2% previously and 38.1% in the current period, and the annual change in asset values for five-year-old second hand vessels increasing by 30% and decreasing by 20% respectively, the story gets even worse.

Relating this to the ship finance market, Hashim said in this situation, the banks are heavily exposed now and adding to the discussion, Vroon Group managing director Coco Vroon said the problem with banks is that they refuse to accept losses and "take their medicine". Instead they are using methods such as warehousing and other means to deal with problem shipping loans.

This leads to the oversupply and low rates prevalent in the market now with bad companies being kept afloat, which unnecessarily depresses the market, he said. Vroon called for them to stop supporting weak companies and for a rationalisation among the shipping banks, with fewer but better banks in the market.

In defence of the bankers, BNP Paribas Asia head of shipping and offshore finance Arnold Wu said banks are naturally averse to foreclosures on ships because they are much harder to do. Unlike in the housing market, foreclosing on a ship is "a painful and difficult exercise", he said.

In addition, the ship finance restructuring in Asia will be different from what is seen in Europe. Apart from the presence of more semi-state owned companies in this region, the Asian Financial Crisis in the late 1990s made Asian owners much more cautious and they have been surviving the current market downturn relatively well. "There is a strong local element to it, with strong support for local industry," Wu said.

The theme of local support was reinforced by Export-Import Bank of China deputy general manager, transport finance depart Chen Bin, who said in the current difficult times, the bank aims to help as many Chinese shipyards as possible.

Chen added however that the focus would be on eco and high tech -design ships especially in the LNG sector as well as in the offshore market.

 

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