Isaac Arnsdorf London
Shipping lenders are tightening rules on who their clients can trade with after the industry’s worst rout in at least 23 years.
Banks are threatening to cancel loans if ship owners do business with customers they perceive to be at risk of failing to honour contracts, according to the Baltic and International Maritime Council, whose members control 65 percent of the global fleet. That meant some shipping companies were being forced into shorter contracts from a smaller pool of clients, said Peter Sand, an analyst at the Denmark-based group.
The value of merchant ships has plunged as much as 80 percent since 2008 as the industry’s biggest-ever building programme created a glut of capacity. The vessels are typically used as collateral on loans. At the same time, banks have curbed lending to set aside more capital following the global recession.
“Five years ago, you always called your ship broker in the morning,” Sand said. “Now you call your ship banker in the morning. If you do not sign up with blue chips, the banks might not approve your loans.”
The ClarkSea index, a gauge of industry-wide earnings, averaged $9 258 (R91 166) a day this year, the lowest level since at least 1990, according to Clarkson, the largest ship broker. The price of a five-year-old Capesize vessel, which typically hauls iron ore and coal, fell to $30 million at the end of November, from $153.5m five years ago, according to data from Simpson, Spence & Young, a ship broker in London.
The surplus of ships available to transport iron ore, coal and grains had expanded to the biggest since at least 1986, Clarkson said last month. The glut of supertankers is the largest since the mid-1980s, according to Fearnley Consultants, a maritime research company in Oslo.
“Banks are imposing a degree of discipline on the market that doesn’t exist when times are good,” said Stephen Cogley, an attorney at Quadrant Chambers in London who specialises in trade and arbitration. “If you’re a blue chip trading party with a low history of default, you may find that’s a very attractive proposition to be contracting with.”
HSH Nordbank said on Friday that it preferred shorter contracts so that ship owners could lock in higher rates later.
“A very careful view on the quality of the charter is of tremendous importance”, especially for dry-bulk carriers, Christian Nieswandt, the bank’s global head of shipping for domestic clients, and Ingmar Loges, the global head of shipping for international clients, said in a statement.
The Hamburg-based bank said on August 30 that its loans to the shipping industry fell by e1 billion (R13bn) to e26bn in the second quarter.
Deutsche Schiffsbank, a unit of Commerzbank, reduced its exposure at default in the shipping industry to e17bn in the second quarter from e18.3bn in the first three months of the year, according to a company presentation. Exposure at default is the calculation of losses in the event of borrowers defaulting. – Bloomberg