DNB ASA, the world’s largest arranger of shipping loans, expects the shipping industry to have a funding gap of $100 billion by 2015 as European banks scale back lending amid a slump in maritime transport.
“The money exiting the shipping and offshore space is a mind-blowing number,” said Dag Thomas Michalsen, senior vice president at DNB Markets, at the Scandinavian Shipping and Ship Finance Conference in Copenhagen today. “Clients will have to look elsewhere for ship financing, such as the bond markets.”
Shipping companies are struggling to make a profit because of an oversupply of vessels, slumping freight rates and soaring fuel costs. That, combined with stricter capital rules for lenders and conditions for bailouts some banks received during the financial crisis, has led many lenders to scale back their shipping operations or exit the market altogether.
With $42 billion in shipping loans, Hamburg-based HSH Nordbank is the largest, followed by Norway’s DNB, Germany’s Commerzbank AG and Stockholm-based Nordea Bank AB. Both HSH Nordbank and Commerzbank are reducing loans to the industry.
While U.S. lenders have increased their focus on ship financing, it’s not enough to cover the shortfall left by European banks, Michalsen said. Asian firms that lend to the industry, which normally have lower borrowing costs than European peers, “stand a good chance of playing a more important role,” he said.
Still, they typically lend more to Asian shipping companies, with Chinese banks often seeking a Chinese angle to finance a European client, he said.
European banks account for almost 90 percent of global ship lending, while Chinese banks represent 9 percent, according to Athens-based vessel-finance consultant Petrofin SA. Of the world’s 10 biggest shipping banks, Bank of Tokyo-Mitsubishi UFJ Ltd. is the only non-European lender, in ninth place, Petrofin data show.