Asia to become world's dominant shipping force

Saturday, 30 May 2009

What might feel like a global shipping meltdown will, in hindsight, be viewed as a worldwide shift to an Asian domination of the maritime industry. Such was the conclusion of a recent shipping finance forum in Tokyo. Asia's determination to protect its shipbuilding industries and to secure its means of supply through nationally owned tonnage has destroyed predictions that a lack of finance would mitigate the impact of an over-exuberant newbuilding market through cancellations.

FSL Trust Management president and chief executive Philip Clausius told a gathering of international shipping financiers that the widely-predicted massive cancellation of the orderbook will happen while state-owned Chinese shipowners are being offered 17% subsidies to soak up cancellations from foreign owners."Ship deliveries may be delayed a year or so. They may not go to the original owners, but they will come. And the massive oversupply hangover will not go away any time soon," he said. In a similar vein, Marine Money Asia's financial analyst Rodericks Wong pointed to the speed of Asian governments, primarily in South Korea and China, in initiating larger financial stimulus packages than elsewhere to support both their domestic shipbuilders and owners.

This was a leading driver that would shift the balance of shipowning primacy eastward, he said.Since the beginning of 2009, South Korea had offered in excess of Won23trn ($18.2bn) in the form of guarantees or direct finance through buy-and-leaseback arrangements to ensure that domestic orders did not slip into the hands of foreign owners at rock bottom prices, Wong said.

HSH Nordbank senior economist Mattias Umlauf said the global reduction in bank capitalisation outside Asia had led to China's banks taking the top three places as the richest source of debt financing.China has made no secret of the fact that it intends to secure the supply of natural resources through the development of its own transport. This was reinforced by the sting of exorbitant shipping costs incurred through the dry bulk boom in 2007-2008.

China's Export-Import Bank has provided $22.5bn in support to the local state-owned shipbuilding industry since 1994 and more recently offered $3.7bn to private shipbuilder Jiangsu Ronsheng. As Western banks teetered on the edge of insolvency, traditional global financiers in Norway and Germany would retrench, offering what credit they had to their domestic owners under the direction of their respective governments, with Greek owners suffering the biggest impact.

Source: Motor Ship