Wave of insolvencies looms for shipping industry

Source FT.com vom 11.12.2011

Fears are mounting that the eurozone financial crisis could spark a fresh wave of shipping insolvencies, after funding problems at many leading European banks accelerated falls in vessel values, triggered by the worst conditions in some shipping markets in 25 years. Several of the world’s most important shipping financiers have told the Financial Times that liquidity problems are putting banks off financing potential purchases of ships that come up for sale, pushing down the values they achieve. That is prompting banks to worry about the value of similar ships pledged as collateral on their loans. A downward spiral in values is developing as falling values prompt banks to pressurise owners to sell off further ships. The warnings come at the end of a year so grim for some of the most important shipping segments that many involved are already comparing conditions to the prolonged slump in the mid-1980s. One of the world’s leading shipping conglomerates – Korea Lines – and one of the best-known tanker operators – General Maritime – have already collapsed into bankruptcy protection as a ship glut has depressed earnings. One of the most outspoken financiers, Dagfinn Lunde, head of shipping at Germany’s DVB Bank, confirmed that the credit squeeze was restricting finance for second-hand ship purchases. As a result, Mr Lunde said, prices realised by vessels were falling fast, prompting more banks to push shipowners into selling ships. “I don’t think we will for many years have a normally functioning market,” Mr Lunde said. “In some markets, we will never have the equity returns we were used to.” Harald Serck-Hanssen, head of shipping for Norway’s DNB, one of the world’s largest shipping lenders, echoed Mr Lunde’s concerns. Financing problems were limiting demand for ships that came on to the market and pushing down prices, he said. “There may be a downward spiral forced by the banks,” he said. Like many senior shipping financiers, Mr Serck-Hanssen expected more companies to follow those that have collapsed this year into insolvency. “There will absolutely be more bankruptcies,” he said. “That’s clear.” According to VesselsValue.com, an arm of London’s Seasure Shipbrokers, a typical fiveyear-old very large crude carrier has fallen 30 per cent in value since August to only $58m. The value of a Panamax container ship – the largest that is able to be used the Panama Canal – of similar age has fallen 32 per cent since May to $39.3m. Even in dry bulk shipping, where earnings have recovered after falling earlier in the year, a fiveyear-old Capesize – the largest class – has fallen 28 per cent from a year ago, to $39.4m.