ShippingWatch

Shipping banks target the same solid customers

With the shipping industry in a major crisis, the banks are now more picky about who they choose to lend money to or invest in. In reality, the banks are targeting the same customers, according to DNB. This is hard for the small and medium-sized players on the market.

Photo: BP

SINGAPORE

A few years ago, cheap liquidity was steadily flowing in to the shipping industry, which could easily finance a record number of newbuildings and projects. Then the crisis came – overcapacity and historically low freight rates – which caused investors to pull out and the cash flow dried up almost immediately.

"The risk has shot way up over the last four to five years. Before – in 2008 and 2009 – it was easier to imagine a scenario in the dry bulk industry about what a big recovery was coming. Investors don't believe in that recovery anymore," said Abhishek Pandey, who is head of Shipping Finance & Structured Finance for ASEAN, Southeast Asia, Africa and the Middle East, at the Singapore-based Standard Chartered Bank, when he took to the podium at this year's Asia Pacific Maritime Conference in Singapore.

Along with several other representatives from banks and investors, Pandey discussed what financing opportunities exist in the shipping industry in 2016.

Trying to be realistic

"Those who thought that shipping was a short-term investment of three to four years, have now learned that this is for the long haul – they have no choice," Pandey stressed, referring to the economic challenges faced by the majority of the shipping industry.

"We are trying to be realistic in looking at the market and where we are situated on the curve. But we cannot change the market, so the goal for the smart investors and the competent owners is to find out where to do business and thus where to invest," said Domenik Nizet, who is senior vice president for Tanker Group at DVB Bank in Singapore.

The panel repeatedly discussed these owners. The idea is to be selective, stated the world's biggest bank, Citi, which was founded more than 200 years ago, precisely by people from the shipping industry:

"At Citi, we target the big customers – we focus on the top of the industry, and this goes for all industries, simply because we want them to make use of all of our products and the global footprint we have," said the managing director, Shreyas Chipalkatty from Global Shipping, Logistics and Offshore at Citigroup in the UK, in comments to ShippingWatch after the discussion on the stand.

Everyone is targeting the same clients

"There is a definite tendency among the banks," continued Norwegian Joachim Skorge, who is the regional head and managing director of DNB Bank in Singapore:

"We are all focusing on the major customers – the solid customers. And this means that we are all going for the same targets, and this creates problems for small and medium-sized companies, which have traditionally had access to bank financing."

Today, the banks not only differentiate based on the size of the customers, but they also look at which part of the shipping industry, they come from. On the panel, there was agreement to stay away from offshore:

"In general, offshore is in a very big crisis, where many ships are unemployed and instead idled. There is a fundamental problem with the demand – not to mention the overcapacity," said Joachim Skorge from DNB. He would go as far as to say, he would rather put his savings in the likewise ailing dry bulk industry:

"The prices are so low right now and with time, dry bulk will get through the overcapacity – just as surprises can emerge in the demand due to new infrastructure projects for instance. So I would definitely put my money in dry bulk ahead of offshore."

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