Dagfinn Lunde, writing in the latest issue of Maritime CEO magazine, ponders the huge hole in ship finance following a series of arrests in Beijing.
Let’s start this column by asking one of the biggest questions in ship finance this year – one I am not necessarily able to provide readers with an answer.
What is going to happen with China leasing? It seems like all the top names in this sector have been arrested. When the banks were reducing their shipping exposure over the past decade, it was Chinese leasing which filled the gap. Now there’s a noticeable hole. Sure, Japanese operating licences are increasing as are Taiwanese ones, filling a bit of the gap, but it will prove impossible to fill this huge void.
Maybe we might look to the West for some financing salvation. Are the German banks coming back, for instance? There’s been plenty of indications this year that some famous old names in German finance are reacquainting themselves with our industry.
It’s also worth noting the huge amount of American capital coming in via private equity and funds.
Historically private equity has a tendency to enter shipping when the sector is beyond its cycle peak, but I’d argue not this time though, private equity is entering more cautiously.
What is fantastic – and headline grabbing – is the yield in shipping now. Dividends are enormous, and shipping shares have often doubled in the space of a year.
The value of old ships is remarkable, redolent of the skewed newbuild orderbook, and the strong markets most shipping segments have enjoyed this year. The highest prices are for ice class tonnage, and they are astronomical, with Russia seeking ships urgently to get exports out through the winter.
I will finish my final column of the year with the shocking development of LIBOR or SOFR. Interest rates that were 4 to 5%, including the margin, are now 8 to 9% – this I can tell you is a huge shock for many people with many owners I talk to every day genuinely incredulous about this. The effect on cash flows is huge.
As ever in shipping, the year 2022 has proven never dull. In a strange way – maybe it’s my age – I’d like 2023 to be a bit more mundane.
To know more about Dagfinn Lunde, click here.