Thirteen of the world’s 19 largest shipping banks stopped new lending to the shipping industry amid an “extreme” vessel surplus that has cut profits among shipping lines and led to vessel seizures after loan repayments were not made, said the DVB Bank SE (DVB).
The Rotterdam based bank which is financing 1,500 vessels through 450 loan agreements is one of six remaining banks funding shipping, said Dagfinn Lunde, a member of DVB’s board of managing directors. As many as 100 banks were lending to the shipping industry four years ago, he said. Prices for new ships will drop further over the next 12 to 18 months, forcing some yards to close, then bringing supply of ships and demand into balance, he said. Delays in delivering new vessels are due to owners postponing completion in a poor market, not because they cannot pay, he said. Export credit agencies are loaning money to owners unable to secure finance from banks to pay the final instalment on new ships, he said. Shipbuilders are also providing “sellers’ credit,” effectively deferring the last payment so the vessel is able to leave the yard. Fifteen DVB loans worth US$2 billion breached loan-to-value agreements after asset prices fell during the past four years and needed additional cash or security to regain compliance with loan conditions, Lunde said. The over-supply of vessels will depress freight rates for container ships, tankers and dry-bulk vessels for at least the next 12 months and as long as two years, Wolfgang Driese, chief executive and chairman said. “The crisis is not yet over,” Driese said. “It is a composition of lower demand and an idiotic situation that everybody ordered at a time when they should have stopped ordering ships so there is a huge over-capacity in the market.”
Overcapacity at the world’s shipyards is “extreme” and needs to be addressed to pave the way for a recovery in freight rates, Lunde said. “We have a capacity for shipbuilding which is about double what we need for normal fleet renewal and that is really scary and it does not go away,” Lunde said.
Many owners of vessels seeking finance are approaching DVB amid the curbs on new ship finance lending elsewhere, Driese said. “German shipowners have learned that their friendly banks have disappeared and they are eager to talk and we are selectively following up on their invitations,” he said.