Petrofin: Shipping Lending Declines to Lowest Level in a Decade

File image courtesy Bjoertvedt

Published Jul 24, 2020 2:38 PM by The Maritime Executive

The shipping industry is expected to remain constrained for finance in 2020-21 in the absence of new positive factors. This continues a trend from the beginning of 2020, when lending by the world’s top 40 ship financers was already its lowest level in more than a decade, according to Athens-based Petrofin Research

The COVID-19 pandemic and its negative impact upon the global economic activity, international trade, and the price of oil has further aggravated the situation in in 2020. 

A recent report by Petrofin found that lending by 40 banks fell from $300 billion 2018 to $294 billion in 2019, the lowest level since Petrofin started monitoring the global portfolio in 2008. However, Petrofin states that the decline of western banks' ship finance appears to have run its course.

Banks’ reaction to COVID-19 was one of caution. “Although there were some loan restructure requests received by all banks, it was hardly a deluge,” says Petrofin. "In fact, the shipping industry, as a whole, weathered the storm well with the exception of offshore and cruising industries, which faced serious financial threats."

Meanwhile the global fleet has grown 31 percent, indicating the funding is coming from non-banking sources, such as leasing, alternative lending, private equity from funds and investors.
European portfolios show a small increase, based mainly on BNP Paribas which has an $18 billion portfolio and KfW, $16.6 bn, climbing to the top two positions. Third and fourth positions, based on market estimates, are occupied by China Exim and Bank of China, $16.5bn and $15bn respectively, ahead of Japan’s SuMi Trust [Sumitomo Mitsui Trust Holdings] with a book worth $13.5bn. European banks occupy the next five places. 

Even the Chinese leasing companies have been adversely impacted by their exposure to aviation, which combined with the higher cost of U.S. dollar funding resulted in a slowdown in their ship finance activities.

“By mid-year, the situation has stabilized and the focus is shifted to the expected timing and magnitude of the global economic recovery. Analysts are talking either of a V-shape recovery, or of a U-shape one, or of W-shape one and yet others of no foreseeable recovery until 2021,” said Petrofin.