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China Attracts Greek Ship Owners

China Attracts Greek Ship Owners
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Δευ, 30 Σεπτεμβρίου 2013 - 17:24
Greek shipping magnates, still the kingmakers of the global shipbuilding trade, are increasingly moving their financing and ship orders to China, drawn by cheap credit and lower shipyard costs.
Greek shipping magnates, still the kingmakers of the global shipbuilding trade, are increasingly moving their financing and ship orders to China , drawn by cheap credit and lower shipyard costs.

The move is a big shift in an industry that had amassed $279.5 billion in orders this year at the end of August. Greek shippers operate 16% of the world's fleet of dry-bulk and container vessels, and about a quarter of all oil tankers. By cutting costs aggressively, they have weathered the global economic crisis better than many of their German, Scandinavian and Japanese competitors--holding on to market share despite a sharp slowdown in international trade since 2008.

Now, with much of the world emerging from the worst of the crisis, Greek shippers have embarked on a capacity-buying binge. As the biggest and most influential buyers of new ships--heavily courted by shipbuilders in places like Japan and South Korea --their growing Chinese orders could influence other global buyers.

For years, Greek shippers financed new vessels with loans from European banks, then placed orders with shipyards in Japan and Korea . Less than five years ago, Greek orders for Chinese-built ships were less than half those they made for Korean-built vessels. That gap is closing fast.

As of the end of September, Greek shipowners had ordered 188 vessels from Chinese yards, compared with 217 from Korea, according to Athens-based XRTC Business Consultants, whose numbers are closely watched in the industry. Japan is a distant third with 39 ships ordered.

And in some markets--for instance, for bulk carriers-- China is now far ahead. Greek shippers ordered 46 such ships from China , according to XRTC, compared with 13 Korean orders.

Angeliki Frangou, chairman and chief executive of New York-listed Navios Maritime Holdings, said Chinese yards are offering highly competitive deals at a time when Greek shippers are bulking up their fleet.

"If you have a strong balance sheet you place orders at the lowest point of the [business] cycle," she said.

Korean yards still have the upper hand in building specialized vessels like liquefied natural-gas carriers and offshore oil-drill ships. "But the Chinese are catching up fast," said XRTC's Managing Director George Xiradakis, who also advises China Development Bank.

A big part of the shift is down to financing. Greek shippers' global operations and international financing helped insulate them from the worst of the economic crisis in Greece . But western banks have become much more leery of lending to anyone since then.

Chinese banks stepped into the void, offering cheap and easy financing. Theodore Veniamis, president of the Greek Shipowners Association, said many Greek owners now get up to 70% of a loan from a Chinese bank with the remainder coming from a European or a U.S. lender.

To be sure, Chinese lenders have pared back amid government efforts to reign in credit. But so far, shipbuilding loans are still relatively easy to come by, especially if a western bank participates in the financing.

"Even with tighter credit directives coming from Beijing lately, it will be rare for a Greek application to be turned down," said a senior ship-financing executive at a major Chinese bank, who asked not to be named.

At the same time, Chinese yards have become a quicker and cheaper place to build, amid capacity constraints in traditional yards in Japan and South Korea . China 's shipyards offer prices on average 10% and 15% less than rivals in South Korea and Japan , respectively, industry officials say. And quality is improving.

The budding Sino-Greek shipping partnership dates back to 2010 when China 's then-Premier Wen Jiabao, while on a visit to Athens , offered $5 billion in soft loans to Greek shipowners if they opted for China 's yards to build new vessels.

The global shipping industry is paying the price for Greek shipowners' binge on cheap Chinese credit and shipyard capacity. Analysts estimate that there is about 35% more container vessels than needed plying routes or anchored unused. Crude tanker and bulk carrier overcapacity, meanwhile, hovers at about 28% and 25%, respectively.

"The Greeks are the world's dominant buyers both in terms of new and used vessels so they are contributing to the glut," said Jonathan Roach, senior analyst at London-based Braemar Securities Ltd.

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