Greek Ship Owners Wait for Lower Prices to Buy, RBS Banker Says
Tuesday, 06 July 2010
Most Greek shipowners, who account for more vessel orders than any other nation, are waiting for prices to drop before expanding their fleets, according to Royal Bank of Scotland Group, their largest lender.
The cost of a new 2 million-barrel carrying supertanker has climbed 5 percent this year to $104 million following a 33 percent slide in 2009, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. Prices for iron ore-carrying capesizes, too big to navigate the Panama Canal, advanced 6.3 percent to $59.5 million a vessel, Clarkson said.
“Prices are more likely to go down than go up,” Lambros Varnavides, the bank’s head of credit to the shipping industry, said in an interview in London on July 1. “Yards still have large order books which they are working their way through. Once they work their way through that, they will be more desperate for new orders.”
Greek owners and operators have the largest order book of any nation as measured by compensated gross tons, with contracts for 19.2 million tons of new carriers, more than Germany or China, according to Clarkson. Oil tanker and commodity transporter prices advanced this year as economic growth boosted demand for seaborne trade, it said.
Compensated gross tons take account of the work that goes into constructing different types of vessel. On that basis, Greece has orders for 19.2 million tons, Germany 16.8 million, and China 15.2 million, according to Clarkson.
By number of vessels, German owners have the greatest order book at 933 vessels, compared with 857 for Greece and 710 for China, according to Clarkson.
Varnavides predicted in January 2009 that as many as half of publicly traded commodity shipping lines may breach their loan covenants after a record collapse in hire rates in 2008.
Any breaches would have enabled banks to strengthen loan terms or to get cash from borrowers who wanted to maintain their original financing terms, he said.
The ratio of losses on RBS’s shipping loans has averaged 2 basis points, or 0.02 percent, in the past 20 years, according to Varnavides, who joined the bank’s shipping department in August 1974. He said he expects that trend to continue for the next several years. The bank’s shipping department is expanding lending, while the unit’s so-called non-core shipping lending has dropped, he said.
RBS has provided about $23 billion of credit to shippers, of which $20 billion has actually been borrowed, he said. In January last year, it had provided $25 billion of credit. Source: Bloomberg
Paris Prodromidis - @ParisPR