February 2020 – The financing and consulting business in shipping at Hamburg Commercial Bank has developed well recently, and the bank expects solid business in 2020 as well. Refinancing well-preserved second-hand ships takes center stage.
Globalization of trade is unimaginable without worldwide container shipping. According to the records of the Federal Office of Statistics, about 292 million tons of goods were processed in German seaports alone in 2018.
Container transport quantity in global shipping from 2014 to 2023 (in million TEU) | Source: Statista 2020
But how will the situation develop in 2020? Currently, the number of political conflicts appears to be growing, Brexit is a done deal, and some of the international trading relationships that have worked well for years are now being put to the test – one catchword here is the discussions between the USA and China. Generally, the economy is slackening slightly around the world. However, the International Monetary Fund (IMF) still predicts global economic growth of 3.3 percent for 2020. “Of course, the global trading volume may be impacted by that in certain ways,” says Jan-Philipp Rohr, global head of shipping at Hamburg Commercial Bank. “But on the whole, a very large amount of goods continues to be transported. The global economic output is not shrinking; it is simply growing more slowly.
After years of crisis, the shipping markets have recovered, especially in the last year, but they are still operating at a measured pace. “The development is encouraging in all asset classes where we are active,” says Jan-Philipp Rohr. “That applies to containers, tankers, and bulk carriers.” The prognoses for the coming years are also good. The majority of market participants is optimistic, but not to the point that they are building an inordinate number of ships, as in the past. “The markets are moving at an acceptable level,” says the head of shipping at HCOB. He is particularly satisfied with the contracts in Greece. “That is now our most important market.” At the same time, the bank is active in the remainder of Europe, including Germany, as well as in the USA and Asia. “Some of our customers have known us for a long time and know that we understand our business and are reliable. The change in proprietor in 2018 did not change that; instead, it even gave us access to new customer groups,” says Rohr.
Above all, activities are focusing on financing second-hand ships. “Older ships are interesting with regard to risk factors in particular,” says Rohr. “Old” is a relative term in this instance: most of the ships are 8 to 15 years old and can still be used for one or two decades. However, some of them need larger maintenance and renovation measures in order to improve their efficiency and environmental balance. That can be done by installing a new twist drive or a new bulbous bow.
Adjustments to the drive technology are also needed in some cases, since the shipping industry also needs to do its part in reducing global carbon dioxide emissions. That involves optimizing the engines, using better quality fuel, installing filter systems (“scrubbers”), or switching to liquefied natural gas (LNG).