January 2021 – Global container shipping is picking up strongly again. And with it the demand for used cargo vessels. However, selling a large freighter asks for the right specialist knowledge, which many do not have - but Hamburg Commercial Bank does.
Hamburg, New York, Liberia, Singapore and the Marshall Islands in Oceania. Five location in the world, five time zones. It’s a huge challenge to get business people from each location to gather at the same time around a virtual conference table. But for Martin Dohrmann, Senior Expert Global Trade Finance at Hamburg Commercial Bank (HCOB), this logistical hurdle is part of his job’s special appeal. For many years now, he’s been mediating between buyers and sellers of cargo vessels – whether these be oil tankers, bulk carriers, reefer ships or the "coolies of globalization", as "Der Spiegel" once referred to them: container ships. Dohrmann cannot complain about a lack of work, especially in recent times: "In particular, the demand for container ships is picking up again." This sounds remarkable in 2020, the year of the pandemic, but is driven by anticipation of the global economy’s recovery. China and other Asian countries in particular, which are hardly affected by the consequences of the latest coronavirus waves at the moment, are recording strong exports with corresponding demand for free shipping capacity.
When a ship is sold, the parties involved rarely reside in the same country. It may be the case that the ship in question is currently anchored in Singapore and is bought by a company in New York. The ship is still sailing under the Liberian flag, but will be based in the Marshall Islands after the deal. And the experts who make it possible to conduct complex transactions across even huge geographical distances are based in Hamburg.
"Ever since the market for ships collapsed in the wake of the 2008/2009 financial and economic crisis, many competitors have left the market for ship sales," says Andreas Beckmann, Team Head Trade Finance at Hamburg Commercial Bank. HCOB, on the other hand, has stuck with the business, even though it has reduced its entire business in the shipping sector. However, the ship sales expertise is still there.
"Even with used ships, we’re still talking about tidy sums. But buyers and sellers often don't meet in person, let alone know each other beforehand," says Beckmann. "In such a vacuum, our task is to therefore ensure confidence, clear processes and a speedy sale. One of the parties involved is usually already our customer. Normally, a shipping client commissions us to support the banking aspect of a ship sale: from the conclusion of the contract to the closing. Before the future buyer is allowed to set foot on board to inspect the ship, the sale contract is concluded and then a joint account must be opened with Hamburg Commercial Bank: This is a joint account held by the seller and the buyer, into which ten percent of the market value is usually deposited as security. The remaining 90 percent is then transferred into this escrow account by the day before the deal is signed.
The shipping business is so globalized and fragmented that it cannot function without agents and brokers working as intermediaries. When "documentary closing", a process in ship sales where the existence and legality of all relevant documents supplied by the companies and people involved are checked, the team of experts at Hamburg Commercial Bank applies the meticulousness of notaries and at the same time the language of international diplomats. Beckmann: "We are active in many cultures at the same time, and quite often have to mediate between different commercial temperaments to close the deal."
But even with the most sensitive approach, situations arise from time to time that are new to even Hamburg Commercial Bank’s most experienced deal makers. Market expert Dohrmann reports of a case in which the buyer requested that an accredited diver inspect a vessel again under water for damage before it was sold. But something went wrong with the dive, which took place in the harbor of an African city. The diver spotted sharks and didn't dare go under the keel. The deal was in danger of falling through. Without further ado, the ship was moved to another port. Then, with a day's delay, the deal was closed.