A number of European and German shipping banks will leave the ship finance market due to the European sovereign debt crisis, which will result in fewer bank loans for shipowners, a leading German ship financier has warned. “The supply of bank loans for shipping projects will become scarcer,” Torsten Temp, managing board member of HSH Nordbank, the world’s largest ship financier, said in an interview with Lloyd’s List. “We see that many foreign banks will have equity problems due to the high risks of government bonds in their books,” said Mr Temp, who is in charge of HSH Nordbank’s shipping business. He declined name the banks in question. Banks need fresh money to solve these problems or they will have to reduce their balance sheets. “Naturally, you do this with business segments which have been less successful in the past and which are tying up a lot of capital, and in this regard shipping is predestined,” he said. As a result, Mr Temp expects the exit of a number of European banks from ship finance. “But we will also see German banks leaving the market,” he added. He was not prepared to name these candidates either. “If you ask Italian or French banks now whether they are interested in ship financing, the answer will probably be no,” he said. HSH Nordbank returned to signing new business in 2011 after two years in which it did almost no new deals. To date, the bank has done €500m worth of new business without extensions of existing contracts. Of this, between €350m and €400m was done with foreign customers, a majority of them coming from Greece, Asia, North America and Scandinavia. This reflects the huge equity problems of German owners, which have not placed many newbuilding orders. “The majority of shipowners in Germany are suffering more or less from equity problems because their traditional way of equity financing is not working any more,” said Christian Nieswandt, who leads the bank’s shipping unit. Traditionally, German owners relied to a great extent on the KG market to fund the equity for newbuilding projects. However, this source of capital dried up during the financial crisis and is not expected to return to past volumes for some time.
Offshore and shipping news - November 28 2011 (48)
Hanjin Heavy in drive to be top South Korean yard
Hanjin Heavy Industries & Construction has launched a full-throttle modernisation of its Yeongdo yard after wrapping up protracted labour negotiations with dockyard workers. HHIC said its goal was to “regain its position as South Korea’s top shipyard as soon as possible” and to “fight off the challenges from Chinese rivals”, a move that has been hampered by the ongoing labour dispute. The Busan shipyard will concentrate on high-value added special purpose vessels, alongside the construction of mid-sized container vessels. In the past it has built drill rigs, liquefied natural gas carriers, cable ships, ice breakers and post-panamax containerships. HHIC said it aims to fill its orderbook quickly with “a lot of bids with relatively short delivery time compared to rival companies”. Delivery times would be sped up by “taking advantage of global manufacturing systems including Busan Yeongdo Dockyard and HHIC-Phil’s Subic Shipyard”, the company said.
Source: excerpt from Lloyd’s List, Thursday 24 November 2011
US LNG exports set to spark demand for up to 100 vessels
More than 100 liquefied natural gas carriers could be added to the global fleet to service new US LNG export projects. The latest forecasts on potential LNG carrier orders come as the US is poised to become a major LNG exporter as it extracts ever greater quantities of its domestic shale gas. Highlighting the high expectations for US LNG exports, by 2020 combined LNG exports from the US and Canada could be the fourth-largest in the world after Qatar, Australia and Indonesia, analysts have said. As such, the development of a US LNG export industry has been labelled a paradigm shift in the global gas market. The US has re-exported LNG cargoes before, but never before has it exported its own domestic gas as LNG. The US plans to turn its import terminals into liquefaction plants to export its cheap gas to Asia, where prices are four times higher. UK company BG has already signed a landmark $8bn deal with Cheniere Energy to export LNG from the US on ships over 20 years. With around five other liquefaction projects at various stages of development, the global fleet of around 370 vessels, with around 60 on order, is set to grow further. “Assuming all proposed US export projects come through, we estimate an additional 85-110 vessels for US projects,” said Arctic Securities analyst Erik Nikolai Stavseth. He noted that even if only a third of US projects happen, around 50-60% of the current orderbook will be required, which works out at around 30-40 vessels.
Source: excerpt from Lloyd’s List, Monday 21 November 2011
BIMCO creates contract for armed guards
BIMCO has created a standard contract for the private maritime security industry and the first draft should be confirmed for early 2012, providing the industry with a much-needed benchmark on which to judge PMSCs. Chief maritime security officer at the shipowner trade association Giles Noakes said that the contract had taken into account the concerns of the P&I clubs as well as underwriters, shipowners and lawyers. He added that the trade body had worked closely with all interested parties to ensure that all views were heard. Mr Noakes explained that the standard would provide and take account of the International Maritime Organization’s MSC.1/ Circ.1405/Rev.1 and MSC1/ Circ.1406/Rev.1 but would provide more detail because IMO members could not be as prescriptive as the industry needed them to be. “The industry is happy with 1405 and 6; it is good advice, and while it has quite a lot of detail it is not quite enough. Law firms currently have to draw up a contract per voyage and part of BIMCO’s role is to provide standards that can be used in this manner. We felt drawing up a standard contract for PMSCs was the quickest way of dealing with a difficult problem,” he said. The standard is expected to come into force as soon as possible and the drafting committee is meeting shortly to get things under way. However, Mr Noakes said the contract alone was not a sufficient indicator of a reputable PMSC. “Just because a security company signs the contract, it doesn’t mean that they are a good company,” he said. “Signing means that they agree to abide by the standards and then organisations like the Security Association for the Maritime Industry will have a baseline of standards to judge PMSCs on. It will at least give everyone a bottom line to work with.
ABS warns against green ship design
The head of US-based class society ABS Christopher Wiernicki has strongly criticised other societies that have begun to offer environmental ship design services, saying the trend creates a fundamental conflict of interest with their role as independent providers of safety approval and certification. He said the move was deeply troubling and went to the heart of the underlying principle for classification, and added he was surprised to have heard no other voices questioning the growing intrusion of class into an area of ethical quicksand. A number of classification societies, including Oslo-based Det Norske Veritas and Hamburg-based Germanischer Lloyd, offer a distinct environmental consultancy service. Both organisations have revealed vessel ideas that they think are the way forward for the industry. “The bottom line is that, since the objectives of the designer and the class society are so fundamentally different, having class societies promote themselves as designers is dangerous,” said Wiernicki. “It undermines the basic fabric of the industry, it destroys the credibility of class as an independent third party, it has the potential to lead to poor designs that could impact the credibility of the whole industry and it upsets the essential checks and balances between commercial pressures and effective safety and environmental risk management.” DNV president and deputy chief executive Tor Svensen told Lloyd’s List that the concepts that DNV have revealed in recent years are just that, and not designs. Earlier in the year the Norwegian class society revealed at a big press launch its Triality concept — a gas-powered ballast-free large oil tanker. Last year it revealed the Quantum, a dual-fuelled container vessel. Germanischer Lloyd also revealed the ‘Best’ aframax tanker design, the result of work with a Greek university, when it put forward its thoughts on how tankers in the future could be compliant with the mandatory energy efficiency design index. Mr Svensen insisted the DNV Quantum and Triality concepts would never be built in the form in which they were revealed to the industry. Owners would have to have the ideas within the concepts designed into their future vessels, he said. He also added that DNV knew where to draw the line between this kind of work and its role in safety classification. When GL was approached for a response regarding Mr Wiernicki’s comments, the German class society also said the work it has pushed out to the industry for appraisal were design concepts which had no relevance for the approval process of drawings.
Source: excerpt from Lloyd’s List, Tuesday 22 November 2011
US storms into global LNG export market
It has been the question on the lips of many gas market commentators for some time — will the US start exporting its vast quantities of recently discovered natural gas, thereby reshaping international energy markets? The question was met with a resounding yes at the end of October, when UK company BG Group signed an $8bn deal with Cheniere Energy to export liquefied natural gas from the US on ships over 20 years, the first deal of its kind. While the US has previously re-exported small volumes of LNG cargoes received from other countries, never before has gas originating in the US been liquefied and exported to international markets. The deal, which will see Cheniere supply LNG trader and major LNG carrier owner BG Group with 3.5m tonnes per year of LNG, should help Cheniere secure the finance to turn its import terminal at Sabine Pass, Louisiana, into an export terminal. As such, the impact of the deal on global energy markets cannot be understated. After years of planning for LNG imports from key producers in the Middle East, the US has now passed the stage of letting its imports dwindle and re-exporting the odd cargo, to be firmly set on its strategy to sell its cheap, abundant domestic gas, opening up new buying opportunities for gas-hungry Asia. Indeed, recent analysis suggests that by 2020 combined LNG exports from the US and Canada could be the fourth-largest in the world after Qatar, Australia and Indonesia.
Source: excerpt from Lloyd’s List, Tuesday 22 November 2011
New plans could double Indian LNG imports
India is potentially set to double its capacity to import liquefied natural gas as Reliance Industries and BP consider coming together to build three new LNG import terminals. The terminals will be able to import around 5m tonnes of LNG per year each, according to reports from Bloomberg, almost doubling present import capacity. The possibility of the two energy giants from India and the UK forming a joint venture to push through the expansion of India’s LNG import capacity comes as demand for the fuel continues to rise across Asia. For example, Japanese LNG imports rose to 6.15m tonnes in October, an increase of 18% compared with the same period last year, according to Oslo-based investment bank Arctic Securities. While Japanese LNG imports have been boosted by the fact that only around 18% of Japan’s nuclear capacity is online after the tsunami earlier this year, India is seeing rising LNG imports as it tries to move away from a reliance on more polluting coal, with major energy companies signing deals with Indian companies. For example, UK-based energy company BG Group signed a deal at the end of September to supply up to 2.5m tonnes per year of LNG to India. The sales agreement with Gujarat State Petroleum Corp is for up to 20 years, starting in 2014. However, amid the superlatives pinned to India’s potential to play a critical role in driving demand, there are obstacles that make it difficult to extract the word ‘potential’ from discussions on India’s expansion of LNG imports. The two issues of India’s growing domestic gas production squeezing out LNG imports, and uncertainties over India’s ability to pay market gas prices, cloud the picture, threatening much-needed investment in its import terminals.
Source: excerpt from Lloyd’s List, Tuesday 22 November 2011
Bridging the lending gap
The head of the world’s biggest ship financing bank, HSH Nordbank, has heralded the further decline of European ship financing. The culprit is the eurozone crisis, and the potential impact of that crisis on Europe’s banks. Torsten Temp, managing board member of HSH Nordbank, told Lloyd’s List on Monday that “the supply of bank loans for shipping projects will become scarcer”. The reason is the current weakness of sovereign debt. What is interesting about this scenario is the tepid levels of international ship financing from China, when its banks have long been expected to fill the gap left by Europe. China’s commercial banks, now the world’s largest, have not been highly active in the international ship financing market this year. The reason has been a government tightening on lending conditions which has only recently eased. China’s inflation has cooled and prices in its real estate market are finally easing. Regulators also clamped down on non-bank lending in October, leaving a gap that commercial banks will have to fill. These openings could lead to more ship financing, but progress is likely to be slow, given the current rates conditions in the three major shipping sectors. Moreover, a primary reason for a slowdown in international ship lending in China has been the dollar liquidity shortage in China’s banks. Only the policy banks are said to have enough dollars to lend aggressively, but sources in China report that even lending agreements through the China Development Bank and the China Export Import Bank have been moving at a slow pace.
Source: excerpt from Lloyd’s List, Wednesday 23 November 2011