Germany: SMM – Funding of “Green Ships” is Important Task for Bankers and Shipowners

Funding and operating “green” ships which can be used worldwide without restrictions is a very important task for bankers and shipowners today, as the internationally applicable environmental regulations for the shipbuilding and shipping industry have become more and more stringent in recent years.

That was the view of Dr. Uwe-Carsten Wiebers, Global Head Maritime Industries at KfW IPEX-Bank, in the run-up to gmec, global maritime environmental congress. The congress is to be held at the Hamburg Fair site on 3 and 4 September 2012, on the occasion of SMM, the world’s leading maritime industry fair. Dr. Wiebers will give a presentation at the SMM Ship Finance Forum 2012, which is the starting event at SMM 2012, on 3 September, the day of the SMM Opening Ceremony. His title is “The future of traditional ship funds”, and he will also participate in the panel discussion on future developments in ship financing, together with Alexander Tebbe, CEO Auerbach Schifffahrt, and Dr. Torsten Teichert, CEO Lloyd Fonds.

The problem of the maritime industry is the current instability of the global economy, which has also created difficulties for the shipbuilding and shipping markets. Thus the order book of world shipping shrank by nearly 30% in the first half-year 2012 versus the same period in 2011, according to statistics of the ISL (Institute of Shipping Economics and Logistics, Bremen). On 1 January 2012 the shipyards still had 5,709 orders for new buildings in their books, for a total of 115.7 million CGT (Compensated Gross Tons, that is the gross tonnage weighted to take account not only of the gross tonnage of ships, but also the work content for the respective ship type); on 1 July 2012 they only had 4,590 ships with 91.1 million CGT. The current downturn is even more evident in terms of orders received. In the first six months of this year, the shipping companies were reluctant to order new vessels, and orders were down nearly 44% in the first half-year 2012 versus the comparable period in 2011.

“What is new in the shipping crisis is the weakness of the banks, especially the European shipping banks, in procurement of US dollars, which are the lead currency in shipping,” says Dr. Wiebers. Due to the volatility of the market and the wide range of risk components in the maritime network, ship financing requires very careful monitoring. Individual ship funds are better able to cope with this situation than the more anonymous capital market products. Third-party equity creates a risk of building up excessive capacities, as current experience shows. State supported export funding models have gained significantly in importance in Asia and Europe, and this trend is expected to continue. The less the importance of the interest on capital employed, and the greater the importance of technology, know-how and logistics, the better is the situation of the maritime sub-sector. In particular cruise and deep-sea oil and gas offshore are intact markets with a reasonable level of rates. “Not only the operators of special-purpose tonnage can look to the future with optimism,” he remarks, adding that KfW IPEX-Bank considers it an important task to support sustainable projects with future technologies. Although shipowners initially see just the costs, for example when they have to retrofit their existing fleet with environmental protection equipment such as ballast water management systems, and not capital expenditure which will “give a pay-back”, Dr. Wiebers calls for more environmental protection, for commercial reasons, too: “In the long run, green ships, which are mostly also very energy efficient, will be more successful in the market. So it is in the interest of a bank to work with this kind of ship project – giving particular energy efficiency and thus sustainability not only in ecological terms, but also commercially.”