On the Hunt for New Sources of Finance

“If you want to understand the container shipping market, fly to Phoenix, and go about an hour out in the desert and see all the aircraft laid up.”

These are cautionary words from Graham Porter, chairman of Hong Kong investment firm, Tiger Group Investments and a director of Seaspan, one of the Tiger Group’s holdings. Porter underscores that for the world’s carriers, the search for financing has become as important as the search for shippers.

The strife in the container market was detailed in an article by Peter T. Leach in The Journal of Commerce last week. The 2009 financial crisis all but closed the doors to financing sources in the shipping market—both traditional and nontraditional. As evidenced in the graph below, German KG shipping investments plummeted from 2008 to 2009 and have not recovered.

In addition, more liner companies are practicing risky business by ordering scores of new super-sized ships. The new ships are coming on top of a record amount of new container ship capacity scheduled for delivery next year, according to Braemar Seascope’s latest Containership Fleet Statistics. Carriers are scheduled to receive 1.55 million TEUs, increasing available capacity to 16.8 million TEUs, beating the previous record of 1.52 million TEUs in 2007.

Some 200 KG funds restructured because of the financial crisis and more are restructuring this year. As a result, shipping order financing is moving toward more regionalized banking sources and both public and private equity funding.

With news like this, there’s no wonder words like “uncertainty,” “risk” and “unpredictability” have become a part of the transportation industry professional’s everyday lexicon. Access the crucial intelligence you need to keep an eye on these and other developments in transportation by trying PIERS products and solutions.

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