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Asian Exim banks throwing good money after bad

Throwing good money after bad – that does seem to be the modus operandi of arguably the two most powerful lenders in shipping today – the Exim banks of China and South Korea.

Among the most read articles on Splash this week was Paul Slater’s contribution yesterday, in which he took shipping investors to task for the continued bloated state of the industry. The article has drawn many comments, both on our site and via social media, a favourite coming from our finance columnist Dagfinn Lunde (“For once, I agree with Paul!”).

Among the most interesting lines in Slater’s thesis was the following: “The enormous losses in the German equity and debt markets will be repeated elsewhere and probably in the Chinese and Korean Exim banks as they work to support their shipbuilders.”

Politicians in East Asia are prolonging shipping’s pain for the sake of keeping folk employed at local shipyards. In China this works in a virtuous state-led circle, where owners order ‘patriotically’ in line with diktats from on high to keep yards ticking over. Today, for instance, sees China’s first ever 20,000 teu-er launched in Shanghai (pictured). The Cosco ship is one of 32 still to deliver for the line – the largest container orderbook of any line in the world – spectacularly poorly timed markets-wise.

Over in South Korea, meanwhile, we reported today on how the new president is being pressed to keep a yard belonging to Hyundai Heavy open. In South Korea, however, a thriving democracy, the debate is far more contentious with much of the general public sick and tired with Seoul draining reserves to prop up loss-making maritime entities.

For me, the most shocking prediction made about shipping all year has come from the normally reliable Danish Ship Finance whose latest market report, issued late last month, suggests long-term growth in seaborne trade volumes will average about 1% per annum until 2030. If that proves to be the case, the Exim banks in East Asia will have some serious explaining to do.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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