Shipping’s greatest loser since Lehman Brothers went under

Shipping’s greatest loser since Lehman Brothers went under

No shipowning nation in the world has been worse hit in the 10 years since the global financial crisis than Germany.

There can be few more classic cases in shipping of overleveraging at the peak of the market than how the German fleet was placed as Lehman Brothers folded. Arguably, the beneficiaries of Germany’s demise have been owners in Norway, Greece and China who have been able to hoover up tonnage on the cheap.

Europe’s largest economy has lost one third of its fleet in the past six years alone, down by 1,300 ships from the 3,900 the country controlled in 2012.

Just as frightening, think for a moment when you know that only 323 newbuilds have been contracted by German owners in the same period, which means that the average age of the German fleet is getting a whole lot older while shrinking.

Just a handful of German owners have actually increased in size in the past decade – the likes of Hapag-Lloyd, Oldendorff, Ernst Russ and MPC.

Germany’s continued shipowning crisis is now largely due to a lack of available financing. Back in the day the likes of Dresdner Bank, Commerzbank, Deutsche Schiffsbank, SHL and Deutsche Bank et al were all household names in ship finance. These days, scanning the pages of Marine Money for recently done deals, I only note KFW as active, and that is a bank that primarily focuses on newbuilds. This is an enormous setback. Still, I do note the new owners of HSH Nordbank have committed to ship finance, although with small money, as has Nord Deutsche Landesbank, otherwise it sadly seems it’s a dying business in Germany.

On the equity side the way that the German authorities have clamped down on KG models is a real shame and has destroyed the local market in an irreversible fashion. Further, due to many KGs losing their ships/equity, investors now connect shipping negatively with high risk.

As I have always stressed, the KG system was and is a good system – it just became overused and overleveraged at the wrong moment. KGs are a 200-year-old system that worked for generation after generation with partners clubbing together to invest in ships. Its glory days of the previous decade might never be met again.

Despite the dreary comments above, make no mistake Germany is still a maritime powerhouse in Europe. Its shipmanagement sector (if one includes Cypriot offshoots) plus its renowned manufacturing expertise remain hard to beat as will no doubt be evidenced at this year’s mammoth SMM shipping exhibition in Hamburg. However, unfortunately the heyday in shipowning and ship finance seem now well behind it.

This article first appeared in Maritime CEO magazine, published this week to coincide with SMM in Hamburg. Splash readers can access the full magazine for free by clicking here.

Dagfinn Lunde

Dagfinn Lunde, previously head of DnB New York (90-95), Head of INTERTANKO (95-00), and on the board of DVB responsible for the shipping and offshore division from 2000 until end of 2013. He is now a board member of Advantage Tankers, Dynamic Drilling and Maxi Shipping and co-founder of DagMar Navigation Ltd.

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