The focus for 2010 is going to be very clearly on the capital needs of the maritime industry. There are new ships to be funded and existing loans that are staggeringly under water.
The world orderbook remains close to an all-time high with more than 4,000 tankers and bulk carriers due for delivery between now and 2013. Best estimates would suggest a funding need for these vessels in the $300 billion to $400 billion range. The traditional shipping banks are not open so the funding will come, if it does at all, from new lenders and perhaps government-backed institutions.
We are seeing the rapid growth of Chinese lending and, more importantly, Korean and Chinese authorities supporting the struggling and cash-deprived shipyards. The delivery of the outstanding orderbook in its entirety or close to it will cast a long shadow over the industry for a generation at least. At this time, some default and continuing cancellations of orders is the tonic the industry needs.
Meantime, existing ship values have dropped anywhere from 30 to 80 percent over the last 18 months, and many shipowners continue to be in technical default. Strong cash flows this past year have kept the banks at bay, but if the market weakens for any sustained period, we can expect the banks to finally turn to face the music and possibly call many owners into default.
The public markets can be expected to provide some relief in the form of new equity or high-yield bonds, but those capital sources are not open to all comers, indeed the public side, while highly visible, represents only a small portion of the vessel-owning community.
The vultures are waiting, but right now, as a well-known Hong Kong shipowner recently told me, there are just not enough carcasses.