We've been following this story for a while, links after the jump.
Via Dubai's Marasi News, February 22:
German shipping fleet dwindles as financing dries up
German shipping investment that once helped shape the world’s maritime operations is in retreat, as years of steep losses lead many of the country’s biggest banks to abandon ship financing altogether.
The number of German-owned oceangoing vessels has declined by nearly half over the past decade. Meanwhile, financial backing in bigger maritime powers including China, Greece and Singapore is giving competing owners more flexibility to renew their fleets as they look to invest in a new generation of environmentally friendly vessels.
The contraction stems from the sharp swings in maritime-sector earnings over the past years, beginning with the 2008 global financial crisis, that were marked by tumbling freight rates amid a glut of ships that was fueled by easy lending practices.
The result was billions of dollars in unpaid loans that shredded shipping-finance programs at many banks and pushed several lenders to back away from a sector once seen as providing low-risk, long-term investment opportunities. That has dimmed a business that has been seen as a sign of strength in Germany’s export-oriented economy.
About 80% of all German ship-owning companies now operate fewer than 10 ships, according to the German Shipowners’ Association, an umbrella group representing the country’s vessel operators known as the VDR. Owners from other countries have expanded their fleets, sometimes by buying distressed German vessels.
The country’s commercial fleet has been cut to around 2,000 ships this year from 3,784 in 2011. Ownership of container ships has declined to roughly 649 vessels from more than 1,700 a decade ago.
“We are smaller, but better off as the basic criterion now for how many ships you run are your actual freight contracts,” said Ralf Nagel, the VDR’s managing director. “But it’s still difficult to get financing as the pool of shipowners has shrunk, leading to a stagnation of new orders to replace aging fleets.”
German shipping money has been traditionally tied to what are known as Kommanditgesellschaft funds, or KGs. Banks and asset managers promoted and sold shares of those partnerships to private investors, and in the late 2000s, thousands of people, often with little knowledge of the sector, became part owners of ships.
They were lured in by terms including full participation in the ship’s profits and liability limited to the value of their shares along with a flat tax on earnings. The business grew as globalization picked up steam and more and bigger ships were needed to move cheap Chinese exports to world markets.
“China was a big driver to increase freight volumes,” Mr. Nagel said. “The enthusiasm was such that an owner would ask the bank to finance a single small ship and the bank would say we’ll give you money if you buy four ships, overstretching its own balance sheet, along with the capacity in the water.”
The banks included some of Germany’s biggest lenders, including Deutsche Bank AG, Commerzbank AG, Hamburg Commercial Bank and Nord/LB....
....MUCH MORE
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