Riding on Asian shipping industry
UNITED States private equity and investment funds are betting Asia's shipping industry, hit by a restructuring wave that has already swept Europe and the US, is the best spot to ride a recovery from the industry's worst downturn in three decades.
Sturdy commodity demand growth and slower new ship deliveries will help balance fleet and cargo demand for the first time since 2004, analysts say, boosting freight rates by next year and into 2015.
For private equity looking to buy into the upturn, Asian shipping firms undergoing restructuring, like South Korea's STX Pan Ocean Co Ltd and Indonesia's Berlian Laju Tanker Tbk PT, offer opportunities. The ships investors are looking for are also being built in the region's yards.
More than US$3.5 billion (RM11.15 billion) has been invested in ships and shipping containers so far this year, according to figures compiled by Marine Money, compared with US$2.7 billion in 2012 and US$4.2 billion in 2011.
Joseph Swanson, managing director of US-based investment bank and restructuring firm Houlihan Lokey, said his company is advising on everything from ship acquisitions to complex restructurings of fleet operators. Some of the projects are in Asia.
The shipping industry splurged on new ships in 2007-08 that were delivered just as demand slumped, particularly on once-lucrative oil export routes between the Middle East and Asia.
The spree sent charter rates down as much as 90 per cent and halved the value of vessels bought at the top of the market, according to data from maritime consultancy Clarkson Research Services. The list of Asian shipping firms seeking rescue is lengthening.
Bank lending to the shipping industry via syndicated loans at US$52 billion last year was nearly half the US$91.8 billion in 2008, just before the financial crisis, according to figures from Dealogic and Marine Money.
The interest from private equity is being driven by expectations that the shipping industry will finally pull out of a prolonged slump.
Barclays Bank estimated in a June report that the volume of seaborne dry cargo will start to outpace fleet growth by next year, increasing by 6.3 per cent against a 3.8 per cent uptick in vessel supply. Reuters
Publish date: 08/07/13