The classic adage of “follow the money” has connotation to supply chain management, logistics and transportation industry developments. The ocean container shipping industry continues to manage its way out of an ongoing multi-year condition of too much excess shipping capacity. Supply Chain Matters has called attention in multiple blog commentaries and in annual predictions research that the primary cause has been multiple carriers ordering and taking delivery of new, rather large container ships, each attempting to compete on higher efficiencies and added fuel cost savings leveraging new ship design and performance technologies.
Earlier this week, European business media and The Wall Street Journal reported that German based HSH Nordbank expects to be sold for around £200 million after receiving bids from some global based private equity firms. The bank is reportedly seeking to find a buyer by the end of February to avoid liquidation, after incurring massive loses on non-performing shipping loans. As the WSJ noted, HSH rose to become the world’s largest ship financier during the current decade, but has since suffered a financial blow because of the 2009 financial crisis’s impact to global trade and shipping volumes. Some shipping companies literally ran out of money and could not pay back on loans. According to the report, the bank’s ship related loan portfolio was £12 billion as of September, while its overall non-performing loans are noted as being £8 billion.
The implications of this industry development are the ability of existing ocean container ship operators or lessors to tap financial markets for any new ship acquisitions will likely change significantly, and loan premiums could be far more expensive.
The good news aspect of not-so-good is that the industry will now need to rationalize existing overall capacity, likely without the option of individual lines ordering and deploying even more new ships. That, from our lens, will hasten ongoing industry consolidation efforts. That may not be good news for various industry supply chain container recipients unless global maritime regulators elect to manage any one multi-carrier shipping alliance becoming too dominant among the most active global shipping routes.
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