Financing from Chinese leasing houses saw a slight dip last year, but an advisor to the sector expects the market to grow further — albeit at a slower pace.
Meanwhile, finance experts at a Marine Money event said banks are still on the hunt for quality borrowers with exciting projects.
Shanghai-based Smarine Advisors has been involved in arranging finance with Chinese lessors since 2014 and conducts an annual survey of the leasing market, which has found that portfolios grew during 2020 but drawdowns fell.
"The drawdown for new financing last year was about $14.7bn, a little bit down from the year before at $15.8bn, but higher than what you've seen in the previous year," Smarine managing director Thor Erling Kylstad said.
"The total portfolio of the leasing houses last year was about $66.5bn, which is up from $55bn the year before and substantially up from when we started to do the survey in 2016."
Kylstad added that around 15 companies in China are involved in international leasing, most of which are owned by banks.
"I think the main conclusion from our survey is that the volumes last year were high and Chinese leasing remained an important factor in the market — and that's going to be the case also going forward," he said.
"There is, of course, a time lag from initiating a transaction and closing it, and the situation we've seen during 2020 might have an impact on the final volumes you'll see this year. But we believe there will be continued growth that may be at a slower pace."
Kylstad also expects Chinese leasing companies to become more selective in their choice of business going forward.
"The various leasing houses may or will most likely target different clients, so they will cover a large share of the market also in the future," he told the webinar.
"They will not be the saviour for everyone who doesn't get bank financing, but they will continue to serve a large part of the international shipping community."
Banks 'here to stay'
There has been a notable squeeze in bank lending to shipping over the past 10 years," Gaurav Moolwaney, executive director of shipping finance at Standard Chartered Bank, said.
"Bank debt is here to stay. It is cheapest form of capital that is available to most companies, and I think that cannot go away."
"But I think, increasingly, being the cheapest form of capital is going to take the biggest slice of the risk."
Moolwaney said banks have "plenty of capital available for most projects", but most shipping companies are trying to mix up the structure of their debt as well as their sources of finance.
"I think it's more a function of being efficient about it — like in terms of what type of LTV [loan-to-value ratio], what type of tenors, what type of pricing can you achieve — and just really trying to squeeze that and optimise that mix," he said.
Moolwaney said banks still have an appetite to fund good projects and good companies, and are keen to grow their portfolios.
"One of the things that we do think about is: what are the opportunities that are going to present themselves?" he said. "One of the things that we have to think about is probably the capex [capital expenditure] programme."
He noted that shipyard orderbooks are at historic lows.
"The question we also have to ask is: in the absence of a major capex plan, how are we going to call that buy — or do we really need to?" he said. "If we're just going to end up doing refinancings and the fleet ages, our exposure will go down."
In an amortising loan business such as shipping, where portfolios run down every quarter, Moolwaney said banks need to "add on some pretty significant delta to see some real growth".
But he added that banks' appetite for lending to quality borrowers targeting growth opportunities will also reflect what is going on in the wider shipping market.
"I think we are going to see some new segments evolve," he said.
Moolwaney added that the offshore wind support sector will be interesting.
"But most of the bread and butter business will also be a function of the capex in the industry," he said.
