Shipping Finance for Russia: How to Source It

by Paul Powell, Partner Moore Stephens London

I start with a very obvious statement. Shipowning is a capital intensive industry. Together with the airline industry, it probably has the highest single cost units needed to provide its revenue generating services than any other industry. Most manufacturers with large factories filled with costly machinery will have nowhere near the amount of capital investment that is tied up in one unit of a shipowner’s fleet.

What shipowners share with manufacturers is that their assets wear out despite what one can do to maintain, repair and renovate them. There is a finite life span after which the asset needs to be replaced.

There have been many forecasts of the newbuilding requirement to replace the world’s aging merchant fleet and the latest suggests that up to $300 billion of investment would be required. Where then will this capital come from? Traditionally, there are three source of finance for shipowners: their shareholders, the State, and the banks.

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