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Asian Liners Get Their Game On
Soaring bunker prices have motivated container liners to re-examine their strategy with a renewed focus on operating efficiency, cost reduction and high fleet utilisation. When market leader Maersk Lines announced its plans to pay USD 1.9 billion for 10 new generation 18,000 TEU vessels, it totally changed the rules of the game and has to some extent prompted other major carriers to look into ordering larger and fuel efficient vessels. Today, there appears to be some form of consensus among liner companies that they would need big ships that are over 10,000 TEUs to ply the Asia Europe trade by 2015 and possibly the Trans-pacific trade by 2020 to stay in the game. At the same time, some liner companies have also expressed their intention to build and own vessels to replace chartered-in vessels, so as to maximise their ability to manage excess capacity. During the shipping downturn, liner companies have realised that the decision to layup or sell vessels becomes much easier if they own the ships themselves.
At Marine Money’s conference in March, Kenneth Cambie, Executive Director and CFO of Orient Overseas International (“OOIL”), told delegates that he believes that container shipping is entering a watershed and it will be clear over the next six to nine months who is in the game and who isn’t. He reckoned that those players with the access to capital will be ordering larger ships and preparing themselves for 2015. The spate of newbuilding orders and the seeming lack of capacity discipline among liner companies have sparked market concerns, but while we leave the arguments and controversies to the industry experts, we agree with Mr. Cambie that the access to capital has become increasingly important to survival and in this aspect, Asian liner companies have the competitive advantage. Continue Reading
The World Tilts East
Dealogic issued the full year league tables for 2009 this week and there were few surprises. Volumes were down as one would have expected and there was a certain Asian flavor to the leaders.
Perennial leaders DnB NOR and Nordea were supplanted by Mitsubishi UFJ Financial Group, which took the number one spot in both the Bookrunner and Mandated Lead Arranger tables. This strong showing was based upon their strong relationship with NYK Lines, for whom they were the sole arranger on two deals totaling $2.5 billion and their lead position on the largest deal of the year, AP Moller-Maersk’s $6.5 billion transaction. Don’t cry for the Norwegians. DnB NOR held its own, finishing in 2nd place in both league tables. Their finish was largely determined by transaction size as the number of transactions were comparable. Nordea slipped to 5th in the bookrunner table but finished third behind DnB in the all-important MLA table.
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Few Surprises But Nonetheless Interesting
A quarter, particularly the first one, does not make a year, but according to the first quarter Dealogic tables, which we received today, the axis of the ship financial world has tipped eastward. Looking at the Top 20 Bookrunner Table of which there are only eight, Asian banks populate four of the places including the three top spots, which are held by SMBC and SBI Capital Markets (State Bank of India), and Mitsubishi UFJ Financial Group (“Misubishi UFJ”) respectively. In the case of the Top 20 MLA Table, Mitsubishi UFJ Financial Group and HSBC took the top two spots and three other Asian banks populate the top 20. Total volume for the quarter was $10.6 billion, continuing the downward trend since 2007. However for those who see a glass as half full this quarters volume is in line with the comparable periods in 2005 and 2006. Is it too early to say we are reverting to the norm?
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