CHINA: ENGINE FOR GROWTH

Transcription

1 9th Annual China Ship Finance & Offshore Summit 22nd & 23rd May 2018, Ritz-Carlton Pudong, Shanghai CHINA: ENGINE FOR GROWTH Marine Money Asia, together with our Partner, Bank of Communications Financial Leasing, hosted the 9th Annual Marine Money China Ship Finance & Offshore Summit in Shanghai on Tuesday 22nd and Wednesday 23rd May Marine Money has been in China for nine consecutive years and over the years our shipping and offshore finance conferences have been held in several Chinese cities including Beijing, Tianjin, Dalian and for the last 3 years have been brought together in Shanghai to become China s Largest International Ship Finance Conference. Over the last nine years, we have closely followed Chinese shipping and ship finance as it has gone from strength to strength. From ECA and traditional debt financing to lease financing and private equity investing, China has over the last 9 years grown its market share in ship financing to an estimated 20% of the global total in We see this trend continuing and be rest assured that Marine Money will firmly and appropriately support and promote the growth of Chinese shipping finance globally. Marine Money hosts 19 conferences around the world and reaches thousands of the most senior level professionals in shipping and shipping finance via our conference platform, our publications and our online data. This year we have seen a strong Chinese presence in every single conference we have held from London to Cyprus, Hamburg to Hong Kong and from Dubai to New York. Wherever we are in the world, we urge major Chinese shipping finance companies to utilize Marine Money s strong networks and platform to build strong, stable, long-term relationships that lead to successful deal transactions and, most of all, good and solid friendships. During the 2018 conference in Shanghai we welcomed 450 delegates from China, Asia and around the world. Of those, about 30% were visiting from over 18 countries overseas. We had about 100 shipowner representatives, about 100 financial leasing company representatives, around 80 bankers and other finance providers, around 30 brokers, 20 legal professionals and many others from shipyards, ports, research groups, accountants, class representatives, the media and the Government. We had 23 Prime and Corporate Sponsors and the valued support of Lujiazui Financial City and several of the most active and well respected finance and trade associations in Shanghai. Key takeaways from the conference included:

2 9 th Annual China Ship Finance & Offshore Summit 22 nd & 23 rd May 2018, Ritz-Carlton Pudong, Shanghai Page 2 Economic Growth Chinese growth expected at 6.8% in Q12018 Of the 6.8%, 65% from domestic demand (government and private consumption) and 35% from investment GDP for full year 2018 estimated at 6.5% compared to 6.9% in 2017 China has pledged a shift to quality investment and development rather than focus on pure growth The service sector has surpassed the industrial sector as the main driver of growth (58% to 36%) Urbanisation is still a major factor in growth. In 2015 the urbanization rate was 58% and in due course it is expected to reach 75% meaning 1.2 million people will move to the cities each year, increasing incomes and spending There will be no full scale China-US trade war, but there will be bilateral tensions International Banks Pricing in Asia is generally finer than in Europe but with a different client base, with Europe more private and Asia focused more on conglomerates The leasing companies are working with all the major ship lending banks. This is a good source of US$ since they get senior debt financing in US$ Banks are not only lenders but also arrangers and packagers Some banks are re-entering the market having tidied up their balance sheets and there is more competition leading to a downward trend in pricing to top clients Debt finance from alternative finance providers at high margins has a place since there is a plethora of clients with fewer options than in the past Market Prospects Demand growth for most sectors looking OK, only crude tankers are weak, and supply looking better than for several years, so most shipping sectors should see a better market There are 20% to 40% fewer yards taking orders in China and Korea in 2017 compared to 2012 Where to place your bets basically all sectors are positive but older ships will get better returns The bulk carrier upside is largely priced into values and only one bulk vessel was scrapped in April 2018

3 9th Annual China Ship Finance & Offshore Summit 22nd & 23rd May 2018, Ritz-Carlton Pudong, Shanghai Page 3 30 VLCCs were scrapped already this year and more are to come, perhaps pointing to a tanker recovery in months Chemical tankers look good and best of all is jack-up rigs if you can carry the investment for a couple of years In a good market everything you say is right, in a bad market everything you say could be wrong The vertical integration of shipping in China yards to charterer to finance is unique Structure and flexibility is key to doing Chinese business including leasing Belt and Road 2018 is the fifth anniversary of China s Belt and Road initiative In 2017 it is estimated that $1.1trillion of trade came from B&R initiatives, and $60 billion of new investments were made B&R creates a new momentum for growth of global trade and investment Long term implications of B&R include providing a public product for the world economy, a platform for cooperation and sustainable development whereby investors will get long term returns Container Discussion Demand is picking up and trade growth of 4.5% in 2017 and 4% in 2018 but that is only 1x GDP compared to some 3x GDP some 10 years ago The US economy is in better shape, intra Asia is good and the global population continues to grow so generally good for demand growth Supply will see new vessels equal to 5.7% entering the fleet in 2018 and about 1.5% scrapping so net gain about 4.2%, the same as the demand growth But the orderbook is diminishing largely as a result of more consolidation The issue is that the ordering is at the top end of the fleet so there is a need for cascading which will take some time A major issue is the increase in bunker costs that will add a $10 billion bill to the liner industry (being 100 million tonnes per annum x the price increase of bunkers) Is the industry ready for $90 to $100 oil? only if the cost can be passed on to clients, or slow speed phase two triggers Consolidation brings a more stable market Blockchain is a great technology making the supply chain more transparent, efficient and secure, but one solution is needed, not 20 versions of a solution

4 9 th Annual China Ship Finance & Offshore Summit 22 nd & 23 rd May 2018, Ritz-Carlton Pudong, Shanghai Page 4 All stakeholders need one direction and one solution IMO 2020 Fitting scrubbers on new ships is one thing, retrofitting existing tonnage and creating space for scrubbers is a mighty headache Only the leisure industry (cruise ships) have made a definitive decision to fit scrubbers because their routes are fixed The rest of the industry is waiting and seeing what will fuel costs be in 2020, will fuel be universally available and decide if scrubbers is a viable option Doing nothing is not an option IMO, BIMCO, ICS and Intercargo are all united and the flag states are on board for the end result the means to get there is not clear Chinese Leasing About $12 billion of lease finance to shipping in No longer an alternative source, but a core source of finance to the industry There is huge interest from all types of shipping structures, even traditional owners who were the bread and butter of the banks The lease houses are showing innovation and are providers of capital, providers of tonnage and providers of service Competition is getting tougher for the lease houses from the banks Ticket size of deals is reducing In recent years lease house budgets have been reached by end of 2Q of each year, this year it will take longer Lease houses are having to decide whether they want to compete on pricing, and lower leverage, to be head-to-head competitors with the banks or keep higher leverage and set higher risk / return Leasing is not cheap but nor is it expensive because it reduces the amount of equity going into a project and equity often wants 15% to 20% return Tier two clients can be accommodated but small ship finance teams means scarce resources so the lease houses do not want too many small deals See you again next year at our: 10 th Anniversary China Ship Finance & Offshore Summit

5 PRESS COVERANGE TO DATE (30 May 2018) OOIL finance executive confident on merger with Cosco Negotiations with the US foreign investment watchdog are continuing and approval can be obtained, says the deputy chief financial officer of the Hong Kong-based shipping line. Container shipping faces $10bn hit from higher oil prices Rise in bunkering bills needs to be passed on to customers and consumers, while further slow steaming is not an ideal option, say senior executives from Maersk, ONE and OOCL. Chinese leasing encounters a slow start to Chunky sale-and-leaseback deals have become scarce as liner shipping M&A quiets down, while commercial banks are making a return with improving market conditions in the dry bulker sector. Carriers turn to bunker surcharges to prop up rates as costs rise Maersk Line joins MSC in announcing Emergency Bunker Surcharges to offset rising bunker bills and restore rates, while the signs are that more will follow suit. Box lines face USD10 billion hit from higher oil prices Container lines face a USD10 billion hit from higher oil prices if they are unable to recover the cost from shippers and cargo owners, shipping executives were told on Wednesday. Gas could be the next China story as iron ore, coal forecast to peak, experts say Gas shipping could be the next growth market for China despite concerns that peak demand for coal and iron ore imports in the country could be reached within the next three years, shipping commentators have said. Marine Money container panel highlight the pros of consolidation The outlook for container shipping is promising with an improving supply/demand scenario this year, speakers at Marine Money s event in Shanghai yesterday concurred 年中国航运 融及海 融资论坛 二 中国 国际航运 融市场增长的引擎

6 9 th Annual China Ship Finance & Offshore Summit 22 nd & 23 rd May 2018, Ritz-Carlton Pudong, Shanghai Page 6 A s i A Marine Money China Ship Finance & Offshore Summit China: Engine For Growth China s Largest International Ship Finance Conference 22 & 23 May 2018 Ritz-Carlton Shanghai, Pudong Partner Cocktail Sponsor Prime Sponsors Official Support Corporate Sponsors Media Sponsors Thank you once more to our sponsors and speakers and to all those who attended our 9 th Annual China Ship Finance & Offshore Summit About Marine Money International Marine Money International, incorporated in the United States, is the premier provider of maritime finance transactional information and maritime company analysis. Relied upon by shipowners, financiers, investors, ship managers, brokers, lawyers and accountants for the past 30 years, Marine Money has bridged the gap between shipowners and the international capital markets. Our goal is to make you money, save you money and provide access to investment opportunities and capital. For more information, visit Marine Money Conferences provide the most up-to-date market intelligence and best networking opportunities available in the industry. Click here to see our Forums Schedule 2018 Audio recordings and visual presentations given at past Marine Money conferences, List of Participants and much more are available at: Conference Organisers: Kevin Oates, Managing Director, Marine Money Asia Pte Ltd (Mobile: ) Andrew B. Oates, Business Development Manager, Marine Money Asia Pte Ltd (Mobile: ) asia@marinemoney.com