China-backed shipping fund for Hellenic ship owners under way

With details about the recent deal signed between the Greek Prime Minister George Papandreou and his Chinese counterpart, Wen Jiabao about the setting up of a $5 billion shipping fund still scarce, Hellenic Shipping News Worldwide spoke with Mr.

George Xiradakis, head of business consultants XRTC, who has an active role in the matter. China is expected to help finance the purchase of Chinese ships by Greek shipping companies with the creation of this fund, which according to Mr. Xiradakis it will be quite selective and biased towards more traditional and well-known names among the shipping industry’s members.
In his recent visit to Hellas, Wen said the $5 billion shipping fund will be set up to tighten relations between the countries’ two maritime industries and facilitate the sale of Chinese vessels to Hellenic shipowners who are currently building more than 300 ships in China. That is an offer to support the purchase of Chinese ships by Greek shipping companies,” said Wen at a joint press conference with his Greek counterpart George Papandreou.

What’s your view of the recent agreement between China and Hellas, regarding the setting up of a $5 billion fund to finance ship purchases from Hellenic ship owners?

This announcement of support towards Hellenic-owned shipping is a true testament of the Chinese government’s intention to actively enhance its shipbuilding industry, as well as further develop its long-standing relationship between the Hellenic maritime community and the Chinese economy. As we all know, Hellenic ship owners didn’t begin now to cooperate with Chinese shipyards. Instead they have established a long term relationship dating back almost two decades.

Do you think that it will shift more owners towards Chinese shipyards, instead of other Asian yards?

I don’t think that this move will be enough on its own to work as an additional incentive. What’s more important is the improvement of the quality of vessels produced, which is already a reality and is undeniable when it comes to vessels of Chinese technology. Of course, in a period like today when there is a significant lack of financing, there will definetely be ship owners who will take under serious consideration the possibility of direct or indirect financing from Chinese banks.

Is there a limit to the sum that each ship owner can secure financing from the new fund? Also, is access open to any ship owners?

It’s certain that the introduction of Chinese banks to the global shipping finance market, as well as the Hellenic market, will be done in a very selective manner and at first will be limited to large maritime players. I don’t think that the amount of financing required by any given owner will be the determining factor, which will hinder the development of a bank relation, rather than the history and the name of the appliant, as well as his ability to take part in the desired investment with a high percentage of own funds. The general strategy as is now evident, leads to an irrefutable competition between Chinese banks and the few European and US banks, which are still active in shipping financing.

Which banks will participate in this special fund?

Although, the exact details about how this new ship financing scheme will operate still remain unclear, I believe that it’s a highly exclusive scheme, which under all likelihood will include state credit lines from the large internationally active banks of China, i.e. China Development Bank, Exim Bank of China, Construction Bank of China and other major banking institutions.

What about the terms of financing? Are they low-cost or comparable to other international banks?

The financing terms are similar to the international standards, with a slight difference regarding the cost of financing which is a bit more expensive. I believe that the large Chinese banking groups possess the necessary know-how to offer attractive loan structures. This fact, combined with their relationships with the country’s shipbuilding industry, provides them with important advantages.
Among the drawbacks, we can say that they lack a long term experience in the field of ship financing at an international level. Let’s not forget that the large fleet of Chinese shipping industry is financed by the same banks which will enter into the international foray, but until now it was only a part of intra-Chinese trading routes (cabotage trade).

Have we seen any agreements between Hellenic shipping companies and Chinese banks?

Yes, it seems that things are picking up, since one of the largest Chinese banks signed an agreement with George Economou’s Cardiff Marine, acting also as the agent of the deal, without any interference from any other European or foreign bank. It’s an agreement which will see the financing of a VLCC currently under construction in China.
At the same time, we are witnessing the stead rise of Exim Bank, which is actively participating to financing schemes, which are settled from European banks. Among those loan agreements, I can mention the deals signed from both the Angelikoussis Group and Diana Shipping of Simeon Palios. It is my belief that the designated sum of $5 billion will be just the beginning of an intense participation of Chinese banks in international shipping and Hellenic shipping in particular.

Do you think that China will soon be the leading maritime nation in the world?

In all likelihood China is already in first place as we speak. It’s clear that the Chinese are developing their shipping fleet in a very fast manner, with their strategic goal being the active participation in determining the transportation costs of commodities and raw materials which are entering the country. But, it’s a fact worldwide that transportation is traditionally conducted through the free market, both in terms of investors entering or leaving the market. This business model has proven its success and efficiency through time, since the cost of transportation is always determined by the strength of the global economy. I don’t foresee any developed maritime nation, like Hellas or other European countries losing their strength, despite their position in the global fleet standings.

Nikos Roussanoglou, Hellenic Shipping News Worldwide