Insights

Ship Financing Shifting, from West to East

By July 9, 2024 No Comments
CEO Anthony Zolotas on ship financing's shift from West to East, Basel IV's impact, and Eurofin's strategic plans for the Japanese market expansion.

Anthony Zolotas, CEO of Greek ship financing and investment adviser Eurofin, was interviewed by Daily Maritime Press newspaper in Tokyo.

Commenting on the changing environment surrounding the ship financing industry, he said, “The ship financing arena has changed dramatically, shifting from the west to the east. I think this trend will continue”. The company, which operates in Asia out of Singapore, intends to further develop its business in the Japanese market and build relationships with Japanese financial institutions. Regarding investment trends among Greek shipowners, Eurofin expects investment in containerships to increase in the future “Greek shipowners will seek opportunities to be more active in that sector as well in the future”, he said.  

 

Basel IV will accelerate the shift to Asia 

Q: Having been involved in ship finance for many years, how do you see the changing environment surrounding the ship financing industry?  

A: When I started my career in ship financing in 1977, it was mainly US financial institutions that provided financing to shipowners, but in the 1980s, the banking crisis that followed the recession in the US brought about a massive exodus of American lenders and European financial institutions such as British, German, French, etc, took over the leading role in the ship financing business.  

The financial crisis following the Lehman Brothers collapse, led to the withdrawal of many European banks from ship financing due to their deteriorating performance. In the midst of this situation, it was Asian financiers led by Chinese Leasing Companies, that rose to prominence: Indicatively (based on Marine Money League Tables) total European Bank Lending which amounted to more than USD 300 billion, in 2010, had shrunk to a third of that amount by 2022, while Asian companies had more than tripled their financings in the same period, surpassing their European counterparts. The ship financing landscape has changed dramatically from west to east.  

Q: What do you focus on when looking at the future 

A: On 01.01.2025 all European financial institutions active in shipping will have to be fully compliant with the guidelines of Basel IV. The new capital requirements provided by Basel IV will force the European Banks to increase their pricing. On the other hand, it is expected that it will take five to ten years for Asian Banks to be fully compliant with Basel IV which means that in the interim period, Asian financial institutions will be able to offer loans at lower interest rates than their European counterparts, thereby increasing their competitiveness, and this will probably accelerate the shift of the ship finance arena from west to east.  

 

Targeting the Japanese Market 

Q: How does Eurofin operate under these environment? 

A: Since its establishment in 1984, Eurofin has been involved in various types of financing advisory work, mainly in shipping. Our Singapore office established in 2007 initially in joint venture with a Japanese Company, helped us take full advantage of the shift in ship financing from west to east. We now do most of our business in Asia. In the future, we intend to develop business in the Japanese market through a joint venture with Springliner. We do a lot of business in Taiwan and we want to replicate this business model in Japan. Japan is a bigger market, with more financial institutions. However, Japanese financial institutions have relatively little experience in dealing with non-Japanese shipowners. It is therefore not surprising that financial institutions are reluctant to work with borrowers that they don’t know. We see our role as someone who would help Japanese lenders increase their understanding of the European shipping business and facilitate their expansion abroad.   

 

Change in Greek Owners investment  

Q: What is the current trend in investment from Greek Owners 

A: Many Greek shipowners, such as Angelicoussis, Procopiou, Navios, Economou, etc., are investing heavily in newbuildings. They prefer to invest in newbuildings rather than second-hand vessels, as they believe that second-hand vessels come at a substantial premium. However, there is the problem of “the new fuel” for the newbuilding orders. So far, the safest and most appropriate “new fuel” has not been determined. The various alternative fuels are generally more expensive, and it is still unclear as to who will pay for the difference. There are also other challenges, such as the need for larger production quantities of the alternative fuels to be utilised as shipping bunkers. On the other hand, thanks to improvements in engine designs, fuel consumption has been reduced by about 40% over the past five years reducing substantially carbon emissions. Therefore, because of the lack of visibility on the “fuel of the future” Greek shipowners are building new ships, burning conventional fuel but with improved operational efficiency and lower carbon emissions. We don’t see many Greek owners investing currently in alternative-fuelled ships. 

Q: Do you see any change in Greek Owners portfolio 

A: I expect that Greek owners will continue to invest heavily in LNGs, a sector where Japan is still the market leader, but the Greek shipowners are slowly gaining a market share. Traditionally Greek shipowners used to own tankers and bulkers trading them mainly in the spot market business, but recently the larger shipowners have been active in the LNG market where long-term charter contracts can be expected. However, the market outlook is uncertain in the current period of transition, making it difficult to foresee how the industry will flow and what will happen to asset values. Many shipowners have delayed placing newbuilding orders. Containerships account for most of the newbuilding order backlog in the current global fleet. Many Greek shipowners feel that this will invariably result in oversupply of tonnage which will have a negative impact on the container market and container ship values. I wouldn’t, therefore, be surprised if in the future some Greek shipowners will be looking for opportunities to become more active in the container sector. Currently, Greeks control around 9 % of the world container fleet but I expect this figure will increase in the years to come.  

 

(Interviews by Kazuhiro Tsushima and Chihiro Yokogawa). 

Stay in the loop
with our insights!

Subscribe now to receive the latest updates, curated content, and exciting offers delivered straight to your inbox. Join our community today for a richer, more informed experience.

Eurofin International Ltd

The Pavillion
96 Kensington High St
London W8 4SG
United Kingdom
Tel.: +44 207 751 5515


Eurofin SA

11 Neofytou Douka
GR-106 74 Athens
Greece
Tel.: +30 210 36 23 334


Seafin Pte Ltd

120 Robinson Road
#15-01, 068913
Singapore
Tel: +65 6812 5717


Eurofin International Ltd

Boulevard de Grancy, 5
1006 Lausanne
Switzerland
Tel: +41(0)78.219.06.89
Tel: +33(0)6.77.12.13.02