By Campbell Houston, Senior Research Analyst of Marine Money International
The COVID-19 virus which emerged in early 2020 wreaked havoc on the globalized world. As supply chains came to a standstill, borders were closed and people were told to stay home, globalization and global trade faced its greatest challenge in decades and shipping, the quintessential globalized industry, had dire prospects. The challenges faced by the pandemic were unique, but the ingenuity and adaptability needed to survive were not. Since the global financial crisis of 2008, shipping has been in turmoil more often than not and shipowners became accustomed to limited access to public debt and equity and a declining availability of bank finance. As a result, the sell-off in global markets may not have affected shipping companies as deeply as some other industries.
Like all business, the global lockdowns had a massive effect on doing business. However, a number of deals that launched before the pandemic were successfully closed by staff working remotely. Deal origination during the pandemic though has become more challenging. Without conferences, meetings, and other in-person events, finding the right people to get a deal off the ground can be a hurdle. Relationship banks may be more important than ever, but for others, live webinars, virtual conferences, and other forms of community outreach have been offered to continue fostering industry connections.
1.1 billion U.S. dollars was raised on capital markets in the first quarter of 2020 thanks to a strong January and February. In March, when the lockdown began in the United States, capital market proceeds totaled just 35 million U.S. dollars, the lowest monthly amount since 2004. Deal volume improved slightly in April and May with 222 million U.S. dollars and 155 million U.S. dollars in proceeds, respectively. Dealogic meanwhile reported a relatively strong 21.4 billion U.S. dollars of syndicated loans to the marine industry during the first quarter of 2020, partially due to the cruise and container industry which saw several large loan facilities at the start of the pandemic. The greatest impact of the pandemic may be to Chinese leasing. The segment has become a pillar of ship finance in recent years. When will the leasing houses resume business and will their deal flow pick up to account for the lost months are key questions which will impact the ship finance market moving forward.
Of course, no industry is immune to a long-term decline in demand. If a global recession persists, container and dry bulk rates will not recover. The tanker market, which experienced record rates due to the tremendous need for floating storage, has already cooled significantly. Offshore meanwhile is bracing for a new wave of restructurings and the cruise and ferry sectors are perhaps the most challenged of them all.
Marine Money International is the premier provider of maritime finance transactional information and maritime company analysis. Over its 30 plus years in business, Marine Money International has helped the maritime industry through many difficult times.
A single purchase
