Credit loans will drop

The shipping industry needs about $300 billion over the next three to four years

Loans to shipowners will drop by at least a third this year as frozen money markets curtail banks' ability to raise funds and shipping prices tumble, according to the largest lender to the industry last year.

Banks will provide as much as $100 billion to shipowners this year, down from $150 billion in 2007, Ulf B. Andersson, head of shipping at Nordea Bank Plc, told a Marine Money conference today.

Funding costs have increased to 1 percentage point above the London Interbank Offered Rate, or Libor, he said, without indicating how much the figure was last year.

''We are in a vicious circle of financial turmoil affecting consumption and slowing down economies,'' Guy Verberne, economic research chief at Fortis Bank, said in an interview in the city. ''We have to sit it out and wait for the dust to settle.''

The shipping industry needs about $300 billion over the next three to four years to fund construction, Andersson said. The cost of hiring ships to haul coal, ore and grains fell by record amounts last month.
Nordea was the largest lender to shipowners last year and Fortis was fourth, according to data from Dealogic Holdings Plc, supplied by Nordea.

Hardest hit by tightening credit markets will be owners of commodity carriers, Andre Kabelitz, senior risk manager at Hamburg's HypoVereinsban, a unit of UniCredit Group, said.

Dry Bulk

''The dry bulk market is going to be affected most because that's where a lot of vessels have been ordered,'' he said. Bank funding for shipping has doubled to 150 to 300 basis points above Libor now, from 75 to 150 last year, he said.

Rental rates for such ships, as measured by the London-based Baltic Exchange, will extend declines because of fleet growth, Henriette van Niekerk, senior dry bulk freight analyst at Clarkson Plc, the world's largest shipbroker, said in an interview.

''More ships are being built and delivered and that will affect the spot,'' or single voyage, rates, he said. Some rentals are ''already insufficient to cover costs'' and financiers are becoming ''increasingly aggressive'' in trying to squeeze margins from their customers, Paal Monsen, an Oslo-based partner at Maarsoft International AS, the world's biggest independent risk consultancy to shipowners and banks, said.

''The financial turmoil in the global markets has started to severely impact the shipping sector,'' he said.

Tanker Derivatives

Some rentals are ''already insufficient to cover costs'' and financiers are ''increasingly aggressive'' in trying to squeeze margins from their customers, Paal Monsen, an Oslo-based partner at Maarsoft International AS, the world's biggest independent risk consultancy to shipowners and banks, said.

''The financial turmoil in the global markets has started to severely impact the shipping sector,'' he said.

Oil-tanker derivatives indicating the cost of leasing supertankers next year have declined 24 percent to $51,116 a day this month, according to prices from Imarex ASA, the largest broker of the contracts.

Demand for oil has dropped 3 million barrels a day, Organization of Petroleum Exporting Countries President Chakib Khelil told Algerian state-run newspaper el Moudjahid on Oct. 4. The group will take ''appropriate measures to ensure stability'' in markets, he said two days later.

''There will be less crude transported from the Middle East'' next year because Brazilian, Canadian and African production will rise, Erik Helberg, head of shipping research at Norway's Pareto Securities AS, said today. Rental income will likely drop by half, he said.

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