Loan Shipping Tumble 94% Market Share as BRICs Beats Yuan

Chinese banks, avoiding the dollar-denominated loans as the yuan appreciates, are cutting funds to the shipyards and vessel owners two years after the government told them to increase their commitment to the industry.

As loans to construction companies, maintenance and operating ships rose 24 percent to $ 32.3 million this year, the share of Chinese banks contracted for the first time in five years, decreasing to 0.7 percent total of 11.2 percent over the same period in 2009. Bank of China Ltd. is the only Chinese company among the top 60 lenders to the ship after three did last year 10, according to the data.

China, the nation's largest shipbuilding, led banks to lend more to the shipping lines in 2008 as the U.S. funding European lenders and dry amid the global credit crisis, threatening ship orders manufactured locally. China's currency was the only one among the BRIC nations will rise against the dollar last month, and Standard Chartered Plc estimates it can earn a 25 per cent in 2020, the granting of loans denominated in the dollar less attractive to Chinese lenders.

"It is not just for dollars in loans to finance shipments," Qiu Jun, deputy director of Bank of Communications Co. 's marine loan department, told a conference in Shanghai on 07 December.

Currency Forecast

China's currency strengthened 0.2 percent to 6.657 per dollar as of 2:20 pm in Shanghai, the China Foreign Exchange Trade System. Delivery period indicate traders expect a gain of 2.4 percent in the next 12 months. The yuan appreciated 0.4 percent against the dollar in November, while India's rupee fell 3.1 percent, the Russian ruble fell 2.1 percent and Brazil's real fell 0 7 percent .
When units of most South Korean shipping company STX Pan Ocean Co. earned $ 92.12 million of loans to eight years in September the Bank of China and ING Groep NV, which agreed to pay 250 basis points more than the interbank rate London's bid interest.

Chang Jiang Shipping Group Phoenix Co., based in Wuhan, China, paid 95 basis points more than Libor when a loan of $ 115 million for 10 years as lenders Industrial and Commercial Bank of China in 2008. Two years earlier, a unit of Seoul-based SK Holdings Co. paid a margin of 65 basis points, or 0.65 percentage point, when he borrowed 198 million U.S. dollars for 14 years from banks including ICBC.

The credit crunch

While STX Pan Ocean has the sixth highest rating of a domestic credit Korea Investors Service Inc., SK Holdings, is ranked highest in four steps of AA + and Chang Jiang Shipping not have a classification.

"The lack of credit in U.S. dollars is a problem and will not change soon," said Chen Qi, head of ship financing in Shanghai Pudong Development Bank, in the December 07 conference. "We are cooperating with banks abroad to learn more about the industry so that when not enough credit you can get up to speed."

China shipyard shipbuilding orders were equivalent to 44.4 million dwt in the first 10 months of this year, surpassing the 39.2 million orders in the No. 2 ranked South Korea, according to Clarkson Plc, the largest shipping corridor in the world.

growth of the fleet would "substantially slow" in 2011 due to order cancellations and delayed deliveries, including commodities as the global maritime trade volumes are expected to increase China's imports of iron ore and collect coal shipments to India are growing, a UOB-Kay Hian Holdings Ltd. said research note Dec. 13.

A widening gap between interbank rates six months dollars in London and Shanghai show the Chinese banks are making it more expensive to borrow in the U.S. currency.

"The Chinese Connection '

The difference reached a maximum of 3.16 percentage points on 4 November, the biggest gap in at least 18 months and up 0.72 percentage point in January, according to ICAP Plc. the nation's banks extended $ 14,300,000,000 in foreign currency loans in November, central bank data show.

"Do not borrow from Chinese banks, because if there is no connection Chinese are not interested," said Khalid Hashim, managing director of Precious Shipping Pcl, Thailand's largest shipping company. "If they offer cheaper loans, and were willing to lend on a bilateral basis to buy ships from anywhere in the world, then it might be something I look."

China is the largest export market of Thailand and bought a 11 per cent of Thai exports in the first 10 months of this year, the Thai government data show.

China $ 1 billion of 4.75 percent notes due in October 2013 offered the lowest yield of dollar bonds sold by maturity similar to the BRIC nations at 1.6 percent, according to Royal Bank of Scotland Plc prices. $ 2,000,000,000 3625 Russian percent due April 2015 of 3.5 percent of the notes, according to BNP Paribas prices. 1250000000 USD 10.25 percent in Brazil June 2013 performance of 2.1 percent, he said, according to Banif Banco de Investimento, SA prices. India has not sold dollar bonds.

Credit Default Swaps

credit-default contracts to five years in exchange for the country's bonds fell 3.6 basis points to 68 basis points, CMA prices show. The contracts rose 28 percent in November after falling nearly 9 percent in October following a drop of 18 percent in September.

Swaps credit-default tends to decrease as improving investor confidence and rising as it deteriorates. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent of a government or a company fail to adhere to debt agreements.

interest rate swaps for one year, or the fixed cost required to receive the floating rate of seven-day repurchase, rose one basis point to 3.15 percent 2:21 pm swaps five years have changed little 3, 89 percent. This rate is from this year low of 2.68 percent on Aug. 12.

Sender Gains

The shipping companies' profits were hit last year as U.S. and European consumers to reduce spending on goods from Asia and the fact that forced idling ships and delay deliveries of new vessels, as excess capacity to reduce value of assets.

AP Moeller-Maersk A / S, owner of the largest container line shipping world, posted its first annual loss in at least six decades in March, after the shipping market shrank for the first time since World containers was initiated in 1970.

"The depreciation of the dollar will have a significant impact on the financing activities of Chinese banks," said Stefan Carl Side, director general of Campi d'Oro Shipping & Financial Advisory LP, in a telephone interview from Singapore. Still, their financial soundness and the European objectives of funding means that he will "become the banks financing the future of the world fleet," he said.