Money from China? Then it's 'Made in China'

[Ronzkie23]

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Money from China? Then it's 'Made in China'

Reuters
Posted at 06/01/2013 10:33 AM | Updated as of 06/01/2013 10:33 AM

SINGAPORE - Chinese banks have sharply increased loans to global shipowners as European lenders retreat from the market but some are driving a hard bargain: the finance often comes with the condition that vessels be built in China.
The financing has given China's shipyards a lifeline after new orders dropped to a seven-year low in 2012. The government wants Chinese yards to move up the value chain by building higher-quality vessels and to become a player in the offshore energy equipment industry, a lucrative sector in the generally depressed shipbuilding market.
The role played by Chinese lenders has drawn the ire of some industry critics, who say an already oversupplied global fleet will only get bigger because shipowners are taking advantage of cheaper quotes from Chinese yards compared to other builders.
Chinese shipyards won new orders of 11.57 million deadweight tonnes in the first four months of the year, up 57 percent from the same period in 2012, data from the China Association of the National Shipbuilding Industry showed.
A key supporter has been the Export-Import Bank of China, a policy bank that provides financing to advance government economic goals.
"China Ex-Im is open to all clients who build vessels in China," said Chen Bin, deputy general manager of the bank's transport finance department.
"In this tough time we want to do as much as we can to help (Chinese) shipyards get orders from shipping companies," Chen told a Sea Asia shipping conference in Singapore in April.
BIG GREEK ORDER
Last month, Greek shipowners ordered 142 vessels, more than 60 percent of their global orderbook, from Chinese yards. Good pricing and Chinese financing were among the reasons, Greek Shipping Minister Kostis Moussouroulis was quoted by China's official Xinhua News Agency as saying at the time.
Among them, Diana Shipping Inc, Angelicoussis Shipping Group Limited and Dynagas Ltd. got loans from the Export-Import Bank of China, the bank said on its website.
The Ex-Im Bank as well as commercial banks such as the International and Commercial Bank of China and the Bank of China are some of the most active lenders.
Together they doubled their share of the loan book of the top 40 lenders to the shipping industry in the last two years to 11 percent, or about $46.5 billion in loans, data from Norway's DNB, the world's largest shipping loan provider, shows.
Ex-Im Bank had about $13 billion in outstanding shipping loans in May, up 30 percent from the end of 2011, and planned to offer more, Chen told Reuters. He declined to give a target.
"The enticement to order at particular yards on the basis that you will get financed certainly attracted a lot of non-listed European companies," said Timothy Ross, head of Asia-Pacific transport research at Credit Suisse.
Seadrill Co. Ltd, Sevan Drilling ASA and Singapore-based Frigstad Offshore Ltd, all of which have made orders at Chinese yards within the past two years, did not respond to requests for comment.
But Larry Pupkin, director of Singapore-based Littoral Management, which helps shipowners find yards for construction and arrange financing, said Chinese quotes and financing terms were attractive.
Chinese banks are not alone in helping their shipyards. Bankers and lawyers said policy banks in South Korea were also giving finance to shipowners to place orders at Korean yards, which topped China in the value of orders last year.
In 2012, South Korea won contracts worth nearly $30 billion, while Chinese yards received $18.2 billion in orders, according to the World Shipyard Monitor published by Clarkson Research Services. Global new orders totalled $85.5 billion.
So far this year, Chinese yards have won orders worth $5.4 billion for 184 vessels, compared to $11.5 billion in contracts for 125 new ships at Korean yards. In tonnage terms, China and South Korea were neck-and-neck, the Clarkson data showed.
"The view in the industry right now is, if you need money to buy ships, Chinese and Korean lenders will fund you," said Jon Windham, head of industrial research at Barclays for Asia ex-Japan.
PUSH INTO OFFSHORE EQUIPMENT
The oversupply of vessels, low shipping rates and sluggish demand has drawn concern from some industry officials in China.
"Banks ... shipowners and cargo owners should take an extremely cautious attitude towards shipping investment under this catastrophically oversupplied market," said Zhang Shouguo, executive vice president of China's Shipowners' Association.
In a letter posted on the organisation's website, Zhang estimated that global ship supply exceeded demand by 30 percent.
Beijing has promised to help its vast shipbuilding sector develop as part of a broader effort to upgrade the country's massive manufacturing industry.
In a 2011 document on the strategy to develop the offshore energy equipment industry, China's National Development and Reform Commission urged banks to increase financing to manufacturers.
Industry leaders in that sector are yards in Singapore and South Korea.
But a number of Chinese yards, including Dalian Shipbuilding Industry Co. Ltd, Yantai CIMC Raffles Offshore Ltd and yards under state conglomerates China State Shipbuilding Corporation (CSSC) and China Ocean Shipping (Group) Company (COSCO), have started to challenge in the market for jackup rigs, which drill in water up to a depth of 150 metres (500 feet).
Chinese yards had 35 of the 95 orders for jackups by the end of the first quarter, from fewer than 20 at the start of 2012, Norway-based Pareto Securities said. Singapore had 45.
Seadrill, chaired by shipping tycoon John Frederiksen, placed an order last year for two barges and two jackup rigs at Dalian Shipbuilding, with a syndicated loan of $440 million in which the Ex-Im Bank of China took a sizable chunk, according to the bank.
Even in the offshore equipment field, which has a good outlook thanks to rising expenditure on oil and gas exploration and production, some Chinese bank executives called for prudence.
"Offshore (equipment) is a huge market, but we are concerned about a rush into the market en masse," said Yang Changkun, managing director of shipping at ICBC Financial Leasing Co. Ltd, an arm of ICBC bank.
Nevertheless, Yang told Reuters that ICBC Financial Leasing hoped to bring in 10 billion yuan ($1.63 billion) worth of ship finance deals this year, equivalent to what the company did in the five years since its establishment in 2007.
HEYDAY OVER FOR EUROPEAN BANKS
European banks still dominate lending to the global industry, although their share fell to 75 percent in 2012 from 83 percent in 2010, the DNB data showed.
One major difference in strategy is that Chinese banks are happy to work with new shipowners, while European lenders appear to be working more with existing clients.
"There are European banks that are able to do new business, however, some of the same banks are also spending a lot of time managing their existing book," said Gregg Johnston, partner at law firm Stephenson Harwood LLP in Singapore.
German lender Commerzbank last year said it would wind up its ship finance unit. France's Societe Generale sold part of its shipping loan portfolio to Citigroup C.N.
"I don't think European banks will go back to the strength they had before the crisis. Asian banks will very nicely fill the gap," said Mario Behe, co-head of ship finance for Credit Suisse in Singapore.

Source: Money from China? Then it's 'Made in China' | ABS-CBN News

[letsee!]

unya unsa may impact sa atoa ani sir? negative? kay ato pikoton mga mata ana mga insika mahilig mangilog.kabantay mo ana ila mapa murag nay duha ka sungay sa kilid...hehehehe.

[<SMILE>]

Namuhal na gyud to gain control,
kung makasulod na ang mga foreign ship builders diha,
sigurado ko mangopya na pud na ug technology unsaon pagbuhat ug barko.
Then they will become number one player of the ship building industry.

[M.A.D.]

This could mean it as a medium term replacement for the housing bubble that china is already experiencing. You will notice that china has a high GDP because of the vast amounts of buildings they have put in place but those buildings have since gone down in value and investors and realtors both have lost money. A result of that downturn would mean a sagging demand for construction including jobs and materials, hence a good replacement would be to have a shipbuilding industry.

Well Chinese banks would choose to finance these projects since the capital won't be going outside of their shores as well as provide jobs for their people but the question would be how the working conditions may improve as this is yet to be seen. This will also increase the value of their currency and will also increase the share of renminbi as a currency in international transaction. Current estimates show that the renminbi is used only in less than 80% of all international transactions, whereas the US dollar is still dominant being traded at around higher than 90%.

Anyway, we could see something similar as other nations follow suite. This is a result of the currency warfare major economies are currently waging on each other with japan at the forefront.

This will result in currency fluctuations that could eat away a currencies buying power, as a result where central banks have lowered interest rates and sold many long term bonds with higher yields in order to produce more money out of thin air. A good way to take advantage of the situation is to speculate, speculate, and speculate.

As for retail investors/individual investors, we are but a small percentage of the speculative market wherein the amount of money we trade in is not significant enough to cause a huge spike in currency as well as commodity prices. Only news and intervention in the markets will cause such spike.