As part of London International Shipping Week, I took part in the Marine Economics - ‘Shipping Finance & Investor’ panel. From the current financing landscape for shipping, China’s dominance in shipbuilding, to options and challenges in relation to reaching the industry’s decarbonisation goals, here are the main topics discussed during the session.

Tailwinds for owners

Currently, it’s an owner’s market. Lenders are competing to finance favourable assets, and owners are getting competitive financing terms, a trend which has developed over the last three years. While some owners are maintaining lower levels of debt following a prolonged period of prepayments, many others are seeking more flexible financing arrangements to traditional asset finance, including revolving credit arrangements. 

This comes as result of strong earnings and geopolitical uncertainty, with debt now being viewed by many as nice to have but not vital. Leasing arrangements remain very popular for shipowners given flexible terms but there are questions around Chinese leasing and the impact USTR will have on that market – see below.

The Chinese market 

China continues to dominate the shipbuilding market by a large margin and Chinese owners own roughly 34 percent of the world’s fleet.

Chinese shipyards are developing technologically advanced, green vessels, and lighter regulation and lower costs continue to make the region highly competitive. 

The current US administration has taken various steps to counter China’s dominance in shipping, including USTR fees for Chinese built and owned vessels and incentives for domestic shipbuilding. It is estimated that billions of dollars’ worth of Chinese lease arrangements will need to be refinanced over the next 12 months as a result of USTR levies, which creates opportunity for alternative structures and European/US lenders. 

Notwithstanding this, the industry acknowledges that changing the landscape of global shipping infrastructure will take decades and China is likely to retain dominance for the foreseeable future. 

Fuel transition 

Funding the world’s decarbonisation targets in shipping will require widespread adoption and co-operation between governments, ECAs, owners, charterers and end users. Charterers will play a key role in passing down increased costs. 

Considering fuel, there is no current clear answer with regards to the sustainable fuel of the future. Ammonia currently is a key candidate; however, safety and infrastructure are major hurdles. Nuclear propulsion could offer long-term fuel savings but raises significant safety and regulatory concerns. More traditional fuels remain currently in use, with ports and infrastructure likely to determine which long-term solution will prevail. 

Tariffs, sanctions and route closures continue to be a persistent disruptor to shipping. In the US, the cancellation of wind projects stands in contrast to Europe’s strong decarbonisation agenda, creating a push-pull dynamic that could shape investment flows over the coming years. The next few years will test the industry’s ability to adapt, refinance and decarbonise, all while navigating geopolitical headwinds.