Shipowners Need $114bn in Capex for Newbuilds in 2018

With the shipping industry set for $114bn in capital expenditure for newbuildings next year alone finding funding will be a major issue for the industry according to analyst Crucial Perspective.

News ID: 77830

Date: 23 December 2017 - 14:16

Even with the newbuilding orderbook at historical low of just 10% of the existing fleet some $231bn in capex requirements remain to cover the investments, with some $114bn of this needed in 2018, MANA correspondent reported.

Crucial Perspective described the sum as “enormous” and noted that it “far exceeded” the $191bn market capitalisation of all the world's listed shipping companies combined.

“However, we expect equity financing to form only a small part of the global ship financing pool as investors remain cautious on the sector given the volatile freight rates and the shipping firms’ low profitability and high financial leverage,” the analyst said.

“As such, shipowners will still need to rely heavily on debt and lease financing plus their internal cash flows to fund their future capital expenditure.”

In terms of break down by region Asian owners will require $43bn in capex in 2018, or 43% of the total, European owners some $40bn, and US investors around 10% of the total.

“In the past 12 months, the global shipping industry has only managed to raise $8.2bn in the equity markets. 61% of the equity funding was raised by Asian shipping companies, 38% by European shipping firms and 1% by North American shipping firms,” the report said.