Credit crisis threatens weak bulk shippers, shipyards

By Nick Carey

CHICAGO (Reuters) - Access to credit is the lifeblood of maritime trade and the credit crunch has largely cut off that supply, threatening to weed out weaker shippers and shipyards, as well as hamper global trade.

"The credit crisis has made banks nervous and the last thing on their minds is making fresh loans," said Omar Nokta, an analyst at investment bank Dahlman Rose. "Some ship owners and shipyards in particular are feeling the pain."

The outlook is worst for the bulk shipping industry, which hauls raw materials such as iron ore, grain and cement. More than 90 percent of the world's traded goods by volume is carried by sea.

Access to credit has been cut off at an inopportune time for the industry, after several years of robust growth in markets like India and China -- accompanied by huge infrastructure investments -- spurred a race to build new ships, creating three-year backlogs on shipyard order books.

Orders reached a milestone of 10,000 ships on Aug. 1. But ordering ships is one thing, paying for them is another.

"There has been a further tightening (in lending conditions) over the summer," Harald Serck-Hanssen, Norwegian bank DnB NOR's ship-financing unit said last month.

Some banks had shut their books for the year and the limited shipping lending banking universe was shrinking, he said.

Serck-Hanssen spoke before the bloodbath on Wall Street of the past two weeks in which credit conditions have worsened for shippers and shipyards, especially newer or smaller operators.