Irish Ship Finance Could Top $15 Billion by 2010
Ireland has established itself among the top fifteen international centres for the highly lucrative business of Ship Finance and Maritime Commerce. Since 2000, a number of Irish institutions have entered the ship asset and finance market, with the Irish Maritime Development Office (IMDO) estimating that the portfolio value of Irish ship financed assets is now close to $2.5 billion.
IMDO forecasts that based on current indicators, this sector of international commerce could increase in value to a $15 billion by 2010. To promote understanding of these new opportunities for Irish investors, IMDO is supporting the “Marine Money Dublin Ship Finance & Investment Forum” today (31st October) in Dublin at the Four Seasons Hotel - an event which is usually hosted by other leading ship finance centres such as London, New York, Hamburg, Hong Kong and Singapore.
“The Global ship finance market is a growing sector,” said Mr. Glenn Murphy, Director of the IMDO. “In 2006, orders for new ships totalling $156 billion were financed, coupled with a further $80 billion in second-hand vessels. This is a dramatic expansion when compared to only four years ago when the annual market averaged out at $36 billion a year.” European ship owners are driving the purchasing spree, accounting for 38% of all new vessels purchased in 2006 and, since many of these new shipping assets require structured financing, the emergence of a dedicated niche sector in Ireland is very timely and opportune.
“Ireland has already established a track record in asset-backed finance, particularly in the mobile asset market, with Dublin recognised as the leading centre for aviation lease financing in the world,” says Glenn Murphy. “Several leading Irish-based financial institutions are already expanding their portfolios into shipping. Bank of Ireland are the largest shipping bank in the market at the moment, with a portfolio of more than $1.5 billion, with AIB, IIB, Ulster Bank, Fortis, and BNP all active from their Irish bases in this market.”
IMDO believes that, based on the similarity of the structuring of these deals (i.e. the involvement of the leading finance/leasing/legal and accounting firms) that Ireland could emulate the level of activity in the aviation sector in 10-15 years’ time and complementing it as a key element of Ireland’s mobile asset finance market.
“We are already seeing, just as in the early days of the aircraft leasing markets, strong growth in the ancillary ships commerce market—in accounting, legal services and ship broking, to support this growth,” said Glenn Murphy. “We believe that these services will continue to grow in line with core ship finance and aviation sector growth. Ireland has much to offer the shipping asset market. It is a stable, low tax environment, with a single currency where English is spoken—which are the key elements this sector searches for as a minimum entry. Ireland also has a dedicated shipping tax regime and a government that is focussed on developing the services sector. Finally, Ireland is now starting to produce the technical and service skills in the finance and banking sectors that enable it to generate product delivery.”
Notes to Editor
Ireland and the Shipping Services Sector
IMDO’s prediction of growth in the Ship Finance and Maritime Commerce sector is supported by recent data from the Central Statistics Office (CSO) which shows that, while Ireland was a net importer of commercial ship services in 2001, we are now a net exporter of many of the services we once purchased from abroad, providing a highly significant source of invisible earnings for the exchequer. Centres in London and Singapore contribute more than $2.2 billion per annum in overseas earnings from shipping commerce activity.
Ireland is now positioning itself in the structured finance market, offering leasing arrangements for shipping, something which is new to the sector. Traditionally, most owners have financed their vessels through simple debt/mortgage arrangements, typically in the region of around 70% debt ratio. The loan would normally be repaid based on the vessel’s charter earnings in the market.
More recently, Ireland has become an emerging centre for more structured and complex ship finance deals, with very significant “securitisation” of portfolios being structured in Ireland, with single securitisation deals being structured at an average of $600 million per deal.
Shipping markets are driven by strong global growth, with new deals totalling more than $600 billion in charter earnings being traded on the various shipping markets in 2006. World seaborne trade is obviously a key driver, with China’s entry into the globalised economy also impacting the major rally in markets since 2002—after which earnings have tripled. The average composite charter index of earnings in 2000 was $12,500 per day and today it is $36,000 with large bulk and tanker vessels earning in excess of $100,000 per day.
Most shipping economists are predicting continued strong demand patterns over the next 15-20 years, which are boosted by continued global merchandise and manufacturing trades. Currently the volume of global trade is around 7.1 billion tons , which is expected to double by 2015. All this growth will require more ships, which will require more funds, which require structured locations to prepare and execute these trades. Ireland is well positioned to ride this wave.
The Irish Maritime Development Office
The Irish Maritime Development Office, of the Marine Institute, was established by statute in December 1999 as the national agency charged with the responsibility for undertaking the following activities through its statutory remit:
- To advise the Minister on the development and co-ordination of policy in the shipping and shipping services sector.
- To promote and assist the development of Irish shipping and Irish shipping services
- To liaise with, support and market the shipping and shipping services sector
- To carry out policy as may be specified by the Minister relating to the shipping and shipping services sector and seafarer training,
The Department of Transport assumed responsibility for the Ports and Shipping services sector in January 2006.