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German ship owners call for state bailout

Friday, 12 Oct 2012 | 12:41 AM ET

FRANKFURT, Oct 12 (Reuters) - German ship owners have called for a state bailout as the sector continues to struggle with overcapacity, rising fuel costs and hard-pressed banks pulling back from lending to the industry.

The global shipping crisis has hit Germany particularly hard because the euro zone's biggest economy is also home to the biggest fleet of container ships, accounting for 1,800 of the 5,000 vessels worldwide. Between 500 and 700 German-owned vessels are facing liquidity problems, an industry source said, and about 100 have already gone bust.

Ralf Nagel, of the Association of German Shipowners, on Friday said that state bank KfW must help German ship owners with limited, temporary loans, adding that a policy decision is need by the end of 2012. "We are in an emergency situation and cannot wait another year," he said.

Sources familiar with the industry said that about 1.5 billion euros ($2 billion) is needed to stabilise the sector in Germany.

The German owners want KfW to provide bridging loans, with existing ships offered as collateral. They also want the state bank to take over shipping loans that commercial banks are seeking to sell, and for it to set up a special financing programme for environmentally friendly "green shipping".

German shipping is a highly fragmented industry, with mostly one-ship companies or specialist funds through which investors raise equity and organise bank loans to buy a vessel. These ships are then let to lines such as Maersk or Hapag-Lloyd .

"The (big) shipping companies, which are struggling to keep above water themselves, will cancel charter lease contracts before leaving their own ships idle," the industry source said.

European banks, meanwhile, are under growing pressure to cut their exposure to risky and dollar-denominated assets, such as ship and trade finance, to shore up their reserves as they strive to meet financial regulators' tougher capital rules.

In June Germany's second-biggest lender, Commerzbank , said that it would wind up its ship finance units as stricter liquidity requirements force it to cut back on capital-intensive activities, a move that has drawn harsh criticism from the shipping industry and lawmakers.

Other European banks, including France's Societe Generale

and BNP Paribas , are also looking to wind down their shipping books.

Shipping companies ordered large numbers of new vessels between 2007 and 2009, when freight rates hit record highs. But extra shipping capacity rose just as economies were slowing, sending rates tumbling. ($1 = 0.7726 euros)

(Reporting by Arno Schuetze; Editing by David Goodman)

((arno.schuetze@thomsonreuters.com)(+49.69.7565.1197)(Reuters

Messaging: arno.schuetze.reuters.com@reuters.net))

Keywords: BANKS SHIPPING/BAILOUT

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