Eversheds comment: Eurozone crisis to spur shipping insolvencies

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Funding problems at European banks have triggered what is being described by shipping financiers as the worst conditions in some shipping markets in 25 years, with vessel values falling and owners being pressurised to sell off ships – international law firm Eversheds has commented on the current situation.

Jessica Maitra, Partner at Eversheds, said: “The comments of the shipping financiers come as no surprise in circumstances where decreased global demand for goods and an oversupply of vessels in the market have seen freight rates in certain sectors nosedive in recent months. The downward spiral in vessel values follows the same trend in earning potential and therefore cash flow. Falling values may be prompting the banks to pressurise owners to sell off further ships, but the question is, will potential buyers be prepared to take the risk of capital values and freight rates continuing to fall.

“The outlook is not as bleak in all sectors of the shipping market, though. The marine press is reporting record liquefied natural gas rates and owners of chemical carriers have seen a surge in rates over the last six months. Times like these provide opportunities for clued up investors, not just in traditional areas but in emerging technologies key to the future of the shipping industry, for example to deal with increased regulation of carbon emissions and ballast water treatment.”