European consolidation may need Far East help

Ship finance lawyer believes Far East help needed to mid-size companies to a scale that will allow them to survive

Consolidation has to come to European shipowning but it may not be coming from Europe.

Ship finance lawyer and sometime shipowner Carsten Stellamanns believes it is coming from the Far East, and without naming any names, he says the consolidators are not ship finance players so much as shipowners active outside the European market.

"I am talking about Germany in particular," said the former Gebab managing director. "[Consolidation driven by Asian owners] is coming soon, within five years — on a small scale for sure, whether on a larger scale I can't predict."

He cites statistics from the German Shipowners' Association (VDR) showing that 77% of German fleets own 10 ships or fewer.

"Medium-size shipping companies are losing their business model and have either been trying to sit out the market or consolidate to generate a scale that will allow them to survive, but the problem is that their partners in Germany are other companies in the same situation," he said.

"It has to come from the outside." 

It is no coincidence that as someone who holds this view, Stellamanns is spending an increasing amount of time in China making connections between investment-minded Chinese financiers and those who control German shipping assets, whether shipowners in the ordinary sense or not.

In the case of many of the casualties of the KG (limited partnership) system, Asian suitors for German assets will have no door to knock on but those of insolvency administrators, bankers and lawyers like him.

Meanwhile, Stellamanns is pitching German fleets to the Chinese leasing houses as well. Speaking to TradeWinds at a recent Marine Money conference in Shanghai on the theme of China Going Global, he sketched one creative solution that he believes could create a risk profile more palatable to the cautious lessors.

"I have been developing, together with both sides, models that might be able to substitute for the long-term time charter in the charter-based leasing model," he said. "For example, pooling the charter hire of a fleet of diverse tonnage types, operating in different markets to hedge the risk."

This was something he saw done under the German KG system, although it was not common. "That was with fleets in the order of 10 vessels, but this would have to be more," he said.

Leasing companies have shown interest in the proposal, he says, but responded with a cautious, "We'll come back to that after we have studied it."