Bank Says Shipping Industry Faces Immense Challenges

The bank noted a rising number of young tonnage being scrapped.

HSH Nordbank said Friday the shipping industry faces "immense challenges" and expected there to be "no swift improvement" for the sector.

The comments from the German bank came as it discussed its 2012 first half results, in which it posted net income after tax of €70 million ($88 million) down from €338 million ($425 million) in the same period in 2011.

"The further worsening of conditions in the shipping industry in the wake of the global economic downturn and the depreciation of the euro have taken a heavy toll on our figures and will continue to exert pressure on us in the foreseeable future," said Dr. Paul Lerbinger, Chairman of HSH Nordbank's Management Board.

The bank said that the further escalation of the international shipping crisis had also lead it to make a "substantial increase" in its loan-loss provisions.

Softer growth in China was cited as the main reason that, contrary to its original expectations, problems in the shipping sector had continued to worsen over the past few years with data released over the weekend showing August manufacturing activity in the country fell to a nine-month low.

Trading volumes between Europe and Asia have also contracted substantially it said, as well as ship prices continuing to drop in the second quarter accompanied by an unexpectedly large number of new ship deliveries.

The bank also noted a rising number of reasonably young tonnage being scrapped.

"The shipping industry, which is of great significance for Hamburg and the rest of Northern Germany - as well as the banks which finance it - face immense challenges," said Lerbinger.

HSH Nordbank said it does not see the emergence of any gradual recovery in freight rates, time charter rates, or ship prices before the end of 2013.