Make Ship Finance Great Again
The United States is the undisputed capital of global finance.
The U.S. dollar is the world’s reserve currency. The largest stock exchanges are in New York. The U.S. has a robust legal and regulatory framework for financing companies.
Yet, the U.S. punches well below its weight when it comes to financing the ships that facilitate international trade.
The size of the international ship finance market—including loans and leases—is estimated at $600 billion. Out of all international shipping lenders, only 5% have U.S. headquarters while more than 20% are headquartered in China.
After years of being an afterthought for American politicians and the U.S. public writ large, U.S. shipping is finally commanding the attention it deserves. Supply chain challenges during the pandemic spotlighted shipping’s economic importance; recent global events highlighted shipping's geopolitical importance.
Much of U.S. shipping’s newfound attention has rightly focused on the shipbuilding sector.
Charts featuring the withering American new vessel orderbook are a dime a dozen. Today’s orders for vessels of at least 1,000 deadweight tons (a measure indicative of vessels’ carrying capacity) include 10 in the U.S. … and 3,543 in China.
For every new ship ordered, someone has to finance construction costs. Both the U.S. and China have government-backed finance providers to help bolster their maritime sectors.
The U.S. provides financing through the Maritime Administration’s Federal Ship Finance Program (Title XI), with a portfolio of approximately $1.6 billion. State-backed China Exim Bank currently has a shipping portfolio of $19 billion.
Zooming out to examine capital sources engaged in financing ocean-going ships from public and private sectors, plus banks and non-banks, Chinese companies’ ship finance portfolio is more than $100 billion larger than American companies’.
The combined international shipping activities of Citi, Bank of America, First Citizens Bank, Beal Bank, Entrust Global, Maritime Partners, and Hudson Structured are small fries compared to Bank of China, China Merchants Bank, ICBC, Bank of Communications (BOCOM), China Development Bank, and Minshing Financial Leasing.
