Barry Parker- Opinion Piece

European and Asian ports have reported excellent growth in 2007 – with teu trade growing at multiples of gross domestic product. But, port planners have noted that a US economic slowdown or, worse, a full blown recession, could have a deleterious impact on container trades. Indeed, Pacific stalwarts such as MOL have expressed concerns about trade slowdowns. A number of big liner operators are now engaged in “slow steaming”- which offers significant fuel economy while potentially soaking up newly delivering vessel supply that could grow at a pace exceeding demand.

But 2008 could be different. If the US economic contagion spreads, and world economies are not, in fact, “decoupled” from the US then economic growth, and trade flows, will ease. The impacts upon the maritime financing landscape may not be intuitively obvious. On one hand, infrastructure investments – even at a slowed rate of growth, look better than residential real estate. However, if the behemoth funds lose their appetite for the transport sector, citing failure of proposed investment projects to meet double digit return hurdles and perhaps, illiquidity, then what?

One clue may come from a separate part of US maritime finance – that of securitised receivables from the container leasing industry. At a recent conference in New York, a speaker from one of the top container leasing outfits pointed out that mortgage induced problems had led to a shutdown of the bond insurers. It turns out that these insurers, also called “monolines”, had provided nearly $6bn of credit support to packages of container leasing companies’ accounts receivable since the year 2000 – enabling investors to get comfortable with packages of receivable put on offer. The speaker suggested that traditional sources of funding, private placements done directly with selected insurance company investors, and secured bank finance, would return to the financing mix.

While infrastructure funds are hardly the exotic instruments that brought about the subprime debacle, they do represent a form of disintermediation that might now be pushed to the side. Likewise, initial public offerings of port operators (along with many industrial entities) may be placed on hold. Though box finance and port finance differ greatly, funding for port facilities may see a move back to basics – just like the box brethren.