Seafin Pte, the Singapore-based ship-financer, expects more than a third of shipping companies to collapse this year as the recession hammers global trade and vessel prices. "Everyday there is an auction for ships, but who wants them?" Dimitris Belbas, Seafin's head of shipping finance, said. Seafin is a venture between Eurofin and Japanese shipbroker, Seven Oceans.

 

At least four shipping lines have sought creditor protection since October as charter rates slide amid global fleet expansion and China's demand for iron ore wanes. Owners may scrap about a third of existing vessels within two years as credit tightens and demand slumps, according to Precious Shipping Pcl, Thailand's largest sea-cargo company by market ＆#118alue.

 

The Baltic Dry Index, a measure of commodity-shipping costs, tumbled 92% last year, as Chinese steelmakers pared imports of iron ore on waning construction. The collapse in rates and the worldwide credit squeeze has forced shipping lines including Ukraine-based Industrial Carriers Inc., Armada (Singapore) Pte. and London-based Britannia Bulk Holdings Inc. to seek bankruptcy or a court-backed reorganization.

The Baltic Index has more than doubled this year, helped by China's 4 trillion yuan ($585 billion) economic stimulus plan. However, rates remain 72% lower than a year earlier.

 

Shipping lines will likely continue to struggle to borrow funds for at least 18 more months because of the global credit crunch and recession, according to HSH Nordbank AG, the world's biggest shipbuilding financer. "We still haven't seen the light," said Paul Chang, the lender's Asia head of shipping. The timing for the end of the credit squeeze will depend on how fast lenders can recapitalize, he added.

 

Banks worldwide have curbed lending to shippers and other industries on repayment concerns. Lenders are also struggling to raise funds, with HSH Nordbank, itself, having to seek a bailout from its biggest shareholders, the German states of Schleswig- Holstein and Hamburg.