• CIT Maritime Finance

    CIT Maritime Finance is active in all major segments of the global marine industry. We offer senior secured loans, sale-leasebacks and bareboat charters to owners and operators of oceangoing cargo vessels, including tankers, bulkers, container ships, car carriers, and offshore vessels and drilling rigs. Our maritime finance experts will work closely with you to understand your needs and can customize financial solutions to free up more of your capital.

    Key Areas of Focus

    Deep Ocean

    • Tankers
    • LNG Carriers
    • Bulkers
    • Containerships
    • Car carriers
    • Multi-purpose vessels
    • Ro-Ros and Con-Ros
       

    Coastal and Inland

    • Tugs and ATBs
    • Wet, dry, bunkering and lightering barges
    • Dredges, service and support vessels

    Offshore

    • OSVs
    • Anchor handlers
    • Well intervention vessels
    • Rigs and platforms
    • Shuttle tankers
    • Floating processing and storage facilities
    • Other specialized vessels

    Products & Services

    • Recapitalizations, restructurings, and distressed purchases
    • Senior secured term loans
    • Bareboat charters
    • Sale/leasebacks
    • First lien cash flow loans
    • Asset-backed revolving lines of credit 
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    We have an interesting situation right now in the international shipping market because we see some sectors of the market doing really well while others are performing poorly. It's definitely a mixed bag and here's why…

    For many years, the tanker market was very depressed. The sector has improved in the last six to nine months as the market has strengthened, both for crude as and product transportation. On the crude side, lower oil prices have resulted in improved demand. This is bolstered by the fact that for many years there was limited ordering of new crude tankers to be built. Eventually, when the demand returned, the supply side was still relatively good because of the limited ordering over the last few years. This has resulted in a good supply/demand balance today, resulting in improved freight rates. On the product tanker side the story is somewhat different. The new refineries opening up, particularly in the Middle East and India, have resulted in increased transportation distances. This has helped the overall supply/demand situation as the increased transportation distances is a positive for the overall supply side.

    Conversely, there still exists a supply overhang in the dry bulk and commodities markets. Simply put, there are too many ships in the water combined with an unfortunate decline in demand. The reduced growth in China, which we see as a major factor for the decline, has also been especially hard on the dry bulk market - it's very close to all-time low levels.

    Although there really aren't that many U.S.-based, U.S.-owned companies very active in the international dry bulk sector, all will be impacted by the cash flow situation in this market. So it's rough going for a lot of these companies. The larger, public companies have raised equity to build a war chest for the next year or two with the expectation that the market won't strengthen for quite some time.

    Some are well capitalized and well prepared for any near or medium term turmoil. They have prepared early and have done a great deal of work on their order books. They've either cancelled orders or extended the construction periods of new builds to allow more time for the market to rebound before actually taking delivery of the vessels.

    We've also seen instances where companies have converted some of their order book to other types of vessels, however, this has been relatively limited.  

    The shipping markets are in general quite fragmented and there is a certain lack of discipline in terms of controlling the supply side. When the various markets pick up, companies have a tendency to rush out and order new vessels instead of focusing on buying modern secondhand vessels. If we continue to see a lot of ordering of crude carriers and product tankers over the next 6 to 12 months, there might be a reason to be concerned with the supply side down in 2017 or 2018. There is a risk that there will be a lot of new buildings delivering at that time. That's something we're keeping a close eye on.

    Svein Engh is Group Head and Managing Director of CIT Maritime Finance, where he is responsible for overseeing financing activities of oceangoing cargo vessels including tankers, bulkers, container ships and car carriers, as well as offshore vessels and drilling rigs. He has more than 25 years of experience in the global financial services sector, with emphasis on shipping, offshore oil services and transportation sectors. He earned a BBA and MBA from Ohio University.

    If you enjoyed this blog post please consider sharing it with your social media networks. If you have a comment on this post, or a suggestion for a future post, please let us know at blog@cit.com.

    There's no denying the slow global economic recovery has impacted the overall shipping industry. From a macroeconomic view, global trade is not growing at the same level that it's been growing at for a number of years. That means that time charter rates in the shipping sector have not improved dramatically. Nonetheless, certain segments of the industry are performing better than others.

    The dry bulk market is still struggling and part of that has to do with new building supply issues. However, there are bright spots - such as the increased demand for maritime transportation of crude oil. So much so that some companies are converting their new build orders from dry bulk vessels to tanker ships.

    In addition to the glut of ships that came to market over the last few years, other factors inhibiting a faster recovery include the need for companies to be compliant with new regulations regarding clean fuel and the addition of ballast water treatment systems; declining steel production in China as well as Chinese imports falling, and reduced Brazilian iron ore exports.

    There are several additional issues impacting the maritime industry, including: 

    • U.S. shale production is a potential benefit for tankers: Despite declining oil prices, the U.S. shale boom has resulted in increased crude exports, rising 34% in November to 502,000 barrels a day - the most since 1920. Today the U.S. is the 17 th largest exporter of crude oil, and with the 114 th  Congress expected to review legislation that could repeal the ban on crude exports to select markets, an increase in tanker demand may follow.
    • Portfolios are weighing down big banks: Many banks are still struggling with the portfolios that peaked right before the financial crisis.
    • Regulations are impeding growth: As a result of pending regulations, many ships may need to be retrofitted, including installation of ballast water treatment systems over the next few years. The costs of these systems remain an unknown which could impact many operators significantly.  
    • Private equity reducing investments: Private equity firms, which filled capital needs gaps for the industry and restructured companies, are reducing their investments in shipping. As a result, banks will have to fill the gaps and provide refinancing.
    • Ship building orders have slowed: Last year there were new orders for tankers and ships on the dry bulk side. Although orders have now slowed, ship yards will be at capacity fulfilling orders until 2016.


    Svein Engh is Group Head and Managing Director of CIT Maritime Finance, where he is responsible for overseeing financing activities of oceangoing cargo vessels including tankers, bulkers, container ships and car carriers, as well as offshore vessels and drilling rigs. He has more than 25 years of experience in the global financial services sector, with emphasis on shipping, offshore oil services and transportation sectors.

    If you enjoyed this blog post please consider sharing it with your social media networks. If you have a comment on this post, or a suggestion for a future post, please let us know at blog@cit.com.