Research on shipping finance in an international maritime centre
Ng, Michael Wei Hao
Date of Issue2016
School of Civil and Environmental Engineering
The development of shipping finance has been pivotal to the shipping industry due to its high capital nature. With a tougher market outlook and regulatory requirements, ship finance has become less readily available and more expensive. These call for companies to source alternative financing as banks reduce their exposure. This paper seeks to explore the financing trends in shipping and aims to validate the correlation between performance of banks and the shipping market. Additionally, the relationship of shipping finance with other sectors will be analysed in the context of developing an International Maritime Centre (IMC). Literature reviews were conducted to identify the literature gaps. Given the limited researches conducted in the aspect of shipping finance trends and correlation of bank and shipping market performance, the paper seeks to bridge the gap by analysing the data collected. Market data such as total and yearly ship finance volume were analyzed with information collected from interviews and surveys. These information points towards the consensus of a decreasing amount of loans available in the market. Banks are also more conservative which indicates the potential for alternative financiers to enter the market. However, ship owners must be willing and able to pay for higher premium compared to bank loans. The paper also shows that different shipping sectors are interconnected and the development of one sector will positively contribute to the development of other sectors in an IMC. Utilising the average quarterly ROE of banks and Clarksea index as data points, a correlation analysis was performed on Excel to compute the Pearson product-moment coefficient. The coefficient was tested for statistical significance using the t test. The results indicated that there is a moderate positive and statistically significant correlation between performance of banks and the shipping market, r = 0.54, t (34) = 3.744, p = 0.000669. The paper concludes that further improvements to the correlation analysis are possible. Quantifying data for a scientific analysis on relationship between different shipping sectors would greatly aid the research for developing an IMC.
Final Year Project (FYP)
Nanyang Technological University