MAERSK’s decision to tap the international bond markets for €750m ($1.1bn) last week was significant not because of the size of the issue, but because of the relatively rarity of such moves by shipping companies.
The deal was not unexpected. Maersk has for some time now been making noises about the need for financial flexibility and diversification of its funding sources.
Outside of shipping such deals would hardly raise an eyebrow but the maritime industry still remains largely suspicious of the stock markets. Consequently the reverse perspective is also true in that investors often view shipping companies as irrelevant.
The global equity market is worth $27,574bn but only $569bn of that is represented by global transport companies. Drill down further through the statistics and you will find that shipping companies only represent $78.5bn – an underwhelming 0.3% of the total market value.
Given the fractured and internationally diversified nature of the industry it is perhaps unsurprising that we have not seen more multinationals emerge and enter the stock markets, but there is a psychological barrier as well an economic one. In reality the perceived barriers to entry are no different to other cyclical industries and perhaps Maersk is leading the way in getting over such hang-ups.
As analysts suggested at the Marine Money Money conference in Pusan last week an emerging recovery in equity and bond markets could help replace traditional bank finance in the shipping markets. With a funding gap for newbuilding deliveries this year is estimated at around $350bn for the entire global fleet on order the money is going to have to come from somewhere.
