You're listening to Taking Stock with Kathleen and Pim Fox on Bloomberg Radio the bankruptcy of the world's largest shipping container shipping company, han Jin, and what it means for the global economy and for the shipping industry itself. Here to tell us more is Ted Jaddick. He is managing director and chief executive as well as president of d NB Markets. He is also the chairman of this week's New York Maritime Form. Ted, thanks very much for being here,
my pleasure. Thank you. Now just to mention that d n B is Norway's largest financial services group, right it's and it's one of the largest in the whole Nordic region. Tell us about what has happened in the shipping industry and in financing the shipping industry since the bankruptcy of Hunjin, the South Korean shipping company. Well, I think bankruptcy is is obviously a dramatic event, um, I think the forces driving the financing of the shipping business have been in
place well before that bankruptcy. Uh and in in in short, that is a a a a more constrained environment for for shipping companies looking to raise financing, whether it's from banks, whether it's from capital markets. UM. Shipping has traditionally been a privately owned industry and and most of the capital has come from the from the from the commercial banking sector, a lot of it concentrated in Western Europe in the Nordic region UH and then the private the owner's private
private checking account. UM. Capital markets are becoming more much more active. Shipping companies are coming to the capital markets more regularly, so you now have a number of listed companies who would be you know, using the typical instruments that the public markets would would be able to offer UM.
But generally speaking, with tighter capital controls on banks, requirements for for higher capital levels and shipping generally modeling out in most banks models as a as a higher risk industry. UH that that's constraining the amount of bank capital that's available for the for the industry. The public markets have been a little bit less generous lately valuations have have come off. That's really sector specific and due to specific
factors in those sectors. So generally a more constrained environment. What what the bankruptcy of Handgin will do, UM will create a lot of dislocation in in in that particular market, UM ships get arrested. UM shippers have goods on these ships that are expected to be in ports all over the world by certain deadlines. It's a very tightly scheduled industry that will that will create a lot of headaches
for people who who have their goods on hangine ships. UM. Whether this will lead to some further consolidation in that sector, time will tell whether the Korean government wants to find a way to fashion a solution to keep the company afloat.
We'll see unintended, I'm sure keeping the company afloat, But Ted, I just have to ask you, Uh, is this is sort of you know, it's it's like developers of houses boom time everybody builds, they don't care about who's going to buy the market because they just want to sell their house. Was there just too much shipping capacity? And is this actually sort of an an inevitable outcome and this kind of shakeout will leave the industry on a sound or footing? Uh, definitely, it is a common problem
with shipping. Shipping. Shipper ship owners managed to shoot themselves in the foot by building too many ships in the good time, and and of course it takes to two years generally to deliver a new ship, so so by the time that new ship comes, the market conditions have have often changed. In the container shipping market. Where Hansine is is that that's their sector. There's been a tremendous growth in the amount of tonnage been ordered by by all of the major liner operators, and they've been not
only ordering more ships, but they're ordering bigger ships. Uh so, so the capacity that has been added to the market has been considerable. UM. Hand engine going into bankruptcy. The unfortunate thing about shipping companies going bankrupt is that the vessels don't go away, and the vessels are what creates the extra capacity. So where those vessels will end up, unless they end up in a scrap yard, UM, will not necessarily alleviate the capacity issue. You mentioned the market
conditions when it comes to the container vessel industry. Of course, there is also the dry bulk shipping industry. Give us your take there. I'm relatively optimistic. On the other this is hauling things such as coal, is coal, iron, ore grain, Those of those would be the three three major dry bulk commodities Pam. Um, I'm relatively more optimistic. UM. Why is that it's been through a terrible period. UM. What that is meant is that owners have basically stopped ordering
new ships. UM, the growth in demand continues. China had been the main driver for many years. The market peaked in kind of the mid two thousand's five six into early seven, as China began consuming less of the of the that type of commodity, kind of shifting their their economic growth model. UM, demand did come off. The owners had built an anticipation of that continuing. UH. So you had for a number of years a a a big
overhang of ships. Now that now that ordering has really slowed down or almost stopped, you know that that overhang continues to diminish, and we've seen demand continue strong and growing. In two thousand sixteen, Chinese production of iron orange coal is relatively much higher priced than world other major producers and of a lower quality. Uh. China was willing to subsidize those domestic producers for a longer period of time
that I think many had had expected they would. That now seems to be clearly coming to an end, and so domestic production of those commodities in China is off, but their demand continues to grow, which ovily obviously helps the import side. We've got about just twenty seconds or so here tell us about the New York Mirror Time Forum this week. Pretty big deal. It is a big deal. I've been leave. It's the seventh or eighth that Capital Link has sponsored. This is our first year working with
Capital Link to to sponsor this event. Um. It is an event that we'll both look at the global shipping industry and where it's standing, so we'll have panels of ship owners and financiers and analysts. But it's also very much focused on New York as a maritime center, so there'll be a number of panels focused on those types of topics as well. We're excited about it. Well, good luck to you and congratulations Ted Jaddeck Managing Directors, CEO and President of d n B Markets and he's chairman
of this week's New York Maritime Forum. I'm Kathleen Hayes along with Pim Fox on taking Stock. This is Bloomberg