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Breakbulk September 2022

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8 The Journal of Commerce | September 2022 Breakbulk & Project Cargo Breakbulk Fleet Update Carriers, said financing from outside investors drives up costs for carriers. Those investors tend to expect high returns, and the go-betweens who secure the investors — as well as those who manage the money — must also be paid, he said. "There are too many layers, and in the end that makes the [time char- ter] too expensive," Feller said. "We always do very conservative bank finance. You bring a certain amount of cash and finance [the rest] via the bank. It's like buying a house." Ghosts of recessions past The MPV industry and the banks that finance it are still haunted by the ghosts of the 2010s, when many investors were badly burned in the The MPV/HL niche is far less transparent than the container, bulker, and tanker sectors, making it more di‹cult to analyze and less appealing to outside investors, Felix Schoeller, a director with Singapore-based multipurpose carrier AAL, told The Journal of Com- merce. "Understanding [those indus- tries] is easier," he said. "The cargo trade indices are there. There are lots of market reports to look at." By contrast, in the multipurpose segment, "you must look at every di"erent trade route and mine that data to uncover the actual cargoes and volumes being moved; there is no one single category reference for MPV cargo," Schoeller said. Wind energy, oil and gas, mining, and steel, for example, all generate dif- ferent project and breakbulk cargoes and di"erent commodities related to these cargoes, he noted. In addition, the sector is small, insular, and mostly privately held. As a result, investors in multipurpose shipping tend to be ship owners, family o‹ces, and smaller investors that already understand the nuances of MPV shipping, Schoeller said. "To get a solid picture of the market, you need to be an operator or a‹liated," he said. "Outside investors have a hard time making sense of it." As MPV earnings improved in 2021, some new money was invested, but this funding came primarily from investors already involved in logistics and often from those already familiar with the multipurpose sector, Rod Schlick, a director and broker with Rotterdam-based shipbroker Fri- day Company, told The Journal of Commerce. Established players such as Splietho" and BBC Chartering/ Briese, for example, are investing in newbuildings, "but for them, the money is coming from a set pool of investors and internal available funds," Schlick explained. "They are not relying on outsiders." Lars Feller, president of Hamburg-based MPV operator dship down market that followed the Great Recession, Schlick said. The recession triggered financial turmoil in the MPV/HL sector, partic- ularly in the aftermath of heavy-lift carrier Beluga's bankruptcy in 2010 and the collapse of the German KG system. KGs, now almost completely out of favor, are a type of tax-favored German investment vehicle through which thousands of private investors owned shares in ships. "Book values fell right across the board," Justin Archard, founder and managing director of MPV-focused One World Shipbrokers, told The Journal of Commerce. The banks that owned these ships after owners had gone bankrupt sold them o" at mas- sive losses, and in an already-weak Felix Schoeller Director, AAL Lars Feller President, dship Carriers -300,000 -100,000 100,000 300,000 500,000 700,000 900,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Deliver ies Retir ements Net additions MPV capacity to increase in 2022 after three years of net reductions *Note: As of July 2022 Source: IHS Markit © 2022 IHS Markit Multipurpose/heavy-lift (MPV/HL) fleet deliveries, retirements, and net capacity additions, in deadweight tons (dwt) "It is simply not a good risk for a bank."

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