The over $350 bn in loans advanced by European banks to the shipping industry threatens to become the Europe's version of America's sub-prime mortgage loans. The collapse of global trade in the current recession and the resultant plummeting charter rates (45% plunge in freight rates for container ships) have devastated the values of shipping assets and rocked banks with shipping industry exposure. This coupled with a glut of previously ordered ships have left many banks clutching negative equity on their shipping industry investments.
While ship owners continue to service their debt, there is growing fears that as the competition for business drives cargo revenue well below what it costs to send a ship across the ocean, ship owners may soon be the next group of borrowers unable to manage their debts. The anxiety generated by the recent collpase of Eastwind Maritime, a medium-size carrier company, underscores the dangers lurking in the shadows, especially if global trade does not recover soon.