The auto shipping market is hot and has begun to attract the attention of shipping investment banks

Due to the strong demand and the shortage of shipping capacity, the hot car shipping market is beginning to attract shipping investment banks such as Hamburg Commerzbank to enter the market.

The boom in the car carrier shipping market has attracted Hamburg Commerzbank (HCOB) to enter the field.

The latest news says that after about a year of evaluating the auto market, the Hamburg bank has formally invested million in capital to enter the sector, specifically for an unnamed automaker. Part of a syndicated loan provided by a shipowner company.

Jan-Philipp Rohr, global head of shipping at HCOB, said: "We want to do more business in the car carrier segment because we still think the market is good and the demand is still there and has not changed."

During the epidemic, the auto industry in many places was plagued by a shortage of parts and downturn in consumption, and car carriers fell to the bottom of the market.

As previously reported by Xinde Maritime.com, after experiencing the sluggish market trough in the 2020 epidemic, the automobile transportation market will start to show strong growth from 2021.

Rents for car carriers, as well as freight rates, have since surged due to increased demand for new cars, a rapidly growing electric vehicle market and a shortage of carrier capacity.

HCOB has clearly noticed this developing trend in the car carrier shipping market.

Rohr said, “We hadn’t anticipated this freight market trend, although we think the market could see a fairly positive improvement.”

He highlighted stable freight rates and a lack of capacity as decisive factors in the bank's decision to enter the car shipping market.

"We've seen a rapid development in the market over the past six months, with rates such as hire rates rising, very good time charters and long-term charters," said the head of Pilot Shipping.

It also said that currently “orders remain low and capacity has been reduced over the years due to scrapping of older ships, with relatively few deliveries expected this year and next.”

Electric vehicles boost demand

In addition, the bank said the future looks bright for shipowners and car carrier operating companies amid increasing demand for car shipping.

“What we are seeing is a higher demand for car shipping. For capacity providers (independent ship owners) and large ship operator companies, electric vehicles seem to be promising,” Rohr said.

According to Rohr, part of the reason for the shortfall in capacity in this segment is that car carriers have been through a series of difficult years.

As a result, very few newbuildings are currently in service, and many of the ships in the existing fleet are relatively old and previously built for smaller car sizes than normal vehicles today. (The size and weight of electric vehicles are relatively larger)

“Cars have gotten bigger and bigger over the years, but the car carriers currently in operation are still built to the old car sizes, which means that capacity is getting smaller relatively,” Rohr said.

The second-hand car market is also optimistic

As for auto dealers, due to the supply chain problems during the epidemic, the inventory of new cars was further limited, and the shortage of new cars made the transportation of used cars a growth business for auto shipping companies.

“We can see that there is demand for used cars as well. With sales improving, car inventories are very low, so there is a lot of incentive to get cars where they are needed,” Rohr said.

He expects motor carriers to represent a promising market for the bank in the coming years.

“We believe better days are ahead and we are happy to lend to tonnage suppliers (owners) and operators. Let’s see how much business we can hopefully do in this market,” Rohr said.

HCOB said it aimed to provide 1.7 billion euros in new loans for shipping by 2022 - a goal that was largely achieved, although the bank has still not released any financial figures.

Rohr said that in addition to car carriers, HCOB also sees the possibility of some small projects in the traditional offshore business, and in the long run, offshore wind power also seems promising.

New ship orders are not small

Rohr said above that the current new ship orders for car carriers are still very low. However, it should be noted that according to the latest data, the current order for new ships of car carriers may not be low.

According to Clarkson data, according to the current order situation, 80,000 CEU of new ship capacity will be delivered in the car carrier market this year. 50000CEU.

If compared with the existing fleet, the total capacity of new ship orders will account for 24.4%, and if all alternative orders are in effect, this proportion will further rise to about 30%.

Frode Morkedal, chief analyst at Clarkson Securities, wrote in the latest weekly market report that with the delivery of these new ship capacity, the total capacity of the car carrier fleet is expected to increase significantly in the next few years. Fleet capacity will grow by a net 0.9%, 4.8% in 2024 and 9.1% in 2025."