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Effects of the Greek crisis in the shipping industry

Effects of the Greek crisis in the shipping industry


The shipping industry is in crisis, companies are reporting plunging profits and its conditions are now tougher than after the global financial crash. The Baltic Dry Index, a benchmark for the health of the global shipping industry, has recently plumbed all-time lows. Jonathan Roach, container market analyst at shipbroker Braemar, said the industry is being squeezed from all sides. “Global trade growth is basically flat and there’s chronic overcapacity within the shipping sector that is not going to go away anytime soon, especially with lots of new ships due to come into service,” he said.

“If you ignore the period just after the financial crash in terms of growth, last year was the worst we’ve ever seen and it could be almost zero this year” said Mr. Roach, and added that the opening of the widened Panama Canal will only see pressure on shipping lines to scrap smaller and older vessels as larger and more efficient ships will be able to use the waterway. Until the long-term trend of increasing international trade resumes, shipping companies are likely to find themselves in a difficult position. To battle the stormy market, shipping lines could look to form further global alliances to ensure ships sail more laden with cargo, and merger activity could increase to create industry giants which can achieve economies of scale.

Image courtesy of  Theophilos Papadopoulos at
Image courtesy of Theophilos Papadopoulos at

The Greek depression is the sovereign debt crisis faced by Greece in the aftermath of the financial crisis. The Greek crisis started in late 2009, triggered by the turmoil of the Great Recession, structural weaknesses in the Greek economy, and revelations that previous data on government debt levels and deficits had been undercounted by the Greek government. However, Greeks have said No to austerity terms imposed by international creditors, which could have led to the releasing a package of fresh financial aid which could help in the long battle to keep Greece afloat. The vast majority of shipowners and other members of the maritime community will have voted “Yes” as the outcome least likely to harm hopes of a return to stability and the country’s standing in Europe.

Shrinking Chinese demand for imported commodities, and fewer exports from its factories, would be devastating for companies that own container ships, oil tankers and other vessels. For example, DryShips, Inc., saw its shares fall 9.2% to $0.54.  And because of the size and success of Greece’s shipping industry, some say it could help raise tax revenues for the country in order to strike a bailout deal. Others, however, say that isn’t a feasible solution and chances of Greek gaining more tax revenues from the shipping industry are too little. It is clear some companies are facing more challenges that others. But worries remain on both sides of the Atlantic over how the supply chain will respond and hopefully rebound if need be. Foreign funds seems to be the key for Greek shipping companies. National shipping companies doing work with other countries can complete transactions electronically and continue working. Yet smaller ship operators that do not have access to overseas cash reserves are out of luck as they need to work within the Greek banking system to pay vendors. Still, companies in the US are uneasy about sending money to producers given Greece’s current banking system problems.

Greek ship owners can presumably expect higher taxes in the future if the reform proposals from the government are passed. Negotiations between the international creditors and the Greek government puts a strong pressure on the government to change the tax scheme for the Greek ship owners. Several of Greece’s biggest ship owners are seriously weighing the possibilities of moving their businesses abroad. According to several media, these companies include Diana Shipping, Navios, Star Bulk and Delta. The possible destinations include Cyprus, London, Singapore and Dubai, where the companies already have a presence and which offer low taxes. Shipping companies and shipowners have been subject to criticism in recent years from the Greek population for contributing too little to society. But even if the government ultimately decides to change the tax conditions for the industry, it won’t have the desired effect for the Greek coffers.

Image courtesy of Andrew Priest at
Image courtesy of Andrew Priest at

But not everything is bad news. Suzzanne Uhland informs that Greek Ministry of Shipping said that the sector’s prospects are positive, thanks to continued Greek-owned fleet growth. Greece now controls the second largest merchant fleet in the European Union and one of the largest fleets in the world, constituting the driving force for a number of related economic activities. Greek shipping remains a vital and successful economic generator of the national economy, contributing significantly to the national GDP and employment. For some, the Brexit is an exciting prospect because, change creates opportunity. The influential Union of Greek Shipowners and the London Greek Shipping Cooperation Committee have always chafed under the policy of Brussels. While Greece remains a member of the EU, the departure of the UK will be a powerful incentive to reject Brussels’ maritime diktats. Countries like the Netherlands and Denmark, along with Greece, are likely to form an influential counterweight to Brussels and make the take some benefits for their shipping industries.


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