Greece braces for shipping storm

PIRAEUS, Greece (Reuters) - Heir to one of Greece’s oldest shipowning families, Leonidas Polemis overlooks the heart of the Greek shipping industry from his plush office in the port of Piraeus and sees a severe economic storm coming.

A worker adjusts a container as being loaded onto a ship at the port of Piraeus near Athens November 13, 2008. Global shipping is facing its worst crisis in decades. In just a few months, dry cargo rates have fallen by more than 90 percent as a five-year boom has turned to bust. For Greece, which owns a fifth of the world's fleet, that spells trouble. REUTERS/Yiorgos Karahalis

Global shipping is facing its worst crisis in decades. In just a few months, dry cargo rates have fallen by more than 90 percent as a five-year boom has turned to bust. For Greece, which owns a fifth of the world’s fleet, that spells trouble.

“Panic is one word to describe what is going on,” said Polemis, sat beneath an oil painting of one of his family’s first vessels, bought some 200 years ago. “People are selling some ships in a panic mode ... Some companies will go bust.”

Greece has a lot to lose. At 170 million tonnes, its merchant fleet is the largest in the world, ahead of Japan. It is the second biggest contributor to Greece’s 240 billion euro economy after tourism, accounting for 7 percent of output.

Its tendrils stretch into many sectors, with shipping magnates investing in everything from banks to building and tourism. The slick cars and quayside restaurants of Piraeus testify to fortunes earned in the boom, but executives say they face a perfect storm of plunging demand and oversupply of ships.

“This is the worst it has ever been,” said George Xiradakis, head of shipping consultants XRTC in Piraeus. “Everybody will be affected. This is a globalized market, probably the first globalized market in the world.”

The global economic crash has slashed demand for transport of commodities to fast-growing nations like China and India. On top of that, the credit crunch has made banks reluctant to lend money to shipowners and to provide financial guarantees to allow their ships to sail, leaving some stuck in harbor.

Dry cargo vessels that commanded $150,000 a day in May are now earning $7,000 or less. The tanker market, where Polemis’ Remi Maritime Corp. owns 22 vessels, has been less badly hit but is still sharply down.

Prices could fall further next year, when a record number of ships are set to flood the market: more than 10,000 new ships are currently on order, according to the UN.


Greeks have been seafarers for thousands of years. Shipowners made fortunes running the British naval blockade in the Napoleonic wars and in the 20th century the riches and rivalry of Aristotle Onassis and Stavros Niarchos was legendary.

For many in Greece, the latest crisis has revived painful memories of the collapse of the early 1980s, when hundreds of huge cargo vessels floated chained together in the Saronic Gulf off Athens, unable to find charterers as the market dried up.

Brokers say some vessels are already being ordered to slow to half speed on the high seas because there are no cargoes when they arrive. The number of ships asking to idle off Piraeus has risen and officials say traffic at the port is down sharply.

“We estimate (the fall) at around 25 percent for the time being but we think in the near future ... we face a bigger reduction,” said Nikos Arvanitis, head of the International Maritime Union at Piraeus. “If this situation will continue ... working positions will be affected. We have to reduce costs.”

While shipping accounts for just over 1 percent of Greece’s 4.5 million workforce, its economic influence is far higher. Foreign earnings from shipping were 17 billion euros last year, according to the central bank.

“We estimate the slowdown in shipping will take around 0.5 percent off GDP,” said Nicholas Magginas of National Bank. “There is a significant risk that there will be some problems with the bank debt ... a need for some restructuring.”


For the first time, Greece faces a shipping crisis in which some of its biggest shipowners on the stock market rather than private businesses.

Since billionaire George Economou floated his firm DryShips DRYS.O on the Nadsdaq in 2005, 12 other mostly Greek dry-bulk shipping firms have listed in New York, raising some $4 billion.

But public listings mean public scrutiny. DryShips said in an exchange filing it might not be able to meet its covenants to banks if things worsened. Economou, who defaulted on bonds in the 1990s, said it has no trouble paying its debts.

“The longer this crisis goes on, the worse it will be, even for big firms,” said Xiradakis, noting some debt renegotiations and ship sales were likely. “Banks have to stand by their clients and wait for the smoothness of the cycle or we are going to have a lot of losses.”

Local lenders, such as Piraeus Bank BOPr.AT, have some 10 billion euros in loans to Greek shipowners, but their relationship is built on years of understanding. Piraeus says its 1.4 billion euro portfolio is spread among 60 traditional shipowners and has a 0 percent loss rate in the last 10 years.

Many analysts question whether foreign banks, which hold over three-quarters of Greek shipping debt, might be more jittery. Royal Bank of Scotland RBS.L, which has needed 20 billion pounds of emergency capital from the British government, is one of the biggest lenders to the Greek shipping market.

Some firms are already protectively cancelling orders. Genco GNK.N, founded by Peter Georgiopoulos, annulled a $530 million deal for six vessels, forfeiting a 10 percent deposit. Shipping analysts estimate a third of worldwide orders may be canceled.

For those forced to sell, prices have tumbled: Xiridakis cited a 1980s cargo vessel, which would have sold for $18 million last year, going for just over 3 million this year. Smaller companies with older vessels will be worse hit, he said.

But some Greek shipowners, used to downturns, are thinking long-term. Commodities carrier Diana Shipping DSX.N canceled its dividend this month but said it was saving the cash to acquire ships at low prices during the downturn.

“We are not worried. In Greece we know any crisis bring opportunities and shipping is in our blood,” said Xiradakis.

Reporting by Daniel Flynn and Deborah Kyvrikosaios; Additional reporting by Renee Maltezou and Vassilis Triandafyllou; Editing by Eddie Evans