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Financing a maritime superpower

The world’s markets for shipping, offshore, petroleum and fishing need reliable and secure funding, and Norwegian banks and financial institutions play a vital role in financing, insuring and advising on global shipping activities. Norwegian financial institutions cannot boast about being...

A company like Rolls-Royce could easily have moved its marine operations outside of a high cost country like Norway in order to produce its ship’s and maritime equipment at much lower labour costs. However, the company finds it essential to utilize Norway’s seafaring traditions and the compact, competent maritime cluster that takes advantage of specialized financial institutions to improve its competitiveness in the global market.

“Some Norwegians think we are a nation of peacemakers. This is not true. We are a small, insignificant nation, but when it comes to shipping, we are a maritime superpower. The world listens to us,” says Research & Technology Director Rune Garen in Rolls-Royce Marine.
Even if the Norwegian stock market is small by global standards, the Oslo Børs (the Oslo Stock Exchange) is one of Europe’s – and possibly the world’s –leading stock exchanges for the shipping industry. “Norwegian shipping analysts are highly skilled, and they provide quality analysis of the individual companies and the different segments in the industry,” says Oslo Børs President and CEO, Bente A. Landsnes.
The CEO is also careful to emphasize Norway’s long standing maritime history. “Norway has long traditions in shipping, fishing and ocean farming. Furthermore, the Norwegian petroleum industry is the biggest in Northern Europe, and combined these strengths boost Norway as a nation and the Oslo Børs as a leading stock exchange creating great values for the future,” she states.
“We are working hard every day to strengthen these sectors so that we can continue to offer investors attractive investment opportunities,” Landsnes says.

A company like Rolls-Royce could easily have moved its operations outside a high cost country like Norway, but it decided to stay in Norway because of the strong maritime cluster. The Rolls-Royce UT 758 icebreaker can not only navigate independently in thick ice – carrying both deck and bulk cargo – but it can also operate in safety standby, fire-fighting and pollution prevention roles. © Rolls-Royce plc

More than Just Lending Money

The world’s shipping markets need reliable and secure funding, and Norwegian banks and financial institutions play a vital role in financing and advising on global shipping activities.
Norway has two heavyweights when it comes to ship financing. The Nordic bank Nordea has global shipping commitments of USD 12.5 billion, while Norway’s largest bank – DnB NOR – has corresponding figures of USD 11 billion. These tallies place the two banks alongside Citibank as the three largest ship finance institutions in the world.
“Combined, these two banks give a tremendous boost to the market,” says Carl E. Steen, head of Nordea’s Shipping, Offshore and Oil Services Division. “We [Nordea] are a lead arranger of syndicated loans to the shipping and offshore industries, and we have about a 15 percent market share in syndicated shipping loans worldwide.”
Nordea is a Nordic bank, but its shipping headquarters is located in Oslo. “We have financial muscles from the Nordic cooperation, and we combine this with extensive shipping experience from the Norwegian maritime cluster and traditions from the old Christiania Bank & Kreditkasse,” says Steen. The Norwegian bank became a part of Nordea in 2001.

The Maritime Cluster

The close cooperation in Norway between actors in the maritime cluster is vital for maintaining close ties between the industry and Norwegian financial institutions. Examples of participants in the Norwegian maritime cluster include:
• Ship owners and ship managers
• Shipbuilding and repair yards
• Ship’s gear manufacturers
• Shipbrokers
• Ship finance institutions
• The Oslo Børs
• Ship classification societies
• Marine insurance companies
• Maritime research and development institutions
• Maritime education
• National authorities

A Global Leader for Fishing

Norway was a pioneer in developing fish farming as an industry, and Norwegian banks played an important role in helping the birth of the industry. DnB NOR has been one of the leading Norwegian banks dealing with the fishery and fish farming industries for more than 150 years, and it made its name by providing financing for the trading and exporting of salt and clip fish from Norway.
Kjell Stangeland, Senior Vice President at DnB NOR, is responsible for the bank’s business and policies for the seafood industry. One example of the industry’s ability to adapt to new challenges is the salmon industry.
“The salmon farming industry was to a large extent developed by traditional fishery companies during the last third of last century. DnB NOR already had substantial business relationships with the mother industries of salmon farming, and it became natural to follow these new initiatives and the further development of the salmon farming industry,” Stangeland says.
At that time salmon farming was quite volatile with huge variations not only in market prices but also on the biological and technical side of the industry. “We chose to maintain a long-term perspective during such set back periods, and, thus, we helped many pioneers to overcome their financial difficulties. Later on several of these pioneers were able to make substantial gains when the market or the biological situation again improved,” explains the fishing finance expert.
Despite good times for the Norwegian fish industry, there are challenges and Norwegian banks aim to take advantage of their maritime experience to provide profitable and stabile conditions for the industry.

Volatile Market

“Market volatility will still remain a major challenge going forward. And it should not be forgotten that aquaculture by nature is a biological process that greatly requires the monitoring and caretaking of the potential diseases threats witch always will be a challenge in such industry,” Stangeland says.
However, these are challenges waiting to be met, and the industry has experienced an enormous demand for its products, especially because the products provide a very attractive combination of good taste and texture, a high level of availability and some unique health aspects.
“To secure further growth of the market it’s important to maintain a high level of consumer confidence through undisputable quality and food safety,” the DnB NOR director states.
Norway has an advanced fleet of fishing vessels with a great need for capital. However, Norwegian banks have a great deal of experience in knowing the needs of the industry.
“We are proud to claim that we know the industry; we have maintained good relationships with the major players in the industry, and we have a long-term perspective and experience. This has also helped us to do good risk assessments and to provide streamlined financing solutions. On this basis we have enabled ourselves to understand and to bear the risk involved and have positioned ourselves to provide financing also for the future needs in the industry,” Stangeland says.
The Norwegian maritime cluster is also a factor making the Norwegian fish industry competitive in the global fishing industry.
“The Norwegian fishery and fish farming industries have given room for the development of comprehensive upstream activities and several good companies within the shipyards, electronic and hydraulic equipment, ship design, catching and harvesting equipment and so on,” he says.
Stangeland says that these companies play an important part in the Norwegian fishery and fish farming industries’ global expansion. These have made vital contributions to the technical development within the industries and contributed substantially to the global leadership the Norwegian fishery and fish farming industries have today.
“DnB NOR has relationships with several of these vendors and its technology has to a large extent been adopted in other important fishery and fish farming areas. This helps us to be quicker and better understand and finance such activities in foreign waters,” he says

The Norwegian bank DnB NOR has intimate knowledge of the Norwegian fishing industry. “We are proud to claim that we know the industry; we have maintained good relationships with the major players in the industry and a long-term perspective and experience,” says Senior Vice President Kjell Stangeland. © Kjell Ove Storvik, Norwegian Seafood Export Council

Global Insurance Players

In addition to the finance of maritime industries, Norway is also one of the driving forces within marine insurance, represented by flagships Skuld and Gard. Combined, Norwegian insurance companies have about 15 percent of the global shipping insurance market. Headquartered in Oslo, Skuld is an international player with offices in Copenhagen, Bergen, Hong Kong, and Piraeus, Greece.
“Our dedicated staff and an extensive network of correspondents make Skuld a competitive service provider that will always go the extra mile for its members,” says President & CEO Douglas Jacobsohn.
A few years back, the marine insurance industry faced a challenge with regards to insufficient premium levels. According to Jacobsohn, Skuld responded to the challenge with a clear strategy. It involved a major restructuring, with strong emphasis on costs, member selection, and pricing and reserve building – all while still meeting the needs of its members. “A dedicated staff and a lot of hard work have made these efforts successful,” he says.
Gard is another international shipping insurance giant, headquartered in the small southern Norwegian town of Arendal. The company employs more than 370 people of 27 different nationalities in nine locations around the world.
“Our workforce possesses a unique mix of expertise in marine insurance, energy insurance and claims handling, as well as a broad range of professional qualifications and practical experience,” says Gard CEO Claes Christian Isacson. “A high proportion of our staff consists of former seafarers with hands-on knowledge of the problems that can occur and the support that is required. They are assisted by an extensive network of correspondents in all major ports,” he says.

Providing Global Infrastructure to Shipping Derivatives

Although Norway excels at the more traditional type of shipping finance and insurance, there is another and just as interesting aspect of the Norwegian shipping finance industry now making a major impact globally.
The international markets for freight derivatives, often called FFAs, have been the fastest growing shipping markets in the world during the last five years. Leading that charge has been the combined efforts of Oslo based IMAREX – the International Maritime Exchange – and NOS Clearing, the number one clearing house for freight related futures and options.
IMAREX is listed on OSE Exchange (OSE: IMAREX), and it operates from offices in Oslo, Stavanger, Singapore, Houston, London and Zurich. Managing Director in IMAREX Asia Pte Ltd, Mikal Bøe, emphasizes the importance of derivatives in the future markets.
“We combine broking, electronic trading, clearing and research, and we have over 200 member companies trading in excess of USD 1 billion per month in tanker, dry bulk and fuel oil derivatives,” Bøe says. “The contracts are traded on the IMAREX electronic trading screen and cleared at NOS. In addition to freight and fuel oil, the group is building a major presence in Nordic Power, Carbon Emissions and Seafood.”
Clearing is a vital function in any mature derivatives market as it allows traders to execute deals without concern for the credit worthiness of other market players.
“NOS Clearing removes credit risk from derivatives transactions by becoming a central counterpart for all members of the exchange. NOS has built an enviable reputation worldwide as the number one clearing house for freight, with close to 95 percent market share in tanker freight futures and around 50 percent of dry bulk freight futures,” explains Bøe.
The IMAREX Group is also an important part of the Norwegian maritime cluster, and it is able to take advantage of the strong Norwegian maritime traditions and include them in future challenges in the maritime markets.
“We are a true Norwegian success story, combining generations of traditional shipping expertise with modern financial know-how to attract large volumes of futures and options trading from the world’s largest oil companies, ship owners, trading houses and merchant banks,” Bøe states.