NEW YORK (The Deal) -- It is a saying that Germans love: better a scary ending than a scare that never ends.
Unfortunately, Germany's water-logged shipping industry, based around the northern port city of Hamburg, has been one long scare since the 2008 credit crunch sunk its bright future. And there is no end -- scary or otherwise -- in sight.
For several years, restructuring specialists and investors have been predicting a major industry crash amid over-capacity, growing competition and weak prices as lenders shoulder huge amounts of shipping debt.
State-backed HSH Nordbank, a Hamburg-based bank that is the world's second-large ship financier, for example, has €21 billion ($22.9 billion) in ship financing on its books, about half of which it sees as non-performing. And Frankfurt's Commerzbank, the country's second-biggest ship financier, has just under €17 billion, though its non-performing loans are in the single digits.
But despite expectations that lenders will run out of patience, banks are so far playing a waiting game.
Although over-capacity is affecting shipping around the world, Germany is a special case because of a unique funding model and favorable tax treatment that allowed a boom in shipping at the turn of the millennium. The country now has the largest container fleet in the world and is the fourth-largest seafaring country.
Hamburg is synonymous with the industry as home to Germany's biggest port and Europe's largest container facility after Rotterdam, The Netherlands.
"Vessel values still suffer from overcapacity. A reduction may help to return to realistic market prices," said Sven-Holger Undritz, a Hamburg partner with White & Case.
"There's a lot of uncertainty right now," he said.