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10 key export finance trends in 2016
As presented at TXF Rome last week, here are the 10 trends we are seeing in export finance in 2016. These were derived from three separate, bespoke research initiatives undertaken by TXF over the past 6 months.
Over the past six months we’ve conducted three different research projects on export finance, which give a good indicator on the health of the market. We used this research to identify 10 key trends for 2016, which we presented recently at the TXF conference in Rome.
The sources are:
1. An extensive set of telephone interviews with 100 exporters and 30 borrowers in partnership with the German research company Clevis. Respondents were asked for key trends and challenges, and also to provide performance ratings on the banks and ECAs they work with (for more information on the report contact [email protected]).
2. The deals data collected via tagmydeals.com – the peer-reviewed deals database of the export finance industry. For a trial of TXF Data click here.
3. An online survey of over 100 export finance bankers in conjunction with the ICC, the full findings of which will be available upon publication of the ICC Trade Finance Survey later this year.
The 10 trends
1. The market keeps going down
According to tagmydeals, the market registered 32% less volume in 2015 than the year before, and our provisional results in Q1 2016 show that the market slowed down even further compared to the same period in 2014 and 2015.
View our latest Q1 data report for more information.
2. Commodity prices
Our survey of export finance bankers showed the low commodity price environment had a dramatic impact on the market over the past year: the issue compounded already existing concerns around the profitability of the product in light of a high cost of compliance landscape.
That said, according to tagmydeals, despite Oil & Gas displaying a significant slowdown over the last few years (2013: $24bn, 2014: $15bn, 2015: $10.7bn), 2016 has started strongly with $11bn worth of deals.
3. From emerged to emerging
In 2016 so far, tagmydeals has seen twice as high a deal volume in emerging markets ($14bn) as in developed economies ($7bn).
In 2014 and 2015, the split was far more even, with the US leading the way in 2015 as the biggest importer.
4. SMEs and small deals suffer
Our bankers survey acknowledged that ECAs and banks need to do more to support the SME segments: despite increased efforts in this area, governmental promises outstrip agency activities.
And according to exporters, projects below $10 million cannot be financed by the banks in the current regulatory environment, even if they want to.
5. Pricing at unsustainable levels
According to our bankers survey, pricing has decreased in the last 12 months, largely driven by high levels of liquidity.
At present, 15% of respondents say ECA business is either loss-making or breaking even; this is not insignificant, but is unsustainable.
Having said that, low interest rates by the central banks worldwide are not getting through to importers. Borrowers report to TXF that they do not feel the low interest rates in the financing they are able to secure.
6. Regulation is inhibiting business… say exporters
Exporters report to TXF that banking regulations are hindering export efforts.
The impact is that banks display a preference for longer-term and high-value export projects and can no longer do smaller deals, even if they wanted to.
Exporters face difficulties finding banks to finance their projects as each step of the business is being monitored so closely now.
7. Private insurance on the rise
Exporters tell TXF they like working together with the private insurance market as they often have a clearer working structure and are able to offer more competitive pricing.
88% of exporters that regularly use private insurance agree that the role they play within export finance will continue to grow.
8. Middle East and Africa
Exporters have identified the Middle East and Africa as the key markets of the near future, and where ECA support is most needed, especially for large projects.
Partly this is a switch from Asia, which many see as stagnating.
29% of all exporters from the energy sector, as well as 32% of firms in construction, see the biggest growth in these regions.
9. Shipping has slowed
After remaining relatively stable at just above $20 billion in volumes in both 2014 and 2015, the shipping sector has slowed significantly in 2016 to date. Only the cruise sector slightly bucks the trend.
|
|
Cruise ships |
Other |
|
2013 |
1368 |
8082 |
|
2014 |
8149 |
11433 |
|
2015 |
9071 |
13314 |
|
2016 |
498* |
1341* |
* Year to date
10. Japan leads the way in 2016
After a dominant year for the ECAs in Europe in 2015, the Japanese agencies lead the way in 2016 to date. JBIC/NEXI already account for $3.6bn of all tagmydeals volumes and Japan is the number one country in terms of supported exports.
|
|
2013 |
2014 |
2015 |
2016 |
|
Japan |
|
|
|
|
|
Oil & Gas |
3644.1 |
1950.9 |
1128.3 |
2683.0* |
|
Power |
2267.0 |
14264.2 |
1580.0 |
697.6* |
|
Metals and Mining |
195.0 |
1915.3 |
100.8 |
111.0* |
|
Telecoms and Communications |
|
16.0 |
25.3 |
63.8* |
|
Manufacturing |
|
6.7 |
8.0 |
32.9* |
* Year to date
If you have any questions on anything above, or with to obtain further information on the three research initiatives that underpin this article, please reach out to [email protected]
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According to TXF Data, the Middle East was the only global region to show substantial year on year growth in export finance deal volumes. Find out why at TXF MENA...
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It's the region where everybody wants to get involved so you'd better be there! TXF MENA is returning to downtown Dubai to help you make local connections and gain local insight.
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