This news article first ran in Spend Matters:
The financial crisis in Greece has taken a hit on the country’s shipping industry. Shippers are stuck at bay, unable to purchase fuel. Producers are finding it harder to fulfill purchase orders and to even access the cash needed to continue operating. Spend Matters has rounded up the latest news on the shipping industry and how the debt crisis has already taken its toll on the supply chain.
Approximately 165,000 people work in the Greek shipping industry, which brings in about $14.6 billion annually to the country’s economy. The industry also accounts for about 6% of Greek gross domestic product, data from the Boston Consulting Group showed.
More statistics about the Greek shipping industry:
* The country’s merchant fleet includes about 4,000 vessels
* The fleet represents about 16% of global cargo tonnage (other sources place it at 19%)
* The fleet is also the largest in the world in terms of capacity
US a Key Cash Flow
The US is no doubt helping to keep Greece’s shipping industry somewhat afloat. Shipping is a main money-making industry for Greece, and Greek shipping companies doing business with the US are paid in US dollars, not euros, which makes the threat of a return to the Greek drachma, well, less threatening for the industry. Demand for Greek goods remains high in the US as well. Greek consumers may not be buying domestic goods as much, but at least others around the world are – for as long as they are available, at least.
Access to foreign currency seems to be the key for companies. Dimitrios Stamoudis, manager at Minerva Marine, which is listed in the US, told The Telegraph that national shipping companies doing work with other countries can complete transactions electronically and continue “working as usual.” 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.
Yet companies here in the US are uneasy about sending money to producers given Greece’s current banking system woes. One Greek food shop owner in Massachusetts told New England NBC affiliate NECN that his Greek food producers have said they now are required to pay for materials in cash, which means they need their customers to pay for shipments in advance. This makes some buyers uneasy. “If we pay that in advance, what guarantees do we have that the order will ship and will deliver to us?’’ the Greek food store owner Jeremy Johnson told the source. “If it doesn’t deliver, for whatever issue, then we’re out of the product and out of the cash.”
Some Greek suppliers have even told customers to not send money because they don’t know if they will actually be able to retrieve it from a bank, or worse, that it will even make it to the bank.
Reuters also reported that olive growers, for instance, have stopped taking large payments through bank transfers because they fear the banks will actually access their accounts and take the money. One olive oil producer, Greekpol, asked its customers, which include grocery stores and restaurants, to pay invoices in cash – but this is only a short-term solution.
“It worked for one week, but it won’t work forever,” Greekpol Managing Director Chris Dimizas told Reuters. “If we keep being unable to find a raw material supplier that can be paid through the banking system and not only in cash, the deliveries will stop immediately.”
Stuck at Bay
Even if suppliers are able to produce foods and other Greek goods, getting these products out of the country is proving to be another hurdle. Some Greek shipping fleet owners cannot even buy fuel. It has been reported that as many as 20% of the country’s shipping fleet has been stuck in harbors because they are not being allowed to make payments to purchase fuel.
Tax Revenue Hopes
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. Tony Foster, chief executive for fund management firm Marine Capital, told CNBC chances of Greek gaining more tax revenues from the shipping industry were “absolutely nil.”
How great an impact the financial situation in Greece will have on its shipping industry is yet to be seen. It’s clear some companies – both in Greece and abroad – 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.
Stay tuned to Spend Matters and the Spend Matters Network for continued coverage on how the Greek debt crisis is impacting the supply chain industry.