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The global ECA-supported debt markets have registered a subdued start to 2022, according to the TXF Intelligence H1 2022 Export Finance Market Report. Export finance volumes in the first six months of the year had little chance of topping a blockbuster second half to 2021. But they remain below volumes from the same period at the start of 2021.
The report does not – so far – support some of the narratives that have emerged since the start of the COVID-19 pandemic, though Covid itself is receding as a source of export finance transactions. TXF Intelligence continues to exclude Covid support deals, though volumes are now comparatively small. In that respect at least, the 1H figures represent a post-Covid market.
However, drilling down by sector and location some more dramatic trends emerge. Only one oil & gas transaction closed up to the end of June, and that was a refinancing of an operational LNG project – Ichthys. This is good news for NGOs that believe that ECAs should be at the vanguard of decarbonisation efforts, but bad news for European gas consumers, who will be relying on oil & gas projects from further afield making up for lost Russian imports.
Developed markets continue to dominate as a share of volumes, meaning that ECAs are by and large operating in countries where commercial bank debt is readily available. Asia-Pacific was the most active region for financings, though Korea and Australia, and to a lesser extent Indonesia and the Philippines, accounted for most of that strong performance.
Aviation activity remains subdued, though transaction numbers are likely to pick up as airlines react to high prices by ordering more modern fuel efficient aircraft. Shipping activity is a little stronger, buoyed by a single large cruise ship transaction, but few tanker orders have yet shown up in deal volumes. In telecoms, network equipment for large mobile operators has taken over from satellites as a major source of dealflow.
But the sharp uptick in economic activity since the pandemic has yet to translate into the major final investment decisions and equipment orders that might pull through into the export finance market. Commercial banks active in the market will hope that higher inflation and febrile credit market sentiment do not cut off the recovery before it can really gather steam.
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