The surging US dollar should be causing concerns for European traders and ship owners according to an analyst at Allied Shipbrokers.

Head of market research and asset valuations at the Greek shipbrokers, George Lazaridis, fears that letters of credit (L/Cs) may become harder to come by.

L/C fears

Many analysts are expecting the dollar to continue strengthening, with some anticipating a medium-term trend towards a 0.8 to 0.9 euro to US dollar exchange rate.

According to Lazaridis, "the truth is that the biggest fear once again revolves around financing, both for trade in terms of L/Cs by banks, as well as for financing asset purchases and placing new building orders."

Ship owners

Lazaridis argues that European banks will find it ever more difficult to keep up with demand for US dollar funds as their Euro based securities continue to drop in value.

The analyst says a further negative consequence for ship owners could be reductions in the price of scrap steel, which would push down the value of secondhand ships.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.