THE risk of financial distress in the global container shipping industry is rising for a third year amid sluggish demand, debt mountains owing to record ship investment while mega alliances form rates stay unsustainable.
Listed companies in the sector as a whole face greater risk of financial distress, including possible bankruptcy, than at any time since 2010, and that risk has grown in each of the last three years.
That is the view of business consultants AlixPartners, who have made a study of the problem.
Contributing mightily to this situation, says the study, is a so-so global economy that still hasn't bounced back from the downturn following the worldwide financial crisis of 2008-09 the way other post-recession economies have in the past, reported GlobeNewswire.
The study notes that while global fleet capacity in the industry has risen steadily in the past decade to 16.9 million TEU for the 12-month period ending September 2013, up from 16.3 million TEU in 2012 and 10.9 TEU in 2007, that capacity is a long way from being totally utilised.
"This, in turn, according to the study, is likely creating an environment of haves and have-nots where smaller carriers in particular may face some hard choices going forward.
The study recommends carriers divest non-core assets, exit unprofitable trades, adopt a laser-like focus on cost control, reassess all value propositions, and join shipping alliances or partner where it makes sense.
WORLD SHIPPING
30 March 2014 - 20:54
Risk of Financial Distress in Container Shipping Industry Rises
THE risk of financial distress in the global container shipping industry is rising for a third year amid sluggish demand, debt mountains owing to record ship investment while mega alliances form rates stay unsustainable.
WORLD SHIPPING
30 March 2014 - 20:54
Ruin looms for carriers as overcapacity is compounded with rising debt
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