From Shanghai to Hamburg, the liner shipping industry is in crisis. The bustling trade route is falling and the flow of goods has slowed dramatically between Asia and Europe.
First there was the boom of mega-ships – they were built of gigantic – but the recent downturn has sparked a race to lower transportation costs and this has affected all the world’s fleets.
The slowdown of the Chinese economy and the global economic crisis are hitting hard the logistics and maritime transport.
Jonathan Roach, analyst at Braemar ACM-Shipbroking, said that about 100 departures Asia-to-Europe were canceled last year, or 10% of the regular trips on the route.
Last November, Maersk Line has announced that the risk of having to lay off 4,000 employees and halted new orders for ships to overcome the collapse in freight rates.
Hanjin Shipping – one of the leading shippers of South Korea – is urging shipowners about the situation of its chartered vessels, it suggested that needs assistance in order to support the effort of the restructuring and the serious liquidity problem.
Unfortunately there are few alternatives in a weak market, transport prices contracted sharply.
Hanjin recently required a restructuring plan of debt to Korea Development Bank. KDB must assess whether help Hanjin or put into administration: PricewaterhouseCoopers has estimated that this operation could cost a billion dollars, to allow the company to maintain its operations over the next two years.
Hanjin will have to significantly cut the cost of the rental, but also the Korean Hyundai Merchant Marine is under renovation.
Cho Yang-ho has suddenly resigned as chief organizer of the Winter Olympics 2018, in order to look exclusively of the Hanjin Group rescue: the answer to the severe financial difficulties at a time of restructuring and stabilization, KDB asked him to revive the company of navigation.
Many shipping companies suffering from heavy debts because of the expensive rents paid to the owners of the ships.
Hyundai Heavy Industries (HHI) and other shipbuilders are struggling to stay afloat. They plan mass layoffs.
Meanwhile, the Korean government is planning to help the shipbuilding industry because it is a special area that has always created a lot of employment.
The Korean Ministry of Labor is considering different ways to support employees in this sector by offering subsidies and benefits.
HHI and Daewoo Shipbuilding and Marine Engineering (DSME) are cutting the workforce because they too are under renovation.Last year, Shanghai International Port (Group) Co., a major container operator in China, saw off the load to 513 million tons, a decline of 5% from 2014.
Willy Lin, chairman of the Hong Kong Shippers’ Council (since 1999), states that the car parts imported from Europe and assembled in China decreased by 13% in 2015. Shipments of luxury goods (clothing of high-end and shoes) from Europe declined by 15% last year.
The Baltic Dry Index – the important index which measures the cost of bulk transport of coal, iron, wheat, and other non-oil commodity – is at an all time low.Globally, orders for new vessels fell by 40% in 2015. The orders for dry bulk vessels, ie door-dry bulk ships, were 1,200 in 2013, in 2015 there were only 250.
The damage is particularly serious in China, the world’s first manufacturer of ships. New orders for Chinese shipbuilders have fallen by nearly half compared to last year (it says the Ministry of Industry and Information Technology of China)
Michele Francioni – CEO of Rina Services – argues that “The trend in the ocean shipping market in this period is mainly dominated by three factors: the excess of the market available tonnage to be getting smaller, the price of oil down and the inevitable reduction in capacity from Asian shipyards also in 2015 “.
The only companies that are taking advantage in this time of crisis, companies operating in the oil sector. They’re taking advantage of the price of crude oil at historic lows and are increasing their stocks: orders for new tankers increased by 14% in 2015.
Given the dismal prospects in the field of the builders and owners of vessels, Hanjin want to ask them, as part of its restructuring costs, a substantial cut in freight rates, or to accept as payment a portion of its shares. In both cases it is a little tempting deal for the owners of ships, however, given the general market conditions will have to accept reluctantly, in the absence of other bids.
These figures clearly speaks about the real prospects of economic recovery much-publicized by the media.
Thanks to Rischio Calcolato