15-10-2016

Major shipping lines show signs of financial distress in Q2: Drewry

Drewry

THE high level of financial risk faced by container shipping lines has been underscored by the collapse of Hanjin Shipping, according to a survey by Drewry Maritime Research, which uncovered two other major carriers being in danger of potential financial ruin. 

Using its z-score rating for financial distress, the average for 14 major shipping lines that publicly disclose their financial results is at its lowest level since the index started in 2008. 

Collectively the 14 carriers rated scored on average less than 1.0 in the second quarter. Any score below 1.8 represents a higher risk of bankruptcy.

Only two of the 14 companies surveyed - AP Moller Maersk and Orient Overseas International Ltd (OOIL) - scored high enough to make it into what Drewry described as the cautionary grey zone, reported Seatrade Maritime News.

Three carriers, including bankrupt Hanjin had scores in negative territory, but Drewry did not identify the two other shipping lines in that category. 

"The decline in the z-score index has coincided with the heavy reduction in container freight rates that dropped to historical lows in the second-quarter," Drewry was cited as saying.

"As freight rates staged something of a recovery in third-quarter we expect to see some uptick to the z-score when the third-quarter 2016 results are published, while the removal of Hanjin from the sample will also benefit the average score."

However, it anticipates most ocean liners will remain in the "distress zone."

As result of Hanjin's bankruptcy filing, Drewry says it is seeing higher demand from shippers for financial transparency, especially from ocean liners that do not publish financial information. "Privately-owned carriers will risk losing shippers" trust if they do not provide any data on their level of indebtedness and balance sheet strength," it said.

Source: Schednet

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