More ruin looming …
Schednet published the following report on the last day of March, with a headline that said it all: “Ruin looms for carriers as overcapacity is compounded with rising debt”
“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 AkixPartners, 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 2008-2009 the way other post-recession economies have in the past, reported GlobeNewswire.
“The study notes that the 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 utilized. 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.” –
Schednet reported the following in the same issue:
“Georgia budget passes with US $ 35 million tranche for Savannah dredging”
“The US $ 35 million in additional Savannah port dredging 42 to 47 feet has been approved by the Georgia state legislature. Along with previous funding, Georgia has now allocated $ 266 million, fulfilling the state’s portion of the Savannah Harbor Expansion Project (SHEP).
“A US Army Corps of Engineers study has shown that SHEP will reduce shipping costs for private companies by $ 174 million a year, said the release from the Georgia Ports Authority (GPA). The Corps study shows a 5.5-to-1 benefit to cost ratio, meaning that for every dollar spent on dredging, the US will reap $ 5.50 in benefits.
“Approved by the Environmental Protection Agency, the Fish and Wildlife Service and the National Marine Fisheries Service, the project is anticipated to cost $ 652 million.” –
[The carriers are losing their shirts because of plummeting demand for containerized goods, but politicians, nevertheless, are blowing money on expanded harbor facilities? Just where is this $ 652 million going, anyway? To the lunatics who are running the asylum?]