Can Shipping Lines Survive?
The world's shipping lines risk bankruptcy and will have to shed assets in order to stay afloat. The outlook for the global container shipping industry remains challenging for the remainder of 2015, according to the new report from AlixPartners.
'It is a very difficult industry to continue to make money in,' Albert Stein, a managing director of AlixPartners.
The global business-advisory firm predicts that operating improvements will continue to prove difficult to achieve amid flat or declining demand and many carriers are now looking to balance their books following an influx of “mega vessels.”
According to the report, total debt for the world’s publicly-traded carriers declined 15% through the end of the third quarter of last year versus 2013, to $91 billion from $107 billion and capital expenditures for the period declined 14%, to $18 billion from $21 billion. By the same token, the study reveals that industry operating expenses declined by 4%, or $7.6 billion, for the period.
Around 6,000 liner ships, some as much as 1,300 feet long, currently sail around the world, carrying multiple warehouses-worth of goods, often using so-called twenty-foot equivalent units—or "containers" that allow ease of movement between ships, trucks and trains.
The industry has struggled for years, grappling with the cost of investing in fleets at a time when the Baltic Dry Index, which measures the price of moving raw materials by sea, knocking around all-time lows.
The report notes that Capex investments for larger, long-term projects also declined to $18 billion in 2014, from $21 billion in 2013 and $25 billion in 2012. As a result carriers appear to be focusing on their core business and also improving working capital management.
