Dry-Bulk Shipping: Hitting the Bottom

 

The global commodities bust has rocked the dry-bulk shipping industry, with a wave of bankruptcies washing across the sector and major players forced to restructure, divest or scrap assets.

 

Many in the industry had hoped it would start to recover this year. But there is not much sign of that—and it looks as if more pain is still in store for shipowners.

 

On Jan. 5, the Shanghai International Shipping Institute issued a striking report after polling about 50 of the nation's largest bulk shippers. The survey concluded that 60% of the firms it polled were struggling with long-term losses and about 40% faced liquidity problems.

 

"The market is extremely depressed and these conditions are likely to continue in 2016, exacerbating dry bulk firms' losses, increasing costs and creating obstacles to obtaining financing. This will kick-start a wave of bankruptcies," government-run SISI said in the report.

 

Small dry bulk shippers have already started filing for bankruptcy. Japanese bulk carrier Daiichi Chuo Kisen Kaisha filed for protection from creditors on September 29, and Global Maritime Investments Cyprus Ltd. filed for Chapter 11 bankruptcy protection in the United States on September 15.

 

According to Freight Investor Services, “The world’s fleet of dry bulk carriers has grown 84% since 2013 while bulk cargo demand has grown by only 33% in the same period and is set to grow by 1–2% for the next several years.”

 

According to the Chinese shipping sentiment survey, more than 60% of the 50 dry bulk shipping companies surveyed were coping with long-term losses and nearly forty percent of the companies were facing long-term liquidity problems. 

 

What is more, a considerable number of dry bulk shipping companies are stretched to the edge of bankruptcy.