New Wave of Bankruptcies for China's Dry Bulk Companies
The overall business climate in China continues to deteriorate and dry bulk shipping companies, being hit the hardest, are likely to be swept by a new wave of bankruptcies, according to the latest report from the Shanghai International Shipping Institute (SISI).
In the fourth quarter of 2015, shipping business climate index was at 82.04 points, the report shows, which is still a relatively depressed level. The shipping business confidence index was at 34.42 points, also slumping heavily. Shipping companies transport capacity, space utilization, freight revenue, profitability, corporate finance and loan capabilities were all down due to deteriorating business conditions. The oversupply plaguing the container and dry bulk shipping sectors pulling down freight rates have pushed companies to the end of their tethers, especially in the dry bulk sector. 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. Furthermore, as the sector enters 2016 in a very weak condition, dry bulk owners are expected to experience further financial losses as the year unravels. The turbulent seas in the sector coupled with tough capital market and inability to secure financing are likely to bring a new wave of bankruptcies for dry bulk shipping companies, SISI said. The announcement comes on the heels of the new record low of the Baltic Dry Index (BDI) which on Tuesday reached 468 points, down from its previous record low of 471 points posted in December last year.
A number of companies in the sector resorted to bankruptcy in 2015 having succumbed to relentless market conditions, including Winland Ocean Shipping Corp, which filed for bankruptcy protection in February last year, and state-backer shipbuilder Wuzhou Ship Repairing & Building Co Ltd, which filed for bankruptcy in December.
World Maritime News Staff