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Cash crunch
cascades over Asian lines
This week
rates on the key Asia-North West Europe route fell $38 to $431 TEU as
carriers somewhat stemmed the flow of losses in the run up to Chinese
New Year. Despite this week’s index recording the smallest decline
since October 2015, rates are still 59% lower than the same period of
2015, reflecting the challenging environment carriers find themselves
in.
This is a fact that has also been reflected in their financials with a
number of carriers reporting a severe deterioration in performance in
the last quarter. OOCL, which in the past has somewhat weathered the
challenging market conditions thanks to its route exposure reported a
decline in revenue for the fourth quarter of 2015 of 15.6%, despite an
increase in liftings of 2.0%.
Its revenue on the Asia-Europe trade fell a whopping 35.6% with average
revenue per TEU falling 23.1% and liftings down 16.4%. Significantly
though, revenue on its largest route, the Transpacific, fell 7.9% with
average revenue per TEU declining 15.2%. This was in spite of liftings
increasing 8.6%.
It’s clear that over the past 12 months the negative impact of
cascading is having a real impact on the carriers’ financials. The
market will now be eagerly waiting to see how worsening market
conditions impact the market leader Maersk Line, which will release its
results on February 10th.
Reports also emerged this week that the chairman of Hyundai Group,
which controls the debt laden HMM is willing to inject her own capital
into the company, which currently has debts of around USD 5.8bn.
Moreover the company is planning to sell off stakes in various
affiliates as it looks to address its debt ratio 980%, as of
Q3-2015.
Previously government financial officials had indicated that “since
further financial support to the companies are like filling a
bottomless vessel, we cannot do that anymore. It is more important for
an individual company to make every effort to implement the targeted
plan first.”
It therefore seems unlikely that the company will be able to tap into
the recently announced USD 1.2bn government fund, which is only open to
companies with a debt-to-equity ratio of below 400%, unless it can
significantly improve its own position. With substantial corporate
bonds due for repayment this year it appears that both HMM and Hanjin
are set for a crucial 12 months.
Elsewhere the much expected GRI roundabout continued with several lines
announcing rate increase on the Asia-Europe trade of between $900-1,000
TEU, effective March 1.
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