Financial Risk for Container Shipping "Highest in Years"

by Ship & Bunker News Team
Monday March 31, 2014

The container shipping industry is facing the greatest risk of financial distress in years, according to a new study of 15 publicly traded carriers by business advisory firm AlixPartners.

The difficult conditions are driven largely by continuing sluggishness in global economic growth, as well as the advent of "mega-ships," which has pushed companies' debt load higher.

The study argues that growth in the global fleet capacity, which hit 16.9 million twenty-foot equivalent units (TEU) for the 12 months ended September 2013, has contributed to underutilisation.

While total debt carried by the companies studied dropped to $99 billion in 2013, after hitting a high of $105 billion in 2012, average EBITDA interest coverage, a measure of the burdensomeness of companies' debt, fell to its lowest point in more than five years.

"The container shipping industry as a whole continues to face stiff challenges, and for many companies in the industry those challenges could be existential if not addressed," Lisa Donahue, managing director and global head of Turnaround & Restructuring Services at AlixPartners, said in an emailed statement.

"These challenges also have, and will continue to have, a big effect on shippers and investors as well."

In particular, the study argues that smaller players are facing difficult conditions, particularly with some large companies uniting in alliances to deploy capacity more efficiently.

Ship & Bunker News Team
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