Chinese maritime freight companies on brink of bankruptcy

Chinese maritime freight companies on brink of bankruptcy

Staff Reporter

2013-07-26

China’s Ministry of Transport is expected to introduce temporary measures to help container ship operators tide over a possible bankruptcy. The move was made public after a planned national stimulus program announced for the shipping industry last year was aborted and the National Development and Reform Commission reneged on its stance to help the industry, according to the Economic Information Daily, a newspaper published by the state-run Xinhua news agency.An industry insider told the daily that all 41 container ship operators in Hebei and all 55 shipping companies in Shandong incurred losses this year.

The report stated that state-run companies have not fared well either. The Chang Jiang Shipping Group Phoenix winded up in debt litigation with banks involving 2 billion yuan (US$325.7 million) and some of its assets have been frozen. From January to June this year, the company incurred losses totaling 360 million yuan (US$58.6 million).

The shipping business is a capital intensive industry and the existence of such companies will be jeopardized if the industry continues to deteriorate. The financial system will also suffer if a large number of shipping companies file for bankruptcy.

He Jianzhong, the deputy transportation minister, said the ministry is mulling different possibilities of reinforcing support for the industry. But the reform commission is still studying what caused an oversupply in the industry and is trying to get to the root of the problem.

The executives of shipping companies have urged the government to implement measures soon that will help them retire container ships that are too old and resume a balanced demand-and-supply ratio in order to avoid large-scale bankruptcy, according to the report.

In May, representatives from the industry suggested to the ministry that it should ban international container ships over 80,000 tonnes and older than 20 years, as well as container ships smaller than 80,000 tonnes, but older than 23 years from ports in China. For oil tankers, they suggested that vessels older than 15 years should be banned from entering China.

They also urged the government to lower the age limit for vessels operating around China to 15 years.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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