Chinese maritime freight companies on brink of bankruptcy
July 26, 2013 Leave a comment
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.
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