A sign of madness?

Malcolm Latarche
Malcolm Latarche

11 May 2016


Access to easy money for financing newbuildings has been notoriously difficult for shipping companies recently which given the state of almost every sector is probably just as well. So some might consider the rumour that Chinese investment house China Minsheng is looking to invest in new ships comforting. However, given that the target for investment is likely to be 18,000teu plus mega boxships others might consider the idea madness. A recent Drewry market forecast suggested the container sector could lose a cumulative $10Bn this year due to falling rates caused by overcapacity and steadily rising bunker bills. With so much red on the balance sheets, borrowing money for new ships even from a willing lender would hardly be considered a sensible course for any operator as the net result would be to depress rates even more. There may be good times ahead as some would like to believe but indications are that they are some way down the road and not just around the corner. Meanwhile big operators continue to talk of consolidation and shaking smaller players out of the market although the loss of a leading player a year for the last 20 years doesn’t appear to have achieved very much. Of course if the big players had not encouraged the smaller players to build by agreeing to take newbuildings on charter while at the same time investing in ships of their own, there wouldn’t be the overcapacity there is now in the first place. It may be easy to return the time chartered vessels once the original time charter period is up but its another thing altogether to remove their influence from the market.