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Maritime Research

Container Shipping 2nd Edition Special Report - A Financial Health Check

June 2017

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Container industry risk assessment

 

The court receivership of Hanjin Shipping sent shock waves through the container shipping industry and even now the reverberations continue through the global supply chains ecosystem. The debacle affected not only shippers, but a vast array of vendors from ship leasing companies, port operators, container box lessors and suppliers - all felt the impact. Following these events our 2nd Edition Financial Health-Check report assesses the current state of each of the key players in the sector and identifies those over which warning signals continue to flash.

 

In this 2nd Edition special report, Container Shipping - A Financial Health Check - Macros and Micros, analysts at Drewry Financial Research Services Ltd have updated their independent assessment of the financial health of the industry.

 

Key findings from the analysis are:

  • Industry debt situation should improve as industry profitability returns. In our sample of 12 container lines, few operators have already started seeing improvements but those towards the bottom of our risk table have plenty of work ahead to mend their balance sheets.
  • Our analysis of the financial health of the operators show slight improvements are already underway. Most are likely to see better balance sheet and credit metrics if the improving profitability levels were to sustain over the next few years.

  • Gearing levels apart, the container shipping industry has remained afflicted with severe debt after investing heavily during the boom years; the expectation of a recovery in 2017 though is expected to ease the situation. Based on 1Q17 data, industry debt is already in the process of establishing a declining trend.

  • Most operators are finally reining in their capital expenses, indicating that the race to add larger vessels may be coming to an end. Similar to leverage, interest coverage has improved, as companies have reduced expenses (increasing EBITDA) and debt.

Drewry Financial Research uses a simple traffic light system to rank companies under according to their risk profiles.

We rank each company’s risk according to the following weighted parameters: balance sheet strength (45%), income growth (15%), diversification (10%), transparency (15%) and management/control (15%).


More Information

Companies included:

  • A.P. Moller Maersk ( Maersk Line)
  • China Shipping Holdings
  • CMA-CGM
  • Evergreen Marine Corp
  • Hapag-Lloyd AG
  • Hyundai Merchant Marine
  • Kawasaki Kisen Kaisha Ltd
  • Mitsui OSK Lines Ltd
  • Nippon Yusen KK
  • Wan Hai
  • Yang Ming

News

VLGC asset values to fall in sync with freight outlook

VLGC asset values to fall in sync with freight outlook
Given the weak freight rate outlook for LPG shipping over the next twelve months, Drewry believes there is more downside risk to VLGC second-hand values, according to its latest LPG Forecaster.

Increasing long-haul crude trade insufficient to support tanker shipping rates

Rising long haul crude exports from the US and Nigeria will not be sufficient to increase tanker shipping rates, given lower anticipated Middle East output and surging tonnage supply, according to the Drewry’s latest Tanker Forecaster.

Spectre of oversupply haunts chemical shipping

The shipping fleet trading in chemical and vegoil markets is expected to accelerate at a much faster pace than demand, weakening earning prospects, according to Drewry’s latest Chemical Forecaster.

Firm demand will continue to support dry bulk shipping

Drewry expects dry bulk shipping charter rates will continue to recover, with firm demand and controlled fleet growth, according to its latest Dry Bulk Forecaster.

Events

Argus Petrochemical Asia 2017

Drewry will present the outlook for China domestic and imports of methanol shipping market.

Black Sea Container Summit

Drewry will present its outlook on the state of container transport in the Eastern Mediterranean and the Black Sea.

South Carolina International Trade Conference

Drewry will present its outlook for the global container shipping industry.