LONDON – The container industry is likely to be the shipping sector most affected by the Covid-19 pandemic, with global box trade set to be heavily impacted by disruption to the world economy, consumer activity and supply chains.
Financial health remains weak and uncertain exacerbated by downgrades in global growth for 2020.
These are the key findings of a report published this week by Drewry Maritime Financial Research Services (DMFR) into the financial health of the global container shipping industry.
The ongoing global pandemic raises many questions around carrier industry financial health and parallels are being drawn to both the 2008-09 economic crises and Hanjin’s bankruptcy that took place in 2016.
The report looks at a sample of 14 container lines. “Few inspire confidence with respect to financial or balance sheet strength. Most have seen a deterioration in their balance sheets with increasing gearing in the past several years,” Drewery said in a release.
The industry is already over-leveraged, driven partly by IFRS 16 lease accounting changes and carriers’ vertical integration strategies. Ballooning debt and years of negative cash flows, in the context of the current crisis, raise questions about future business viability, Drewry asserted..
High levels of debt not only damage long-term profitability and shareholder returns but have significant implications for key stakeholder groups (customers and vendors).
The companies studied in the report are:
AP Moller Maersk
Orient Overseas International Limited (Cosco subsidiary)