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Financial Distress in Container Shipping Industry Rises for Third Straight Year

Continued sluggish demand, a growing mountain of debt, and a radically changing global marketplace has the ocean container shipping industry reeling, say financial analysts.

By ·

Supply chain managers are justifiably concerned about the recent consolidation of ocean carrier services, but an even greater threat to their operations may be lurking ahead. According to a new AlixPartners study, many of the major international players face more financial distress—even possible bankruptcy.

Esben Christensen, director of the business advisory firm, says that listed companies have been troubled for the past three years.
“Our analysis suggests that the number of parties controlling containerized transportation on critical trades is shrinking through operational alliances and—potentially in the future—through carriers exiting the business,” he says.

Contributing mightily to this situation, says the study, is a so-so global economy that still hasn’t bounced back from the downturn following the worldwide financial crisis of 2008-2009 the way other post-recession economies have in the past. However, the study also points to several structural issues also buffeting the industry. These include a drive to build “mega vessels,” and fill key trade lanes with these new ships. This represents a trend that over the past decade has steadily increased leverage across the industry and has left it with an average EBITDA interest-coverage rate of just 4.9. This is less than half the rate it was in 2011 (10.8) and less than a third of what it was in 2010 (15.0).

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By ·
Download Article PDF

Supply chain managers are justifiably concerned about the recent consolidation of ocean carrier services, but an even greater threat to their operations may be lurking ahead. According to a new AlixPartners study, many of the major international players face more financial distress—even possible bankruptcy.

Esben Christensen, director of the business advisory firm, says that listed companies have been troubled for the past three years.
“Our analysis suggests that the number of parties controlling containerized transportation on critical trades is shrinking through operational alliances and—potentially in the future—through carriers exiting the business,” he says.

Contributing mightily to this situation, says the study, is a so-so global economy that still hasn’t bounced back from the downturn following the worldwide financial crisis of 2008-2009 the way other post-recession economies have in the past. However, the study also points to several structural issues also buffeting the industry. These include a drive to build “mega vessels,” and fill key trade lanes with these new ships. This represents a trend that over the past decade has steadily increased leverage across the industry and has left it with an average EBITDA interest-coverage rate of just 4.9. This is less than half the rate it was in 2011 (10.8) and less than a third of what it was in 2010 (15.0).

SUBSCRIBERS: Click here to download PDF of the full article.

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