Carriers awash in red ink and over capacity as season peaks

MORE than US$6 billion in losses have been incurred by container shipping lines in the first six months of the year, reports Paris-based Alphaliner Weekly Newsletter.

"Carriers have sought to raise over $6.1 billion in fresh capital within the last three months. More cash calls are expected as carriers remain caught in the surplus capacity trap which would take several years to clear," said the Alphaliner report.

All 17 big liner companies posting financial results in the first half reported losses, blaming a collapse in freight rates and steep declines in demand. Their revenues dropped 36 per cent to $31 billion and losses are expected in the second half, despite rate increases and surcharges.

In the face of continuing surplus capacity, it is doubtful that higher rates imposed in the peak season can be maintained after it ends in October, said the report.

Falling pre-tax earnings and dealt carrier cash reserves a blow. This has led major carriers to seek capital injections through share placements, rights issues, debt-to-equity conversion and asset sales.

Copenhagen's AP Moller-Maersk, owner of the world's biggest container carrier Maersk Line, raised fresh capital through a $1.58 billion share placement. This followed the rights issue by Singapore's NOL for $985 million in July.

More troubled Santiago-based CSAV, Hamburg's Hapag-Lloyd and Israel's Zim are also seeking greater liquidity. Even Marseilles-based CMA CGM, the world's third biggest container carrier, joined cash hungry rivals with plans to sell assets for cash.

Without cash to tide them over the downturn, bankruptcy looks are a real possibility for some liners in the absence of take-overs. Zim has already warned that that is a risk, said Alphaliner.

Recapping the methods of raising fresh capital, AP Moller-M鎟sk raised $1.58 billion through a share placement, Hapag Lloyd raised $1.3 billion through shareholder commitments, NOL, $985 million, through a rights sale; Zim, $755 million, through capital injection; CSAV, $750 million, through a combination of a rights sale and charter fee-to-equity scheme; NYK, $40 million, through a bond issue; CCNI, $105 million, through a rights issue and a charter fee-to-equity scheme and Hanjin sold assets and borrowed, but amounts were not been disclosed.

(Source: www,schednet.com)