Over half listed shipping companies may go bust

The grim assessment was issued by Paul Slater, chairman and chief executive of First International, who forecast that the next 12 months would be “really painful” for the three main shipping sectors of containerships, dry bulk and tankers.

However, Mr Slater’s views on the fate of the public companies was described as “alarmist” by a leading representative of the financial and shipping industry in New York, where most of the stock market listings of the past decade have taken place.

Mr Slater pointed out that there were now more than 30 public shipping companies on US stock exchanges, about 60% of which were not public at the beginning of this decade.

“The average reduction in market value of the US public companies is somewhere between 60% and 68% in 12 months,” he said.

“That is huge in any industrial sector.”

Even more important was the lack of cash-flow, Mr Slater said.

“We’re in a situation where revenue streams are barely covering operating costs,” he said.

“In some cases, such as the medium range product tanker market and the container shipping industry, they are not even getting close to covering operating costs.

“At which stage, you have a ‘cash burn,’ that is a net outflow of cash.”

The container shipping industry had "without doubt" already suffered the most pain and still had the most to endure.

That was particularly bad news for the German KG companies and the banks that have supported them.

Mr Slater was also gloomy about over tonnage in the dry bulk market.

He said there was much talk about cancellations but, on closer examination, most of the information was actually about deferrals.

“Therefore, the capacity will arrive; it is a question of when,” Mr Slater said.

“I feel that more than half of the public shipping companies will go into either bankruptcy or administration within 12 months.

“For me to say that I think that these companies will run out of cash within a 12-month period is not an outrageous statement given the fact that where the markets are today is far worse than at the end of the 1990s.”