Threat of bankruptcies for container-shipping industry

Ships’ captains no longer fear that they’ll sail over the edge of the earth, according to American business magazine, Forbes. For container carriers today, the real-life brink is bankruptcy. And a growing number are in danger of approaching it. According to a new study by AlixPartners, the container shipping industry as a whole stands closer to outright failure than any time since 2010. And the risk grows more serious each year. Long-time industry observers might be tempted to greet that message with a yawn. They’ve seen the cycles of boom and bust, the ups and downs of freights rates and the demise of any number of weaker lines. Yet the stronger carriers sail on, in bigger and evermore efficient ships. Things are different now, said Lisa Donahue, an MD with AlixPartners. The traditional cycles are out of whack, she said — to the point where the industry is experiencing “a new normal.” “Normal,” in this case, doesn’t mean “good.” At first glance, one might think the business was in shipshape condition, with container vessels of record size and the promise of steady global trade growth. But the industry’s woes aren’t hidden below the waterline. They take the form of outright dysfunctional behaviour by the carriers themselves. “There’s almost a lack of a learning curve,” said Donahue. “They go through these massive cycles where they overbuild, get over-leveraged and crash down.” So it has gone for decades. What’s new, said Donahue, is the nature of economic cycles. They’re shorter and more severe than ever before. And the old strategies for riding out the storm aren’t working anymore.