CHINA’s dry bulk shipping will likely see more bankruptcies this year as freight rates hit record lows and the country’s demand for imports falls, says the Shanghai International Shipping Institute (SISI).
The SISI, which also surveyed container shipping, ports and shipping services firms, said business sentiment across these sectors had also slumped, Reuters reports.
A number of firms have already gone bust over the past year as the industry grapples with the worst downturn on record due to falling demand for iron ore and coal from China and a global surplus of vessels.
According to the SISI, more than 60 per cent of the dry bulk shipping firms it surveyed were struggling with long-term losses, while about 40 per cent faced liquidity problems.
"The market is extremely depressed and these conditions are likely to continue in 2016, increasing dry bulk firms’ losses and costs, creating obstacles to financing. This will spark more bankruptcies," state-backed SISI said.
Among the Chinese firms that have already gone bust are dry cargo shipper Winland Ocean Shipping Corp, which filed for bankruptcy protection in February last year, and state-owned shipbuilder Wuzhou Ship Repairing & Building Co Ltd, which filed for bankruptcy last month.
With the Baltic Dry Index hitting a record low last week, it has dropped 80 per cent from its 2014 high and 96 per cent from its 2008 peak.