Thursday, January 15, 2009
Panic in Asian dry bulk sector
Michelle Wiese Bockmann - Thursday 15 January 2009
MAJOR Asian dry bulk operators are on the brink of bankruptcy as defaults on chartering contracts potentially worth hundreds of millions of dollars mount up and claims swamp courts in New York and London.
The most vulnerable firms include Glory Wealth and Transfield, Ocean Glory Shipping and Beijing-based Worldlink Shipping, which creditors allege has already ceased trading.
A chain of defaults on charter hires, freight contracts and paper trades has crippled cashflow for the Asian operators over the last five months.
The defaults were triggered after steel mills, miners and commodities traders failed to nominate cargoes as the global economic upheaval of September killed demand. Freight rates plunged by 98% and now hover at their lowest levels in more than 15 years.
“We are trying to pay others, our [ship] owners; we are trying,” said the legal representative of one large Asian-based company that has defaulted on a series of time charters, renegotiated others but is running out of time. He declined to have the company identified.
“We want to show that we are a responsible company and not evade, but we cannot get any money from others,” he added.
A series of high-profile shipping company bankruptcies has seen financial troubles cascade down to owner and operator creditors, who leased them ships.
Many are now locked in arbitration in London over failed contract of affreightments, including Australian iron ore producer Fortescue Metals Group.
It has 10 ‘suspended’ chartering contracts being arbitrated, including one covering shipments of 10m tonnes of iron ore.
Its counterparties include Armada and Glory Wealth, and European owners and operators Classic Maritime, Alpha Tankers and Freighters International, and CMB (Bocimar).
“I think there’s a lot of people misbehaving,” said a Europe-based senior dry bulk shipping executive, who declined to be named.
“If you look at the likes of Armada and so on, they’re victims of what is going on, with Fortescue being a contributory factor to that. One can always question the counterparties that they have, but in principle they wouldn’t be in the situation they were in had their counterpart performed. It’s a very similar situation for everybody who has exposure in the steel industry.”
Hong Kong-based Transfield, which had operated a fleet of up to 120 bulk carriers in the last quarter of 2008, has declined to comment.
“We do not have the time or the interest at this stage,” a company executive told Lloyd’s List. “Everything is rather sensitive, everybody is rather busy.”
Transfield, which said its 2007 turnover was around $3bn, was last week listed as the largest creditor by Singapore-based operator, Armada, allegedly owing the company $113m. Armada has filed for bankruptcy protection.
Transfield has around 10 cases before a US federal court over alleged chartering or freight contract defaults in the last two months.
Glory Wealth declined to outline its current financial position. Records show about 15 bulk carriers on period charter, including one capesize vessel for four years at $115,00 per day.
Ocean Glory Shipping, which recently restructured as Sparkle Wave, is embroiled in litigation with Korea Line Shipping and declined to comment.
Bankruptcies to date:
* Industrial Carriers Inc
* Parkroad
* Britannia Bulk
* Atlas Shipping
* Armada (protection order)
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