The global shipping industry has been struggling for years according to the world’s largest credit insurer Euler Hermes, and is not likely to change soon, as evidenced by recent examples in the container segment. From January 2016 through to May 2016, insolvencies in the sector rose by more than 10% compared to the previous year. The industry continues to feel the effects of overcapacity and record low freight and charter rates, especially as global trade weakens. This has created a domino effect on the funds and banks providing financing.
With container shipping firms counting on riding out the storm through mergers or alliances, there’s no end of the consolidation wave on the horizon. The global economy should rise by only 2.4% in 2016, the lowest rate since the financial crisis. The growth outlook for 2017 is also modest, at 2.7%.
For the sixth consecutive year, growth will be below the 3% mark and well below the 4% average annual growth rate of 2004-2007. Similarly, the U.S. dollar value of global trade is forecast to contract once again in 2016 by -2%, after a -10% decline the previous year.
While shipping companies benefited from the sharp drop in oil prices, these cost savings were not always sufficient to offset low rates. Industry risks therefore remain high, and some specific segments will see further insolvencies.
Do you have shipping industry clients, or rely on shipping industry suppliers for your exports? Cover yourself with credit insurance to reduce your risk in a volatile industry. For impartial advice, contact The Channel Partnership on 01275 817320.