Wednesday, November 25, 2009

Ocean Containers – That Sinking Feeling

Pirates in the Indian Ocean are not the only concern for shipping lines and their customers

Ocean shipping is in rough water, and companies with their products on board need to take notice.

Eastwind Maritime went under last week, burdened by debt of $300 million, and the New York-based carrier’s bankruptcy could be a harbinger of more failures to come, analysts say. France’s CMA CGM, with $5.6 billion of debt, is facing demands from creditors to oust management before the loans are restructured.

Cato Brahde, a portfolio manager at Tufton Oceanic, a hedge fund that specializes in the shipping industry, suggested that most of the pain for the shipping industry is still to come. “We estimate that there will be a 50 percent oversupply in container ships,” he said. “And in the next five or six months you will see more banks repossessing ships.”

When Eastwind Maritime went under, ships and their cargoes were left stranded. In some cases, the ships had no money to purchase fuel, or even provide food and water for their crews. Some of Eastwind’s vessels, which are a prime mover of Chiquita brand fruits and vegetables, were left stranded in open water, reported The New York Times.

The maritime carriers’ pain is rippling through insurance companies, banks, shipbuilders, and the shippers whose freight keeps the whole system afloat. Companies that are dependent on ocean transport to bring their goods to market should pay attention to the storm warnings on the sea ahead.


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