Shippers’ profits sinkingNearly 60 percent of Korean shipping companies saw operating profit plunge due to low demand for cargo because of the sluggish economy and rising fuel prices, an analysis by the Korea Chamber of Commerce and Industry (KCCI) showed yesterday.
According to an analysis of regulatory filing made by 99 local shipping companies, 55 companies’ operating profit dropped by 146 percent in 2012 on-year as costs and maintenance fees surged while revenues dropped.
“Many companies have been struggling due to a sharp drop of freight demand coupled with rising maintenance costs, which include fuel and raw material prices,” the KCCI said. “As deadlines for repaying of principals on loans approach, companies are in an emergency situation to secure liquidity. If the marine transportation business doesn’t improve within this year, 30 percent of related companies will reach the management’s limits to keep running the company.”
A separate survey by the business lobby group showed 9.7 percent of 175 shipping companies responded they have already reached that limit.
Evidence that shipping companies are feeling the pinch was witnessed in liquidity ratios, which compares a company’s liquid assets to its short-term liabilities.
The vast majority, or 75.8 percent, of 99 companies said their liquidity ratios were below 100 percent while 56.6 percent said their liquidity ratios in 2012 worsened compared to a year before.
“To help maritime logistics companies improve liquidity, repair aging ships and secure a competitive edge, the government should suspend loan repayment dates and loan-to-value requirements,” said Kim Gyeong-jong, an official at the KCCI. “Nearly half of 99 shipping companies picked those as the No. 1 priority that the government should take.”
The Korea Shipowners’ Association called for the government’s immediate intervention since countries like Germany, France and China have been giving help to their maritime logistics companies since the 2008 global financial crisis.
According to the association, Hapag-Lloyd, Germany’s largest shipping company, received 750 million euros ($671,140) from a support fund from the Hamburg city government earlier this year. Last year, the German government guaranteed $1.8 billion in loans for the Hamburg-based company.
Five private Chinese shipping companies received $160 million in financial aid from the Export-Import Bank of China earlier this year.
“The maritime logistics industry shows a country’s competitiveness,” said an employee at a shipping company. “Many countries are trying their best to support the industry. I’m concerned that the Korean government isn’t taking the issue seriously. The government announced in April that it will create a 2 trillion won shipping guarantee fund but it’s not making progress.”
Oceans and Fisheries Minister Yoon Jin-sook said earlier this month she will quickly roll out measures to support the maritime logistics sector.
By Kim Mi-ju [email@example.com]
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