During the first decade of the new millennium, the shipping sector was what can only be described as a goldmine. The rise of China as a global trading superpower, an aging fleet and easy access to credit allowed shipping companies around the world to expand rapidly, plowing billions into new vessels that were quickly snapped up on trading routes. The rising demand for transportation capacity also sent spot rates for vessel charters skyrocketing improving the economics of shippers and making it look as if their rapid expansion was the right course of action. However, the financial crisis exposed these companies for what they were: overleveraged, inefficient, capital hungry disasters.
Since the financial crisis, the shipping industry has struggled to turn a profit consistently. In fact, most of the industry has struggled to remain alive as charter rates have collapsed, extra capacity ordered in the boom years is no longer needed, and debt falls due. Even with rock-bottom interest rates many shipping companies have struggled to service their growing debts. Continue Reading »