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01-10-2015

Analysts: Declining Market Means More Dry Bulk Bankruptcies on the Way

The recent bankruptcy of Daiichi Chuo could set off ripples in the sector.

Analysts are warning that a recent spate of bankruptcies in the dry bulk sector may continue as the market continues its decline, IHS Maritime reports.\u00a0

"We highlight that continued decline of the dry bulk markets and negative cash flow could put more companies in jeopardy; hence, we prefer shipping companies with strong main owners and liquidity to sustain a prolonged downturn," said Oslo-based DNB Shipping in a research note.\u00a0

Ship & Bunker reported earlier this month that Cyprus-based\u00a0Global Maritime Investments Cyprus Ltd. had announced that it would be liquidating its business due to the dry bulk downturn.\u00a0

Earlier this week, Daiichi Chuo Kisen Kaisha also filed for bankruptcy, prompting some analysts to caution on the ripples that would result in the Japanese shipping space. \u00a0

"We see the fact that Daiichi does not have the funds to go through a restructuring process as further exacerbating the situation," said Oslo-based Arctic.\u00a0

"This may ultimately mean a slew of lawsuits and redelivery of tonnage, as well as forced sales of vessels - potentially adding pressure on a fragile dry bulk market."

It was reported that at the time of filing for bankrupcty, Daiichi Chuo had\u00a0roughly \u00a5120 billion ($1 billion) in liabilities.

Earlier this week\u00a0Deutsche Bank\u00a0offered a surprisingly upbeat outlook for dry bulk, predicting a recovery for the sector could start as early as November, while Drewry Shipping Consultants Ltd (Drewry) earlier this month voice the more commonly held view that any relief for the sector is still a "long way off."


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