While other sectors of the world economy are rehearsing for the return of growth after the problems created by the US economy, those now feeling the affects of the crisis more keenly are long-haul shipping companies. These have had to deactivate part or all of their fleet in recent weeks for want of cargo, and will still have to wait some months for international traffic to regain the rhythm of a year ago. That’s not counting the fact that a decrease in demand has caused a sharp fall in freight costs, which can be great for customers at the moment, but will prove to be prejudicial in the future. This is because in order to lower costs, the shipping companies will need to reduce services and the quality of maintenance, besides not investing in the fleet that percentage of the cost that would normally be used.

The fact that the end of the crisis is in view for industries and other production areas merely lets them breathe a little more easily, since it indicates a more optimistic future scenario, but it does not ward off the complications of the present moment, which demand strict cost controls, a reduction in traffic, postponement of contracts and other measures to guarantee liquidity in these companies.   

As the Chilean publication Aqua comments, four large measures are being adopted by shipping companies in danger of going under: the sale of dispensable assets, the direct injection of capital from current or new shareholders, the renegotiation of contracts with shipyards, or company mergers. In certain cases, the preference is to adopt several of these alternatives at the same time.

In cases where shipping companies have ship-leasing contracts that they can no longer honour, the ship owners can ask that such companies declare themselves bankrupt in order to recover some capital, or capitalize the debts, transferring them from liability to asset by becoming company shareholders rather than creditors. 

This is what happened to CCNI (Compañia Chilena de Navegación Interoceánica), which opened up 18% of its share capital to 80 German ship owners.  The same company renegotiated contracts with the Samsung Heavy Industries and CSBC Corp.  shipyards. With these two measures, the Chilean shipping company’s objective was to bring together capital in the order of US$ 710 million, winding up stronger at the end of the process.

In other cases around the world, shipping company shareholders themselves have injected capital into companies, or new shareholders have been accepted so as to strengthen their ability to survive the worst period of the international crisis.

However, as in the domino effect, when the first piece falls, the others fall in sequence. So, it’s easy to foresee that while shipping companies are doing financial reorganizations, the next industry to suffer the effects of the world-shaking crisis will be ship building, already affected by the lack of new contracts and the suspension of those already signed, and which could suffer more through non-payment by clients. After that, suppliers of parts to shipyards and shipping companies are showing adverse effects with a slump in sales.

Interestingly enough, in Brazil, while long-haul shipping, almost totally denationalized, suffers the effects of the crisis in foreign head offices, with a wave of dismissals, ship building is going through a positive phase, but for another reason: contracts for building  supply vessels for offshore platforms in the so-called “pre-salt layer”, besides keeping existing shipyards busy, are also stimulating the installation of new shipbuilding careers in Brazil.

In other words, on Brazilian territory, if the sea brings a crisis, the sea has to take it away...