- By Region
One of the world’s fastest-growing container shipping lines, Israel’s Zim, has announced plans for a capital increase, while Malaysia’s MISC has said it will quit container shipping altogether, in the latest signs of the growing distress in the economically vital sector.
Zim, which was rescued by a $450m cash injection during the last container shipping downturn in late 2009, announced on Thursday that it would need $100m in fresh equity and that it had made a $63m net loss for the third quarter, on turnover of $973m.
Zim is the third leading container line – after Chile’s CSAV and Korea’s Hanjin – to announce equity-raising plans since container shipping rates started to fall in the middle of the year. Zim, according to Alphaliner, the Paris-based consultancy, has enough ships on order to expand its fleet by 47 per cent, one of the highest ratios of any large carrier.
Zim’s new capital will come from the Israel Corporation, its main shareholders, and the Ofer brothers shipping family, the corporation’s controlling shareholders.
Meanwhile, MISC, which was once a significant force in Asia-to-Europe container shipping, announced it was leaving the business altogether after losing $789m there over the past three years.
The company withdrew from the Asia-to-Europe trade in early 2010 after concluding it was impossible to compete with large operators such as Denmark’s Maersk Line. However, it had still been operating in trade round Asia, which accounts for more container movements than any other part of world container shipping.
MISC blamed its exit from the industry on the surge of investment by larger container lines in far bigger ships, designed to bring down the cost of shipping each individual container. Maersk Line announced earlier this year plans to buy up to 30 ships, each capable of carrying 18,000 20-foot equivalent units (TEUs) of containers, about twice the capacity of the largest ships just five years ago. Other lines have been scrambling to place their own orders for similar, monster-sized ships, each of which costs about $190m.
Nasarudin Idris, MISC’s chief executive, said the company had focused in recent years on energy shipping, rather than container – or liner – shipping. “In view of the expected larger demand of investment in the liner industry, the cost for us to remain relevant in the liner business is untenable,” Mr Nasarudin said.
It will cost MISC $400m to leave container shipping – a cost that it predicted would push the company as a whole into a full-year loss. MISC will continue to operate in other areas, including oil tankers and liquefied natural gas carriers.
Significant numbers of other container lines are expected either to seek fresh equity or to withdraw from container shipping over the next few months because of the slump in rates in the sector, where ship supply is growing far faster than demand to move goods.