Cash-strapped Chinese ship-owners are struggling to find financing to keep vessels afloat in the face of soaring debt and a sharp slowdown in the world’s second largest economy
Five-storey shipping company, nominally owned by a tiny company in Hong Kong, is the latest to meet the daily mile-long lineups of weary ship captains at China’s ports after placing an ad for a new crew on Facebook.
Cash-strapped Chinese ship-owners are struggling to find financing to keep vessels afloat in the face of soaring debt and a sharp slowdown in the world’s second largest economy.
“I’m unemployed now so can you take my captain?” the advertisement, written in English and in Chinese, read.
“Pay my captain and transport,” said a sign attached to the ship.
The sunken containership Ritrachi, one of the many ships in the waters off China. Photograph: Reuters
Already scrambling for an un-to-fortunate life, thousands of steel mills, coal and coal-burning power plants are running out of cash to pay the bill for delivering raw materials to factories across the country as profits have collapsed.
From next week, shipments of China’s iron ore are likely to be some of the last stocks exported after President Xi Jinping’s pledge to cut back coal and steel production is preventing grain exporters from satisfying the insatiable appetite of a country on track to overtake the US as the world’s biggest importer of the raw material.
Port queues of up to three hours are reportedly common with ships posting daily photos of waiters bringing them fruit juice as a testament to their lack of financial security.
A day after the Philippines evicted UN agencies from ports citing Beijing’s protectionism, the rule of law for shipping firms is proving even more elusive.
The Global Times newspaper recently ran a story under the headline, “Is China Paving the Way for a Chinese Shipping Crisis?” With the slow death of the world’s second largest economy, and poor management of the resources it produces, China is back to the very same problems that roiled its shipping markets a decade ago, it said.
The giant containership Sun Sky Star, which is docked at the southern China’s Shenzhen port. Photograph: The Public Domain
“The shipping companies [owning huge ships] don’t know the end game and most of them don’t make enough money,” said Li Tao, director of a marine consultancy called Compass Measuring Co, based in Suzhou in eastern China.
In the post office of the global shipping industry, cash-strapped shipping firms often can’t get loans, forcing them to accept cash as a form of payment to fill in the void, said Tim Page, a columnist for the Interbulk Journal.
“If the company only has a certain amount of money, then there’s nothing that’s going to encourage them to finance the ship, so I would say they’ve already suffered from this condition in many ways. The most obvious thing is their ships aren’t making as much money,” he said.
Ship builders struggle with overcapacity in the global market, especially for large container ships. At present, 48 of 66 so-called “mega” and 13 “double-hull” ships that were designed to carry more than 20,000 containers have not been sold for conversion, according to the National Centre for Classification and Certification, a company that handles class marking and certification.
Ship owners in China are facing a similar plight that shipping companies in Japan and Korea faced in the late 1990s when “Asian financial crisis” ended up cutting down ship deliveries in China, said Rowland Yu, an official with the Japan Shipowners’ Association, and the Japanese ministry of transport.
“They stopped buying big ships and relying on the shipping business as a whole is having an impact on Japan’s shipowners,” he said.
“If they cannot buy big ships or small ships at the current prices, then it means they will not have much power as a shipping firm in the market.”
Most people can’t find anything to do, he said. “After office work or such, they must go home and not focus on the shipping industry.”