Shipper sees charter and corporate defaults ahead

PUBLISHED : Friday, 16 March, 2012, 12:00am
UPDATED : Friday, 16 March, 2012, 12:00am


Shipping firms may see more charter and corporate defaults because of a tougher operating environment, says the head of a leading local dry cargo shipping firm.

Ng Siu-fai, chairman of Jinhui Holdings, however said there should also be 'interesting opportunities' to acquire shipping assets that are expected to be put up for sale amid the adverse climate.

In 2010, Jinhui Shipping and Transportation, the firm's Oslo-listed unit, took legal action, including launching arbitration proceedings, against mainland shipping firm Grand China Logistics to recover almost HK$202.8 million it was owed in unpaid lease and related payments.

'We received total amounts of outstanding hire and settlement sum, including interest under those arbitration awards in early 2012,' Ng said without referring to the mainland firm by name.

He said Jinhui would seek to recover a further outstanding claim, totalling HK$39 million, against Grand China in due course.

His comments come amid confirmation that Sanko Line, one of Japan's leading shipping lines, plans to restructure and strengthen its balance sheet after running into financial difficulties.

Raymond Ching Wei-man, vice-president at Jinhui Shipping and Transportation, said Jinhui was not exposed to the Japanese firm, although other Hong Kong operators are known to have ships with Sanko.

Ng said the freight market would remain challenging this year, as the volume of new ships being delivered has been outpacing the growth in dry cargo volumes.

There was an increase in the number of older ships scrapped last year but that was insufficient to provide 'positive support to the freight market', he said. 'Excess shipbuilding capacity remains a risk.'

Jinhui Holdings yesterday posted a drop in net profit attributable to shareholders for last year to HK$259.27 million, down from HK$366.82 million in 2010.

Revenue fell 11 per cent to HK$2.78 billion last year from 2010.

Revenue from Jinhui Shipping & Transportation, in which the parent firm holds a 54.77 per cent stake, declined to HK$2.38 billion last year, compared with HK$2.72 billion in 2010.

That was due to the fall in charter and freight earnings as the number of chartered vessels was reduced and ships were re-leased at lower rates.