Wednesday, April 12, 2017

Demise of a Famous Name as Container Shipping Line Goes to the Wall

Another One Bites the Dust as Expected
Shipping News Feature
SINGAPORE – In November 2016 one of the oldest established names in the global shipping industry which can date its origins back to the 1830's, Hamburg based Rickmers Holding AG, issued a press release concerning the imminent demise of its Singapore based associate group Rickmers Maritime Trust (RMT), Singapore, the container vessel owning arm of trustee manager Rickmers Trust Management. The release went to great pains to point out that, due to the sale of the management company one month earlier the links between that operation and the holding company were almost entirely divorced from each other, with problems in Asia having no operational impact on the vessels owned by Rickmers Group.

Today the sword of Damocles which has hung over Rickmers Maritime since that release, which announced the company had failed to make good on payments due to bondholders, finally fell, terminating the company’s operations. In December moves were made to restructure the outstanding S$100 million debt but these fell on deaf ears leading to the failure to pay the US$196.7 million principal repayment to the main creditors HSH Syndicate (HSH Nordbank AG and DBS Bank Ltd) due on 31 March 2017.A statement today from the company laid out full details of the problems.

The outcome of the winding up of the Trust is to release the 14 container ships it owns, all of which are of the out of favour Panamax class. This class of vessels has arguably suffered the most in the general downturn due to the Panama Canal Lock expansion programme. VesselsValue, the online market specialist which calculates the worth of both individual ships and entire fleets, as well as mapping and tracking global ship movements, estimates the scrap value of the RMT fleet at just US$89 million, this down from around US$200 million just 7 months ago, a 55% collapse largely due to the demise of Hanjin.

The RMT fleet has an average age of 9 years, not bad compared to the industry average of a decade, but of a vessel type now considered unsaleable by many analysts. According to VesselsValue the worth of the global container fleet has fallen by 27% over the last 12 months from US$141 billion to US$102 billion today. Live fleet capacity has grown by 0.6% over the same period whilst the order book has shrunk by 18.4% in the same period.

With a carrying capacity between 3,000 and 5,999 TEU, Panamax vessels, once one of the giants of the trade, look increasingly neither betwixt nor between. Too big for most feeder routes and too small for modern deep sea container routes where most of the major players have opted for ever larger box ships, even embracing age old competitors as route sharing partners to try and justify the enormous investments they have made in their newly built behemoths.

VesselsValue estimates 88% of the world’s Panamax fleet is now only worth scrap value, a valuation which itself can be liable to some fairly wild fluctuations as scrap prices move, particularly in a downward direction when too much material comes to the market.

As for Rickmers Linie, the long established heavy lift and out of gauge specialist itself changed hands in February, purchased by the German Zeaborn Group for an undisclosed sum as Rickmers Holding AG moved to sell off the family silver in what are parlous conditions for small to medium sized shipping groups in just about every sector of the industry.