A weak dry bulk shipping market could put more firms in ‘jeopardy’ after the collapse of Daiichi Chuo Kishen Kaisha in Japan, shipping analysts in Oslo warn, adding that Daiichi’s apparent lack of funds to undergo restructuring worsens the situation.
“The company owns 95 ships and is 17% owned by MOL (Mitsui OSK Lines); MOL alone expects to book a one-off loss of USD211 million as a result of this filing. We highlight that continued decline of the dry bulk markets and negative cash flow could put more companies in jeopardy; hence, we prefer shipping companies with strong main owners and liquidity to sustain a prolonged downturn,” said DNB Shipping analysts Nicolay Dyvik, Petter Haugen, and Oyvind Berle in a daily market report emailed to IHS Maritime.
Meanwhile, Erik Nikolai Stavseth and Kurt Waldland, shipping analysts at Arctic in Oslo, said Daiichi has liabilities close to USD1 billion. “At the end of March 2015, the company had a total debt of about USD710 million on a consolidated basis across all the different sub-companies, and we see the remainder as likely being related to long-term charter commitments,” they said in a daily market report emailed to IHS Maritime. “While accessing information about Daiichi is not straightforward, we find the bankruptcy to be another clear sign of the state of the dry bulk market. However, more importantly, we see the fact that Daiichi does not have the funds to go through a restructuring process as further exacerbating the situation.
“This may ultimately mean a slew of lawsuits and redelivery of tonnage, as well as forced sales of vessels – potentially adding pressure on a fragile dry bulk market. While the size of Daiichi is difficult to assess, we do not see the ripples of Daiichi having the same impact as Sanko Steamship back in 2012 as Sanko had some 70+70 dry bulk vessels owned/chartered and was also more deeply involved in the tanker market.”