Here’s the first of more to come. A Korean shipper is headed down the tubes:
Korea Line filed for a court receivership on Tuesday in the wake of losses caused by the global oversupply of bulk vessels and low freight rates.
Low rates are bedeviling big shippers right now. Any major shippers that put in orders for new build hulls last year are going to suffer from buyers’ remorse for a long time. Here’s a thought. Instead of counting on a revived consumer economy to boost bulk or container traffic, shippers should reorient to building LNG ships. Energy demand rises even in global recessions thanks to the emerging consumers of the BRICs. This big Indonesian LNG project is a great example of what the future holds for shippers with the right assets.
I’ve stayed away from shipping stocks because their attractive earnings and P/E ratios can’t make up for their huge debt loads. Stocks like Frontline (FRO) and Ship Finance International (SFL) will have better days once shipping rates recover. Until then, it’s a waiting game to see how many more bankruptcies will reshape this very important global industry.
Full disclosure: No positions in FRO or SFL.