Shippers in Bankruptcy, Coming Soon

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.

About Anthony Alfidi 128 Articles

Affiliation: Alfidi Capital LLC

Anthony Alfidi is the Founder and CEO of Alfidi Capital. His firm publishes free investment research with honesty and humor.

Mr. Alfidi holds a Bachelor's degree in human resource management from the University of Notre Dame (cum laude) and an MBA in finance from the University of San Francisco. He is a life member of Beta Gamma Sigma, the academic honor society for business majors. He has been a private investor since the 1990s.

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