GOVERNMENT intervention to prop up container shipping lines in the face of unprecedented low freight rates and the resulting financial losses is slowing recovery of the market, according to maritime analyst and insurer Lloyd’s List.
In its daily briefing on Thursday, Lloyd’s List said that by governments’ propping up loss-making shipping lines through state subsidies, oversupply in the industry is persisting longer than it should and the natural readjustment in supply and demand is being delayed as a result. This is keeping freight rates lower for longer.
“While providing some relief for the individual shipping lines involved, ultimately the industry as a whole continues to suffer as capacity remains stubbornly above demand, keeping rates depressed,” Lloyd’s List said.
Although governments globally are providing various levels of support for shipping lines, the biggest support has been offered by Taiwan, China, and South Korea. Taiwan earlier this month announced a $1.9 billion loan package, which is mainly intended to support its two largest shipping lines Evergreen Marine Corp. and Yang Ming Marine Transport Corp. Lloyd’s List pointed out that China has provided about $1.7 billion in support to Cosco and China Shipping over the past seven years. And in the wake of the collap se of Hanjin Shipping, South Korea has created an $871 million ship financing facility to help Korean shipping companies purchase new ships from local shipyards.
However, some governments are apparently “beginning to tire of the constant support needed by the shipping industry,” Lloyd’s List noted. Singapore’s sovereign wealth fund Temasek earlier this year pulled the plug on continued support to NOL, allowing sale of the line to CMA CGM, and the recently announced merger of United Arab Shipping Company (UASC) with German giant Hapag-Lloyd was initiated when the government of Kuwait said it would no longer support UASC as a standalone company.