Hanjin Shipping bankruptcy highlights container lines financial distress Drewry

Using its z-score rating for financial distress the average for 14 major container lines that publicly publish financial results is at its lowest level since the index started in 2008. Any score below 1.8 represents a higher risk of bankruptcy and collectively the 14 container lines rated managed an average score of less than 1.0 in Q2 this year

Of the 14 companies surveyed, only two AP Moller Maersk and Orient Overseas International Ltd (OOIL), scored high enough to make it into what Drewry described as the cautionary grey zone.

Three lines, including the bankrupt Hanjin had scores in negative territory, Drewry did not name the other two lines in that category.

“The decline in the Z-score index has coincided with the heavy reduction in container freight rates that dropped to historical lows in the second-quarter,” Drewry commented.

“As freight rates staged something of a recovery in third-quarter we expect to see some uptick to the Z-score when the third-quarter 2016 results are published, while the removal of Hanjin from the sample will also benefit the average score.” However it expected most lines will remain in the “distress zone”.

As result of the Hanjin bankruptcy Drewry says it seeing a higher demand from shippers for financial transparency especially from lines that do not publish financial information. “Privately-owned carriers will risk losing shippers’ trust if they do not provide any data on their level of indebtedness and balance sheet strength,” it said.

Read all the background to the Hanjin Shipping bankruptcy on our timeline