2016 was an exceptionally tough year for the shipping market. Demand for bulk cargo kept declining further while shipping capacity outstripped demand. The Baltic Index, a bellwether for the industry, kept falling, leaving many shipping companies lamenting the difficult business climate.
As 2016 unfolded, the shipping industry faced mounting financial pressure. The Baltic Dry Index (BDI), widely regarded as the barometer for the international dry‑bulk shipping market, tumbled repeatedly during the first half of the year, hitting successive record lows.
According to Suzhou Cosc Side Thrusters, freight rates have hit rock‑bottom. Actual market rates are sometimes even lower than officially‑released figures. To keep operations running and repay bank loans, some shipping companies and ship‑owners are operating at a loss. Vessels still have to sail no matter how low the rates go, as companies struggle to survive day by day.
According to Suzhou Cosc Side Thrusters, amid the poor market conditions, freight rates for coal shipments from Qinhuangdao to Shanghai fell below CNY 20 per tonne, while the break‑even rate stood at no less than CNY 26 per tonne. “A single voyage could result in a loss of more than 100 000 yuan.”
As learned by Suzhou Cosc Side Thrusters, the coastal dry‑bulk shipping market remained weak. China Coastal Bulk Freight Index trended in an irregular wave pattern, fluctuating persistently at low levels with a minimum reading of 771.01 points. The Baltic Dry Index (BDI), which reflects global shipping economic conditions, dropped to 291 points in February that year, marking the lowest level since August 1986. Although it rebounded in subsequent months, it remained far below the 1 500‑point break‑even threshold for the shipping sector.
According to Suzhou Cosc Side Thrusters, the shipping market remained severe from January to June 2016. Cargo freight rates stayed at low levels and enterprises suffered difficult operating conditions. Sluggish market performance, coupled with banks’ credit tightening and loan withdrawals, greatly increased operational risks, and some companies faced bankruptcy. Sources familiar with the matter stated that Zhejiang Marine Shipping Group might initiate debt restructuring within the year.
According to Suzhou Cosc Side Thrusters, the outlook for the shipping market remained gloomy. First, shipping freight rates would stay depressed. Moderated global‑growth expectations together with decelerating growth in emerging economies and multiple destabilizing factors would push freight rates further down and exacerbate corporate operational difficulties. Second, neither global nor domestic economic conditions showed any signs of improvement. Third, the shipping industry was classified as a high‑risk sector by banks. Credit curtailment and loan withdrawals could easily trigger capital‑chain rupture and threaten corporate survival.