Cash-strapped carriers sell terminals while their prices still high

NEWS that China Shipping (CSCL) is planning to sell its stake in the two million TEU annual capacity Lianyungang New Oriental Container Terminal (LNOCT) is a reflection of an increasingly common problem facing today's carriers, says Drewry Maritime Research.

The new deep sea terminal half way between Shanghai and Qingdao, was developed by CSCL port operating unit, China Shipping Terminal Development (CSTD), which now hopes to sell its 55 per cent stake for US$124 million.

Drewry analysts say that cash-strapped carriers like CSCL, which suffered a net loss of $200 million, are selling terminal assets while terminal profits are still high.

Getting $124 million for what cost it $90 million to build is a good deal and will pad a thin balance sheet, staving off the threat of de-listing if operational losses persist as they threaten to do.

"The strategy may well be indicative of a wider liner industry pressure. Carriers will undoubtedly face a tough year in 2014, with volumes on the main trade routes settling at the 'new normal', more modest growth levels, and substantial vessel capacity still to come on stream," said the Drewry report.

"On top of this there is the as yet unclear impact of the P3 Alliance. It may well be that CSCL's move reflects a fear by carriers of continuing severe financial pressures - and so more sales of terminal assets by carriers seems likely as the hatches are battened down," analysts said.