Dive Brief:
- Drewry Maritime Consultants on Tuesday launched a credit research service for its clients, evaluating carriers' investments, bonds and trustworthiness.
- Industry leaders Maersk, CMA CGM and Hapag-Lloyd are the first to be rated, but the consultants soon expect to rate port operators, tankers, dry bulk, and gas shipping as well.
- The two ratings are issuer credit outlook (positive, stable or negative) and bond valuation (attractive, neutral or negative). Considering debt capital is a large source of funding for the maritime sector, evaluating bond valuations may yield greater risk insight.
Dive Insight:
The implementation of independent credit assessment for carriers comes at a time when the shipping industry is experiencing extreme disruptions, through bankruptcy, alliances, and buyouts. Given all the changes, and the logistics fiasco caused by Hanjin Shipping's bankruptcy, shippers are turning to financial risk evaluation to ensure their products are in good hands.
In fact, just after Hanjin's bankruptcy shippers demanded updated Z-scores — a scale used to predict bankruptcy — for many of the major carriers. The demands were exacerbated when reports revealed the conditions for Hanjin's bankruptcy were evident all along, but complacency and a belief the shipping line was "too big to fail" caught many off guard.
However, fail it did, leaving the industry uncertain and insecure. In fact, in the nearly six months since the announcement of bankruptcy, fear has only grown, as evidenced by the recent public announcement of Yang Ming's poor debt to credit ratio and the subsequent drop in company stock prices. Naturally, the line worked quickly to push back on the claims and make an argument for its financial health.
Shippers and carriers are in a delicate position: stability in the industry requires the carriers' financial health, but moves to solve economic imbalances — such as industry consolidation and alliances — has left shippers wary of price fixing or other anti-competitive practices. It's a balancing act, where carriers must work to regain the trust lost after one bad apple fell from the tree, while shippers must remain vigilant to protect their product. Increased transparency in the form of independent credit analyses is one step in the right direction.
