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Container line casualties are likely says Drewry

January 8 - The latest edition of the Drewry Container Forecaster predicts that carriers may have to sell more assets or liquidate before recovery commences.

The report adds that although container freight rates are on the rebound on many routes, this does not mean the ocean container shipping industry will recover any time soon, and many carriers may run out of money.

"Even if the industry can secure the same amount of fresh cash in 2010 as it received from shareholders in 2009, it will not be sufficient cash to cover its needs," said Neil Dekker, editor of the publication by Drewry Shipping Consultants in London.

Another estimated USD1.4 billion of cash may be needed from other sources the carriers stay in business. "This may then prove to be the catalyst that leads operators to start selling assets - such as their terminals," he said.

The Drewry report forecasts a "very cautious recovery" in 2010 with global container traffic expected to increase by 3.4 percent. It expects that all-in rates in the key east-west headhaul routes will increase by as much as 14.1 percent this year, after a decline of 26.2 percent in 2009.

But it warned that the industry still has a long way to go before it can be considered to have reached any kind of stability "despite the fact that there are some encouraging signs to be found."

The biggest danger is that large banks, which are already highly exposed in the shipping industry, might refuse to lend more money to liner companies. The report says this could produce any of three outcomes: Carriers could be forced to liquidate their assets, selling off ships and terminals; suppliers and banks or carriers could walk away from vessel orders at shipyards; or governments could be forced to rescue the carriers.

Drewry said that at least 10 KG partnerships that own one ship each have gone under recently. "Their vessels have been sold, indicating that non-operating owners will continue to have an extremely tough time in 2010 given the propensity for carriers to return as much chartered tonnage as possible," the Drewry report says.

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