CHINA’S dry-bulk shipping industry will likely see a surge in bankruptcies this year as freight rates hit record lows and the country’s demand for imports wanes, consultancy Shanghai International Shipping Institute (SISI) said.

    A number of firms have already gone bust over the past year as the industry grapples with the worst downturn on record due to stalling demand for iron ore and coal from China and a global surplus of vessels. With benchmark freight rates now at an all-time low, finances will be further stretched for shippers.

    According to the SISI, more than 60 percent of the dry-bulk shipping firms it surveyed were struggling with long-term losses while about 40 percent faced liquidity problems. It said it had spoken to 50 of China’s largest dry-bulk shipping lines.

    “The market is extremely depressed and these conditions are likely to continue in 2016, exacerbating dry-bulk firms’ losses, increasing costs and creating obstacles to obtaining financing.

    This will kick-start a wave of bankruptcies,” State-backed SISI said in a report published Tuesday.

    Among the Chinese firms that have already gone bust are dry cargo shipper Winland Ocean Shipping Corp., which filed for bankruptcy protection in February last year, and State-owned shipbuilder Wuzhou Ship Repairing & Building Co. Ltd., which filed for bankruptcy last month.

    In a move to improve the competitiveness of its State-owned shipping giants, the government last month approved a merger between China Ocean Shipping (Group) Co. and China Shipping Group that will see them shuffle assets between their listed units.

    But the outlook for the sector looks gloomy, with the Baltic Dry Index plumbing a record low of 445 points Thursday. The index has dropped more than 80 percent from a high in 2014.

    The SISI said that more than 60 percent of the survey respondents did not expect the Baltic Dry Index to climb above 800 points. It was last at this level in October 2015.

    The chance of a recovery in the index is slim as prices of the main products shippers carry remain near multi-year lows.

    (SD-Agencies)