The Shipping Industry Is Suffering From China’s Trade Slowdown

Bloomberg reports:

The damage is especially severe in China, the world’s leading producer of ships. New orders for Chinese shipbuilders fell by nearly half last year, according to the Ministry of Industry and Information Technology. In December, Zhoushan Wuzhou Ship Repairing & Building became the first state-owned shipbuilder to go bankrupt in a decade.

The yuan has dropped 6 percent since last August. While that should help exports, Hutchison Port Holdings Trust, a company controlled by Hong Kong billionaire Li Ka-shing that runs some of China’s top container terminals, has yet to see an uptick in outbound business. According to Ivor Chow, chief financial officer of Hutchison, the devaluation is leading to a slowdown in traffic as customers wait to see how much lower the yuan will fall. “People are really hesitant to commit to orders at this point,” he said on a conference call with analysts on Feb. 2.

The slowdown is hurting many Chinese ports. Sales at Shanghai International Port were 7.5 billion yuan ($1.1 billion) in the third quarter, down from 7.6 billion yuan the year before, and net profit was 1.4 billion yuan, a decline of 18 percent. The Shanghai Shipping Exchange’s containerized freight index has dropped 27 percent since the start of 2015. While container volume at Shanghai’s port, the world’s largest, grew 3.7 percent last year, that was down from 4.8 percent growth the previous year and was largely the result of taking market share away from high-cost rival Hong Kong, according to Bloomberg Intelligence analyst John Mathai.

Global recession?