The combined force of the fall in demand for imports and the slump in freight rates is putting Chinese dry-bulk shipping firms at risk of bankruptcy, according to Reuters.
Shanghai International Shipping Institute (SISI) has stated that 60% of dry-bulk shipping companies are experiencing long term losses.
SISI said: “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.”
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.
Winland Ocean Shipping Corporation is among the dry bulk shipping firms to file for bankruptcy, as was state-owned shipbuilder Wuzhou Ship Repairing & Building Company.
The Chinese State Council has recently cleared a merger between shipping companies China Shipping Container Lines and Cosco in order to boost the country’s competitiveness and handle the demand slump.
The Chinese stock market crash is also likely to affect ports and the supply chain, with global shipping firms scrambling to order higher capacity vessels to lower slot costs and to prepare for an anticipated increase in trade volumes.