Overcapacity Sinks China Shipping Profits

China Cosco Holdings has revealed a 22% dip in its 2015 earnings, while China Shipping Container Lines (CSCL) witnessed a deficit of more than US$448 million in 2015 as a result of lower rates driven by vessel overcapacity, according to Bloomberg.

Read: Global Ship Growth in 25 Year Drop

Um Kyung, Analyst at Shinyoung Securities Company in Seoul said: “At the current shipping rate, most of the liners are losing money.”

PTI previously reported that private equity firms are pulling back their investments in the bulk commodity and shipping industries as a result of excess funding that has exacerbated overcapacity within the industry.

Overcapacity is a major issue in the shipping industry, caused by a number of carriers ordering large numbers of super-sized containerships in order to obtain economies of scale.

It was previously reported that the economies of scale are not coming to fruition in the shipping industry, due to the slump in both demand and oil prices.

Although the financial outlook looks gloomy for carriers, it is believed that governments will step in to avoid shipping lines entering liquidation.

Read: Shipping Confidence Falls to Record Low