Liquidation of Carriers

Liquidation of carriers is something that no one wishes to experience especially when it is not easy to secure each and every deal. If payment is dependent on the receipt of the shipment, the non-delivery poses many implications and even additional delay costs or damages.

When any news of any carrier in financial trouble spreads, their ships are likely to be stranded at any port around the world. No port operator will allow their vessels to dock, especially with the uncertainty of payment for unloading work. This is especially so if there are already pending outstanding dues.

With globalization, the movement of goods around the world is very common. It is very common to manufacture goods in countries with lower costs. Once completed, they are then shipped to different locations worldwide for the intended end users. Many manufacturers make use of just in time delivery to further lower their storage and other miscellaneous costs. With improvement in technology, the size of vessels has also increased over time. Under-utilization of the vessels depressed the freight costs over time.

The financial struggles of many carriers were attributable to a downturn in the container shipping industry. This is a result of numerous interrelated factors such as weak global GDP, overcapacity on container vessels, “bloated” retail inventories, changing consumer spending patterns, economic slowdown in some countries, and muted growth in demand for container shipping. The downturn dented profits and crippled the financial health for the majority of the top carriers.

Retailers avoid keeping too much stock for the various seasonal events. Smaller companies arranged their seasonal stock nearer to the various seasons. This helps them to keep their operational costs to the minimum, maximizing their profits. Any disruptions is disastrous to them. The late arrival of these seasonal stock means nothing to sell during the seasons. They are out of season by the time these stock are delivered.

The exit of any carriers mean a boost in the shipping rates. The shipping rates have since increased significantly with the tightened space of the various vessel operators. Existing operators are also working together to maximise their vessel capacity further. Spaces for certain destinations are fully booked weeks and even months ahead of the actual vessel departure schedule. Mergers, acquisitions and co-operations are picking up across the international scene. Companies suffer when they are unable to move alone with the evolving times.

Any liquidation of carriers have a long term impact on the freight rates. An exit of just a vessel would limit the ability to move a significant number of shipments. Hence commanding a higher rate to move the same shipment. Liquidation of any carrier affects everyone in the shipping and transport industry. There are many alliances in the shipping and transport industry to attempt to fully maximise capacity of each vessel. An exit of a vessel means a reduction of an ability to move at least 2000 containers (depending on the vessel size) worldwide.

Possible to get shipments released?

From our experience, collection of any affected shipments on the affected vessels is not impossible. It is not easy to facilitate arrangement of the shipments due to the limited communication lines and customer service officers. There are strict procedures to be followed for shipments to be released. These are announced once the relevant operators come to an agreement.

Payment of the usual import fees (quoted before loading) to the carriers still applies. There might be additional charges for an agreed demurrage (port storage) depending on the duration the various operators take to come to an agreement. There are limited payment mode accepted. To avoid further delays, it is best to follow accordingly. There might be a requirement for a deposit for the return of the empty equipment. After returning the equipment, there are various confirmations to be made. Only after all the confirmations by various parties, then the deposit can be collected.

As Singapore was one of the transit ports for many shipments to other part of the world, we are also given the opportunity to check on the possibility of discharging various transit shipments in Singapore. The possibility of stopping a voyage and rearranging the voyage separating is there, however the cost might be higher than the additional cost of the delayed voyage. Depending on the urgency of the various shipments, the costs of terminating the voyage may or may not be worthwhile. The other carriers in the alliance would have their proposed solutions to continue to execute their promised transport carriage.