"Huge overcapacity hurting shipping"

Zodiac Maritime Agencies chairman Eyal Ofer blames China for building too many ships.

"The shipping sector is going through a terrible and dark period, and you have to remember that without shipping there is no international trade. The current situation will continue for at least two years and perhaps even three and meanwhile there is no hope for change," Zodiac Maritime Agencies Ltd. chairman Eyal Ofer said yesterday at the Milken Institute's annual global conference in Beverly Hills, California.

He said, "The difficult situation sweeping through the sector is caused by a combination of factors: the rise in the cost of fuel, the economic slowdown and above all else huge overcapacity in shipping among other things because of China. The pessimistic picture that I am painting is far worse in reality."

Eyal Ofer added, "The shipping industry needs to reshape itself with the level of fuel and transport costs looking as though they are going to remain at the same level."

He said that the planned expansion of the Panama Canal, allowing the passage of larger ships, was a potential bright spot for his industry. “If world growth is accelerated, the amount shipped will be increased,” he explained, “But if there are too many ships on the high seas, shipping growth will be affected.”

When asked by "Globes" if any shipping companies are expected to go bankrupt he said that on the face of it no but added, "The present crisis at shipping companies is not a normal one. In previous cycles, when a company was caught in a crisis, its ships were impounded by the banks and sold on the market. Today banks cannot allow themselves to do this because they know that at the current price they would get for selling the ship they would have to wipe out debts. The banks prefer to play for time in order not to wipe out balance sheets. Consequently the sector won't be brought to order and there also won't be any bankruptcies. It holds up everything and delays the sector's recovery."

The Ofer family are eminent shipping magnates. Eyal's brother Idan is responsible for the activities of Israel Corporation (TASE: ILCO) unit Zim Integrated Shipping Services Ltd.. Zim has lost hundreds of millions of dollars over the past four years and was forced to agree a complex debt settlement for $3 billion. Eyal is responsible for the family's shipping activities through Zodiac and sits on the board of the cruise line Royal Caribbean.

Published by Globes, Israel business news - www.globes-online.com - on May 1, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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