By Brenda Goh

SHANGHAI, Jan 6 (Reuters) – China’s dry-bulk delivery business will possible see a surge in bankruptcies this 12 months as freight charges hit report lows and the nation’s demand for imports wanes, consultancy Shanghai International Shipping Institute (SISI) mentioned.

A lot of corporations have already gone bust over the previous 12 months because the business grapples with the worst downturn on report on account of stalling demand for iron ore and coal from China and a worldwide surplus of vessels. With benchmark freight charges now at an all-time low, funds shall be additional stretched for shippers.

According to the SISI, greater than 60 p.c of the dry-bulk delivery corporations it surveyed have been combating long-term losses, whereas about 40 p.c confronted liquidity issues. It mentioned it had spoken to 50 of China’s largest dry bulk delivery traces.

“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,” state-backed SISI mentioned in a report printed on Tuesday.

Among the Chinese corporations which have already gone bust are dry cargo shipper Winland Ocean Shipping Corp, which filed for chapter safety in February final 12 months, and state-owned shipbuilder Wuzhou Ship Repairing & Building Co Ltd, which filed for chapter final month.

In a transfer to enhance the competitiveness of its state-owned delivery giants, Beijing final month permitted a merger between China Ocean Shipping (Group) Co and China Shipping Group that may see them shuffle belongings between their listed items.

But the outlook for the sector appears gloomy with the Baltic Dry Index plumbing a report low of 468 factors on Tuesday. The index has dropped round 80 p.c from a excessive in 2014 and 96 p.c from its 2008 peak.

The SISI mentioned that greater than 60 p.c of the survey respondents didn’t count on the Baltic Dry Index to climb above 800 factors. It was final at this stage in October 2015.

The likelihood of a restoration within the index is slim as costs of the primary merchandise shippers carry stay close to multi-year lows.

Thermal coal futures are close to 12-1/2 12 months lows, down greater than 80 p.c from their peak in 2008, whereas iron ore costs <.IO62-CNI=SI> are near report lows.

Prices for these commodities are usually not anticipated to rise anytime quickly as China’s industrial rise and urge for food for uncooked supplies slows.

Reflecting the general bearish sentiment, a worldwide index measuring the boldness of logistic corporations fell in December to its lowest stage since March 2012.

The SISI, which additionally surveyed container delivery, ports and delivery companies corporations, mentioned enterprise sentiment throughout these sectors had additionally slumped.

(Editing by Henning Gloystein and Himani Sarkar)

(c) Copyright Thomson Reuters 2016.