N.Y. Times News Service HONG KONG - Last month,
T.Y. Chao sold his collection of jade, lovingly assembled over a
lifetime, to help pay his shipping company's $850 million in debts.
Chao, whose Wah Kwong Shipping Group is in the middle of a
painful restructuring with creditor banks, raised less than $10
million from the jade sale. But if the gesture was more poignant
than meaningful, it was a reminder that the industry that created so
many fortunes in the past now is erasing them at a dizzying pace.
From the Port of Los Angeles to the docks of Liverpool and the
shipyards in South Korea and Japan, the shipping world has been
turned upside down by five catastrophic years of tumbling freight
rates, rising costs and sinking values of used ships. While the
problems are rooted in cyclical overcapacity, many executives now
say the downturn is so deep and traumatic that the industry is
``Shipping is like a piece of ice under a hot sun,'' said Frank
W.K. Tsao, chairman of International Maritime Carriers, one of Hong
Kong's biggest shipping companies. ``There used to be hundreds of
shipowning companies in Hong Kong. Now, out of every 10, eight are
bankrupt. And the survivors are badly wounded.''
While not everyone agrees that conditions have been quite that
bad, shipping companies are indeed collapsing all over the world.
Just last month, McLean Industries, an American company whose United
States Lines unit is one of the world's largest container shippers,
sought protection from its creditors under Chapter 11 of the Federal
Bankruptcy Code. And Japan Line Ltd., one of the biggest tanker
operators in the world, asked its bankers this month for help in
reorganizing the company.
Ships built for $50 million a half-dozen years ago are sometimes
sold as scrap for $5 million. Shipowners who used to earn $20,000 a
day on a charter now are happy to accept $5,000 a day. In October
1973, the freight charges of a crude oil cargo on a supertanker
voyage from the Persian Gulf to Western Europe amounted to 106
percent of the value of the cargo; by last year the freight rate
had plummeted to just 3 percent of the value of the oil.
Since then, tanker freight rates and used tanker prices have
risen somewhat, and some shipping executives say they believe the
worst is over. As a sign of the new optimism, orders for new ships
are picking up, giving a new lease on life to shipyards around the
world whose order books were virtually blank just a year ago.
Last summer, some ships were on the way to scrapyards when they
were called back in midocean because of rising tanker freight rates
and ship prices. …