In International Shipping News 12/10/2016
Potential impairment losses could exceed $35 Bn for the liner industry NYK will recognise the largest ever impairment loss in container shipping history, after announcing on 7 October that it will record an extraordinary loss of JP¥100 Bn ($972 M) on its containership assets. The massive loss represents almost a quarter of the total assets of NYK’s liner shipping business, which stood at JP¥419 Bn at the end of March 2016.
The extraordinary loss posted by NYK exceeds previous impairments recorded by other container carriers by a large margin. This includes MOL’s impairment loss of JP¥56.5 Bn ($501 M) recorded in March 2016 for its containership assets and K Line’s cumulative impairment losses for its container shipping business of JP¥13.4 Bn ($123 M) in the seven years from 2009 to 2016. Apart from the Japanese shipping lines, most other main carriers have not taken any significant write-downs on the value of their containership assets, even though current market values are well below historical tonnage values.
Based on Alphaliner estimates, the Top 18 carriers may need to write off some $35 Bn, assuming they were to take a 25% impairment loss on the value of their total assets. Based on the depressed market values for ships and container equipment, the carrying values of such assets are significantly higher than the amounts that are currently recoverable. Total impairment losses would vary depending on the individual carrier’s fleet composition and accounting policies, but NYK’s move could trigger a fresh review of containership asset valuations that have fallen to historical lows.
Source: Alphaliner
