Zim Integrated Shipping Services Ltd. is in negotiations with South Korean shipyards to delay deliveries of new container ships that the company ordered by at least one year.
"Lloyds Register" reports that leading international shipping companies, Zim included, are pressing Hyundai Shipyards Ltd. and Samsung Heavy Industries Co. Ltd. (KSX:10140) to reopen contracts and delay delivery of ships ordered to 2011-13.
Zim's aggressive policy to buy new ships is one of the factors now hurting the company and is liable to affect its financial soundness. Zim is due to receive nine container ships this year for a total cost of $1.16 billion.
Delaying or cancelling the orders should be carried out with the consent of the shipyards and the banks, mostly foreign, financing the deals. Zim's parent company, Israel Corporation (TASE: ILCO), has noted that it will have to finance half of the cost of the ships at delivery, but did not say whether it had the means to do so, or if it would have to raise capital.
The global economic crisis and the collapse of shipping prices has resulted in a glut of ships. "Lloyds Register" reported that shipping companies' ability to cancel orders or delay delivery of new ships is critical for their survival through the crisis.
Zim has already mothballed 20 ships, a fifth of its fleet. The company owns 27 ships and leases 77, for a total fleet of 104 ships.
Published by Globes [online], Israel business news - www.globes-online.com - on January 21, 2009
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