Evergreen ship in Kaohsiung
ID 178777363 © Yali Shi | Dreamstime.com

Yang Ming is to receive TW$8bn ($270m) in financial assistance from the Taiwan government.

The low-interest loan will be part of a fresh TW$16.5bn bailout package for Taiwan’s container sector.

Liner compatriot Evergreen will receive a similar amount, to provide liquidity and help the carrier survive the impact of Covid-19.

A spokesperson told The Loadstar today: Evergreen Marine Corporation has applied for TW$8bn in loans to be guaranteed by the government.

“The application is in process and the loan is subject to approval of the company’s board of directors.

“We would like to clarify that this is a loan guaranteed by the government, and not state aid,” the line said.

Lin Chia-lung, head of Taiwan’s Ministry of Transportation and Communications, told the Taipei Times the island depended “heavily on the development of the container shipping and aviation industries for economic development”.

He added: “We are determined to take action to help the shipping industry cope with the impact brought by the pandemic. Through the bailout package, we hope container shipping carriers can quickly secure the funds they need to sustain their operations and weather the crisis.”

In March, Mr Lin was reported to have asked Taiwan’s banks to offer the container lines a one-year interest holiday on their bank loans, using the nation’s Commercial Port Development Fund as collateral.

Evergreen reported a net loss of $15m for its shipping business in the first quarter, while Yang Ming posted a loss of $27m. Only niche container line Wan Hai managed to stay in the black, with a modest profit of $3m.

However, according to analysts, the full impact of the coronavirus demand crisis will only be felt by carriers in Q2 and Q3, with the alliances having already announced a substantial reduction of capacity through to October.

Alphaliner noted that although freight rates had so far “remained relatively resilient, supported by the shipping lines’ tight capacity management”, longer-term contract rates had fallen 7.4% during the first quarter.

“Carrier earnings will likely take a hard hit in the second quarter,” said the consultant, “with sharper volume reductions expected across all tradelanes.”

It follows that Yang Ming, already 48% state-owned, could need a further cash injection before year-end.

Elsewhere, South Korean carrier HMM’s $5bn in state support over the past two years, which has funded its newbuild tonnage of 24,000 teu mega-ships, dwarfs the subsidies given to its Asian liner peers.

HMM has recorded cumulative losses totalling over $3.5bn over the four years since its financial restructuring, confirming the South Korean government’s “whatever-it-takes” funding commitment to its largest shipping line, following the debacle of Hanjin Shipping’s collapse into bankruptcy in 2016.

Elsewhere, in Europe, CMA CGM recently tapped a $1.2bn loan from a consortia of three banks, secured by a 70% guarantee from the French government.

One of the biggest critics of state involvement in container shipping is Maersk’s CEO Soren Skou, who has described the subsidies to Asian shipping as “totally unacceptable” and a “distortion of competition”, and he has called on the EU to intervene.

So far, however, Mr Skou has been silent on the state aid for CMA CGM.

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