Norwegian ship owner’s lobby sees more industry bankruptcies
Reuters reported that the Norwegian ship owners’ association expects more bankruptcies in the maritime industry as it prepares to fight the Norwegian government on a tax system it says will contribute to the sinking of shippers.
Norway, which controls around 5% of the world’s merchant fleet, has been a major player in international shipping for more than 150 years and has built up a large maritime industry around traditional shipping operations. The financial crisis has severely hurt the highly cyclical industry, and freight rates have plunged up to 90% in some segments, with the dry bulk segment hardest hit.
The ship owners’ association said that two yards had so far filed for bankruptcy namely Havyard Solstrand AS in October 2008 and Karmsund Maritime Service in March 2009. Other shipping groups have run into financial difficulties, including dry bulker Golden Ocean, which raised USD 110 million in new equity and delayed and cancelled orders in April, though it now says the measures it took will create a solid financial base.
Mr Sturla Henriksen CEO of the Shipowners’ Association said that “This is a very demanding and serious situation. We know this will be a very difficult time for many, and we know that not everyone will survive. The industry should be prepared for lay offs and shutdowns both at sea and on land.”
It may be noted that Norwegian shipping groups have clashed with the Labor led government over a tonnage tax system presented in 2007 under which back taxes are being imposed on undistributed profits retained by companies over many years. The plan was presented before the worst of the crisis was evident last year, as part of a system akin to the tonnage tax in European Union countries. Norway is not in the EU.
Numerous companies have called the new tax a betrayal of a 1996 deal, meant to keep them competitive under the Norwegian flag, and the first companies are now preparing to fight the government in the court with the association’s assistance. Norwegian groups have so far paid NOK 2.8 billion of a NOK 14 billion bill, and the court cases seek to reverse the back tax in full, claiming it is illegal.
Mr Henriksen said that more court cases could be expected if the court’s decision favor the shippers. He added that his association, regardless of the court’s decision, was also calling for a postponement of the tax. At a time when profits are fading and credit from banks is tighter, the industry will suffer even more because of this.
He said that “What we are asking for is that the government postpones further payments until the economic times have improved. If the government is firm in its position, it ought to know that this will have consequences for the ship owners involved.”