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Hanjin resurrection “exceedingly unlikely”

Time:2016-09-08 20:39 Source:World Cargo News Writer:admin Click:Times

Shipping analyst and market intelligence consultancy SeaIntel concludes Hanjin’s “days as a major global player are over”.



Officially Hanjin is preparing another restructuring plan, but SeaIntel’s view is that the carrier's problems, and the resulting loss of confidence from both its creditors and shippers mean Hanjin will most likely be broken up. 



If Hanjin does survive, SeaIntel believes it will be shadow of the company that was previously the seventh largest in container shipping. “All in all, if we do end up with a resurrection of Hanjin, it is likely to be in the shape of a much smaller carrier than they have been until now, and possibly only with a narrow niche focus. Their days as a major global player are over," SeaIntel concluded. 



Putting Hanjin's problems in context, the analyst notes that over the past 21 months five of the largest 20 carrier have been eliminated, mostly through M&A deals. While a receivership this large is “in itself is unprecedented”, it is really only one element in a wider consolidation that will ultimately result in very few large alliances and “no large independent carriers."



SeaIntel urged the market to keep Hanjin’s situation in perspective. “Yes, if you’re a CKYE carrier or one of their major customers, this will be massively disruptive, but it is not the end of the line”. Hanjin’s fleet accounts for 5-8% of the weekly capacity of the four major East/West trade lanes. SeaIntel reminds its readers that “we have seen trade lane capacity growth far exceeding this many times in the past, so the magnitude is clearly within the annual ebb and flow of the industry”. 



The more pressing situation for shippers, however, is the 540,000TEU of cargo Korea’s maritime ministry said is currently loaded on Hanjin vessels. SeaIntel notes that the actual number is uncertain due to alliance and vessel sharing arrangements, but clearly it is a huge disruption for any shipper involved. Some shippers have got their cargo back relatively quickly, but for others the worst case scenario is “a process lasting many months before they see their cargo.”



Analysing the Hanjin fleet, which consists of 37 owned vessels and 53 charter ships with a total capacity of 606,892 TEU, SeaIntel notes the largest vessels are nine 13,102 TEU ships, four chartered and five owned. Hanjin also has 10 vessels between 8,000 to 10,000 TEU capacity, but 42% of its owned capacity is in the 4,000 to 7,000 TEU range. “These vessels”, said SeaIntel, “are likely not going to be very fuel efficient, and thus not likely to attract any major interest from the second hand market”. 



As to the impact on freight rates, shippers have felt rate increases on key lanes already, but carriers are now moving to put extra vessels into gaps - today MSC announced a new “Maple service” linking Busan with Prince Rupert. Put another way, there will be short term constraints, but the market is not expected to be over supplied for long if Hanjin departs.



SeaIntel is warning shippers, however, that a return to the pricing levels before the Hanjin crisis ultimately puts them at risk of supply chain disruption. “The relentless pressure on rates in recent years have created a situation where the entire carrier industry is heavily loss-making. And it is of course impossible to see a situation where you can both have a stable supply chain and at the same time ensure that the providers of said supply chain are loss making”.



The message for shippers from Hanjin’s demise should be that carriers are not too big to fail, and the consequences can be very disruptive. “Hence for the combined collective of global shippers they are facing a future where they have to start planning for increasing costs for ocean shipping compared to the current levels – the alternative is a situation where we will indeed again see large-scale supply chain disruptions,” SeaIntel concluded.





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