Hanjin Bankruptcy - Is the shipping Industry headed for Lehman type of crisis?

With the current court protection filing of HANJIN, Shipping industry has got a big jolt and it has created a panic wave among Shippers, port operators, land side services providers as well as the employees in this sector. The after effect of this is going to be seen across various areas, which are supporting shipping trade. A large part of the crisis is coming from the slowdown in global trade and freight rates were not picking up for some time.

Hanjin Shipping, 10th biggest Korean CHAEBOL, one of the biggest container carrier service, with 170 containerships / 640,348 TEU, 35 countries and reported revenues of $6.86bn /2015 and employed approximately 5,800 people globally. We are already seeing too much turmoil, the rivals trying to eye the assets of Hanjin and many loaded container’s stay on board or around port areas. This will be impacting landside services where containers may not be moved to CFS as the truckers may think that they will not be paid. We also need to keep in mind that some of those contractors may exclusively work for Hanjin.

We have also seen Hapag Lloyd taking over ailing UASC and although Hapag situation has also not been good. End of 2015, CMA took over APL lines business thus creating third largest carrier. Probably APL saw it coming earlier.

With Hanjin, it also means that with one sizeable competition going down others may benefit from it. The same thing happened during the Lehman crisis and there were few competitors who benefitted from it. We did see Hyundai stocks going up sharply and freight rates to/from Korean ports / transpacific routes moving up almost by 50%. It may give hope for other carrier’s but it just may not be enough due to extra capacity prices are just in the normal levels.

It's introspection time for carriers as well as logistics provider to stop negative selling. Even the Shipper’s, who purchase logistics services, may like to do thorough investigation whenever providers are getting into pricing war or negative selling.

So we need to see if Hanjin crisis will put some more mergers ahead and there will be continued industry consolidation and will also impact Freight forwarders at large. It was in similar lines when Lehman filed for bankruptcy, many other companies like Merrill lynch and AIG had to merge. Another view will be that post financial crisis after effects are seen in shipping industry now. For sure there is lot of action ahead.

This article has been written and published in personal capacity. I have experience of over 18 years in Asia covering Hong Kong, China, SEA & Indian Sub continent in the Logistics & Supply Chain sector. Having cross-cultural experience and with keen follower of M & A space.

Fuente: Ajay Shukla