Among the vessels sitting at anchor off the southern shore of Singapore, the Hanjin Rome does not, outwardly, stand out. But its status at one of the world’s busiest container ports is still extraordinary.
On Tuesday, creditors of the ship’s owners, Korea’s Hanjin Shipping, sought an order from a Singapore court arresting the vessel, in the hope of recovering what they are owed. Until the dispute is settled, the vessel is barred from departing.
The Hanjin Rome is one of scores of ships worldwide caught up in the legal aftermath of Hanjin’s decision on Wednesday to become the first big container line in 30 years to seek bankruptcy protection. Another vessel, the Seaspan Efficiency, is waiting off the US port of Savannah, Georgia, unable to dock because the port authority fears it will not be paid. The Korea International Trade Association says 10 vessels have been seized in China alone. It may take months for owners of cargo trapped on board the affected vessels to retrieve their goods.
Yet, while the confusion is expected in the short term to help container lines, which will benefit from the temporary removal from service of Hanjin’s vessels, the industry’s fundamental problems look unlikely to change. The industry, which has grown nearly every year since its foundation in 1956, has struggled to adjust to a near halting of growth since late 2014 at the same time as shipyards are delivering big supplies of new ships. Demand to move containers rose 2 per cent in the second quarter this year, while the supply of capacity increased 6 per cent in the same period, according to Denmark’s Maersk Line, operator of the world’s biggest container ship fleet.
Philip Damas, a director at London-based Drewry Shipping Consultants, says Hanjin suffered partly from problems of its own making. It was carrying Won6.1tn ($5.5bn) in gross debt from losses incurred both in container shipping and the equally crisis-hit dry bulk sector.
“We’ve been warning since 2013 that Hanjin was living on borrowed time because its debt to equity ratio was over 600 per cent,” says Mr Damas.
However, Paul Slater, a Florida-based ship finance adviser, says the mismatch between supply and demand growth means the whole industry is in “terrible trouble”.
“Frankly, I don’t think there’s a container shipping company in the entire world that’s making any money,” he says.
At the heart of the challenges facing those caught up in Hanjin’s bankruptcy is the arcane complexity of the industry that moves most of the world’s manufactured goods and components. Container ships run to a set schedule, selling slots for containers in the same way that airlines sell passengers individual tickets. A big, modern vessel like the Hanjin Sooho, currently berthed in Shanghai and reported to be under arrest, will consequently be carrying thousands of different customers’ cargo.
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