Zombie Apocalypse
With Korea’s Hanjin Shipping filing for court receivership last week, the assumption that major container lines will always find a way to survive has been rocked, says Drewry.
In 2009 when the container industry posted operating losses of nearly $20 billion and many lines were said to be minutes from bankruptcy, none died. The “zombie” carriers’ survival methods were varied and complex, ranging from off-hiring ships to requesting government support, but ultimately they worked.
Having survived the worst crisis the industry has ever faced the assumption grew in strength that major carriers could not be killed off. While some smaller players have fallen by the wayside this decade none were remotely in the same league as Hanjin Shipping, which with a containership fleet of around 100 ships and total capacity of 620,000 teu ranks it seventh in the world.
Hanjin’s move into administration shatters the complacency that major carriers are immune to failure and can stomach prolonged years of low rates and financial losses.
It was this complacency that blinded most to the very real possibility of Hanjin’s demise. It was common knowledge that the company was in financial trouble; from 2010 to the first-half 2016 the company’s operating loss amounted to approximately $580 million with most of the damage emanating from the container division.
Since 2013, Drewry Financial Research Services has warned that Hanjin was dangerously leveraged and living on borrowed time.
