Hanjin Shipping: Shipping industry in chaos as Hanjin implodes and others may follow

In April 2016, Hanjin applied to its creditors for debt restructuring, in an attempt to avoid formal bankruptcy proceedings. However on August 31, 2016, Hanjin was forced to file for bankruptcy protection at the Seoul Central District Court and requested the court to freeze its assets. The company had lost the support of its banks the previous day. Hanjin was the world’s 8th largest shipping company, an organization which controlled close to 100 container ships and around $10 bn worth of revenue per year. Its collapse is the biggest ever seen by the industry. The root cause of the problem however has overshadowed the industry since the financial crisis of 2009. Overcapacity in the system caused by ambitious companies ordering new ships that were too big and in too large a number has meant that the entire industry has suffered from poor prices and assets that are too expensive to maintain.

Scope

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Reasons to buy

What happened to hanjin?

What is happening in the global shipping industry?

Could this disaster happen to other companies?

Companies mentioned

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Table of Contents

Overview

Catalyst

Summary

Hanjin Files for Bankruptcy

Hanjin was one of the world’s largest shipping companies

Hanjin’s problems started 2011, culminating in bankruptcy

Competitors move in for the kill

South Korean government hoped Hyundai would take over

2M the winners, but Cosco, K-Line and Evergreen Marine profit

The biggest shippers are now consolidating in response

The Shipping industry and bankruptcy

Overcapacity in the industry partially caused Hanjin’s demise

Bigger ships mean bigger ports and more investment

Port congestion from consolidation and supercarriers

Consolidation will continue for some time to come

Shipping industry, what happens next

Companies have already tried everything to survive

Overcapacity will continue and we will see more bankruptcy

Almost any shipping company could be struck next

Industry is polarized and financial backers are leaving

Conclusions

The Hanjin problem will take subsidiary companies with it

Hanjin’s calamity has been a long time coming

Overcapacity is the problem which will take more companies

Hanjin crisis, customers are starting to choose more carefully

Appendix

Sources

Further Reading

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List of Tables

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List of Figures

Figure 1: Pre-Bankruptcy order of largest global shipping groups

Figure 2: Change in market share October to November 2016 Asia-North America line

Figure 3: Marketshare % of Hanjin’s competitors November 2016 North America-Asia Line

Figure 4: Comparison of the Largest ship classes

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