Hanjin Shipping bankruptcy roils container market

Korea’s Hanjin Shipping, the world’s seventh-largest container shipping line collapsed into bankruptcy this week after a restructuring proposal was rejected by creditors. Korea’s largest liner company reported $4.5 billion (USD) in liabilities on its June 30, 2016 financial report and efforts to attract more capital and extend payment periods on current debt quickly fell apart.

Several Hanjin vessels have been detained at various Chinese ports and one was being held in Singapore. Korean courts dealing with the bankruptcy are expected to work out terms for an orderly discontinuation of Hanjin’s shipping business that involves regaining control of its fleet overseas and the eventual liquidation of its assets.

The company owns 59 of the 132 ships in its fleet which consists of container and bulk vessels. Among its chartered vessels are three from Vancouver’s Seaspan Corporation which were delivered in 2014 on 10-year contracts with a total value of $364 million (USD). Seaspan now has 88 ships in total and says the Hanjin contracts are not significant enough to endanger its own business.

Hanjin, a member of the Trans Pacific Stabilization Conference, calls at Vancouver and other West Coast ports. See Hanjin’s service map for an overview of its routes. The company’s demise has stranded cargo at the start of container shipping’s high season when retailers are stocking inventory for Christmas season sales. It has also led to rate increases of 50% or more on the spot market for some containers on the Asia-U.S. West Coast route. (Sources: Hanjin Shipping; Bloomberg, 2016-08-30, Korea’s Hanjin Shipping Becomes Symbol of Industry in Pain); Vancouver Sun, 2016-08-31, “Hanjin Shipping receivership affects Seaspan Corp’s charter operations“; CNBC, 2016-08-31, “More Hanjin ships seized, as freight rates surge and cargo owners fret“; CBC News, 2016-09-01, “Giant container vessel stuck in Prince Rupert, company in receivership“)