The demise of Hanjin has come as a surprise to many market participants. Mostly, because the signals given by banks during the last six months led many to believe that Hanjin was the stronger of the two Korean national carriers. But let’s not debate the past and rather try to analyse the still developing situation and try to take steps to prevent a bigger disaster, which in fact, might be ahead of us.
The top 10 container carriers are the engines of global trade. The further up the list, the bigger the systemic risk in case of a breakdown. They are not too big to fail and they are organised in large consortiums, which are spreading out the consequences of a possible collapse of a single carrier all over the world. We have seen that Hanjin containers have been loaded on many different vessels around the world, while at the same time, Hanjin vessels have loaded containers for many different carriers, which are now more or less stuck.
Of course, the maritime network is suffering from the sudden collapse and the owners of charter vessels, terminal operators, ports, fuel suppliers and equipment suppliers are rushing to protect their interest, maritime lawyers and courts are working around the clock and around the world. And in the middle, deep down in the hole is the customer, who is going to pay the ultimate price. Who is taking care of the cargo interests? The cargo owners are struggling to find out where their containers are and how to get them. They are being ignored or taken advantage of by some market participants, which feel the need to recover as much of their losses from the cargo owners, as possible.
Unlike in a collision, there is no general average in bankruptcies. All of a sudden, the vessel owner and the cargo owners are not ‘in the same boat’ and there is no set of well-established rules on how to deal with such an ‘accident’. And I think that we now might come to realize that this is exactly what is missing here. We need to establish a set of rules and agree on procedures on what happens with the cargo in case of a sudden bankruptcy of a carrier. It simply cannot be that the customers are left stranded.
As soon as the bulk of the work is done, I suggest that perhaps under the leadership of the IMO, organisations representing regulators (FMC) and shippers (ESC, shippers councils) and ocean carriers (the World Shipping Council), ports and terminals and last not least the seafarers convene and hammer out a term sheet and a road map on how to set up, fund and administer a ‘Container Rescue Fund’, which should assume control of a collapsed carrier and make sure that the ships can call at a safe port, discharge the cargo and repatriate the crew as needed. The funding needs to be supplied by all stakeholders, even if it is as little as $1 per each container carried around the world. Funding needs to be built up to cover the costs, while some organisations, such as ECAs or insurance companies should be tasked to provide necessary bridge financing, in case the amounts available in the rescue fund are not (yet) sufficient.
The goal of setting up such an international (neutral) non-profit organisation is to prevent a collapse of world trade, keeping disruption and losses to a minimum. Most certainly, it is not intended to pay for everything. But it should be a system, which limits the exposure and has clearly defined terms. Shipping is based on pre-agreed contracts, such as the bill Of lading, the time charter, the voyage charter and many other forms. Let’s find a solution for this case, which is not yet covered.