Is the fall of Hanjin shipping’s Lehman Brothers moment? That’s the point of view of Gerry Wang, the head of Seaspan, which charters a number of ships to the bust Korean line.
Speaking on Bloomberg Television, the Hong Kong domiciled shipping veteran said: “The fallout of Hanjin Shipping is like Lehman Brothers to the financial markets. It’s a huge, huge nuclear bomb. It shakes up the supply chain, the cornerstone of globalisation.”
The bankruptcy of New York bank Lehman Brothers eight years ago ushered in the global financial crisis.
Wang went on to say that the current business model of container shipping was not sustainable.
“At the end of the day, the industry has been money losing. For like any industry, for long term, it’s just not sustainable,” he told the television channel.
Not everyone agrees with Wang’s Lehman comparison however.
Splash’s lead finance columnist, respected ship finance veteran Dagfinn Lunde commented: “I do not agree at all. Very little will happen due to Hanjin’s demise; the ships will still be there.”
Hong Kong-based transport analyst Charles De Trenck was more circumspect.
“It could very well be similar in the sense that no other government allows another line to go down,” he said, adding: “Well, until the next disaster, which could come sooner than a decade.” Like Lunde, De Trenck warned boxship overcapacity was still very much prevalent, while global economic growth remains “anemic”.
De Trenck argued there is a “Lehman post event realization” for some that this is worse than some of the “apparatchiks” thought possible.
Robbert van Trooijen, chief executive for Asia Pacific at Maersk Line, told Splash that, long term, fewer players in container shipping would benefit shippers.
“From a Maersk perspective we have always said that our industry is too fragmented and that industry consolidation, despite temporary but inevitable supply chain disruption, is ultimately good for the industry. The resultant stability will eventually benefit the shippers,” van Trooijen said.
Neil Dekker, Drewry’s director of container research, said Hanjin’s court receivership should serve as a “big wake up call for the entire industry”.
“The events of 2008/09 should have shaken the industry up and four companies were very close to financial failure at that time,” Dekker revealed, adding: “But the industry has reacted rather arrogantly and lessons were not learnt with overall profitability so poor in recent years.”
The Drewry analyst warned other box firms could fold too.
“Lines have focused on cost cutting for years, now is the time to focus on revenue,” he advised.
Tim Routh, from portal China Sea Rates, said shipping had yet to have its Lehman moment, despite the enormity of Hanjin’s failure. Hanjin is the world’s seventh largest containerline with a strong bulker portfolio too, controlling around 140 ships. To date, it is the largest container shipping bankruptcy in history.
“I have stated from the outset of the HMM and Hanjin issues that they are the Fannie May and Freddie Mac moment,” Routh said, referring to the failed US mortgage lenders who collapsed before Lehman. “The Lehman Bros is still on the cards,” he warned.
At a live Q&A session on our new interactive forum, Splash Chat, eight days ago, Lars Jensen from SeaIntelligence Consulting predicted there would be just six to eight global container carriers by the mid-2020s, down from the current 15.
To access Splash’s full, unrivalled coverage of the decline and fall of Hanjin Shipping, click here.