Hanjin’s spectre looms again as liner outlook turns red

Ratings agency Moody’s has raised the spectre that liner shipping could be hit by another Hanjin Shipping style collapse.

In deciding yesterday to change its forecast from stable to negative for shipping across all segments over the next 18 months, the agency said it expects the EBITDA of rated shipping companies to decline by around 6-10% in 2020 compared with EBITDA growth of almost 40% in 2019.

The EBITDA of shipping companies globally could decline by 25-30%, similar to levels last seen in 2016 when Hanjin Shipping went bankrupt in one of the largest bankruptcies experienced in shipping.

Container shipping was warned at the end of last month, even before the full effects of the global coronavirus contagion had been factored in, that liner bankruptcies are highly likely. The potential for liner bankruptcy is at its strongest in the 10 years that US consultants AlixPartners have been tracking this specific data set in a report published on February 28.

BIMCO, the Danish-headquartered shipowning body, yesterday rejigged its 2020 forecasts for the main shipping segments in light of the spread of the coronavirus.

For the full year, BIMCO had already expected average liner freight rates below last year’s level. But that level is now expected to be loss-making, BIMCO warned.

“Slowing globalisation may be even more pronounced than what we have seen in terms of slowdown since the financial crisis of 2008. Increasing protectionist measures may also become more widespread as nations seek to fix exposed vulnerability which the health crisis has made abundantly clear. Global and regional supply chains will be up for a review and while some will alter, some of the changes will benefit shipping demand while others won’t. This crisis has exposed several unwanted vulnerabilities to supply chains as we know them today,” BIMCO warned in its update.

The trade-to-GDP multiplier may again provide guidance to the direction of shipping demand stemming from global economic activity, BIMCO suggested. Coming down from an average multiplier of 1 (2002- 2008) to an average of 0.85 (2011-2020F), BIMCO expects the multiplier to stay below 1.