Marsh forecasts lower charter rates in the wake of Hanjin’s demise

Marsh forecasts lower charter rates in the wake of Hanjin’s demise

Cargo owners and shipowners are most at risk of suffering financial losses from Hanjin Shipping’s entering into court receivership, according to a new briefing published by insurance broker Marsh.

Charter rates could take a hit as a “considerable” number of vessels end their contracts with Hanjin and return to the market, increasing competition, said the briefing, which is titled Shipping industry vulnerable following Hanjin administration (accessible here).

“As a result, owners may face a reduction in income when they do find a new charterer, or, failing that, be forced to have the vessels laid up and suffer a complete loss of earnings,” the paper said.

Hanjin has vessels on charter from Seaspan, Danaos and Navios, among others. The South Korean carrier accounted for 17% of Danaos’ revenue during its fiscal year 2015. Gerry Wang, the head of Seaspan, on Monday compared the fallout of Hanjin’s receivership to the effect that Lehman Brothers’ collapse had on financial markets.

Cargo owners should brace themselves for disruption to supply chains, which Marsh said could be “significant and have knock-on effects as facilities become clogged and competition for alternative capacity intensifies”.

The disruptions may also extend to Hanjin’s partners in the CKYHE alliance (Cosco Container Lines, K Line, Yang Ming and Evergreen), if the lines rely on Hanjin vessels to provide a service for their own customers under box-swapping agreements.

Terminals and ports may also need to protect their own financial position, Marsh went on. Port fees, tug and pilot services are at risk of not being paid if Hanjin vessels are permitted to come berth at their facilities, the firm said.

Hanjin’s port agents and crews are also at risk of not receiving their full pay, as are suppliers of bunkers, equipment and stores to Hanjin vessels, Marsh said.

“The wider ramifications of such an important company failure are only beginning to unfold. The situation is particularly acute, as August to October is generally the busiest time of the year for the shipping industry, as companies stock up for the holiday season,” Marcus Baker, chairman of Marsh’s global marine practice, said in a release.

Hanjin’s effects on marine insurance will be more uncertain, in Marsh’s view.

“There is now considerable concern throughout the industry as to whether or not companies are insured against this scenario. Marine cargo insurance policies are written on a wide variety of terms and conditions, for which there are going to be very different answers on a ‘case-by-case’ basis,” said Baker.

Holly Birkett

Holly is Splash's Online Editor and correspondent for the UK and Mediterranean. She has been a maritime journalist since 2010, and has written for and edited several trade publications. She is currently studying for membership of the Institute of Chartered Shipbrokers. In 2013, Holly won the Seahorse Club's Social Media Journalist of the Year award. She is currently based in London.

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1 Comment

  1. Brian R. McCaughrin
    September 13, 2016 at 5:51 pm

    Had Seaspan, Helped Hanjin Shipping, When they called for “HELP”, On Lowering Chartering Rates, Hanjin Shipping, Would not of Filed for Bankruptcy. Nobody has to do anything, “but” When Banks, Push so far and Now Hanjin Shipping, Maneuvering room is blocked at every corner, Simple and Fast, File Chapter 11, & 15, and Now Anyone Connected to Hanjin, Are All Screwed, I’am Very Happy. I, hope you all lose your shirt in the process. You have No one to blame except yourself. You could all stop this from happening months ago..You Did nothing. Chartering Rates for Capesize Bulkers, Dip 10-15% for the for see able future, Because, You people did not act in professional manner, “If” I get Hanjin, You All Are FIRED!