RLL Container Report - 28 September 2016
From: John Keir, Ross Learmont Ltd. Email: john.keir@telia.com Date: 28 September 2016
Hanjin – Nature abhors a vacuum.
On the 31st of August 31, 2016 Hanjin, the world’s seventh largest container shipping line, announced that it had filed in South Korea for court protection from its creditors. A receiver was appointed on September 1, 2016. At that time, Hanjin was operating a fleet of owned and chartered vessels with a capacity of some 690,000 teu. The value of the cargo on board was estimated at USD 14 Billion. Already four of the Korean company’s vessels are under arrest and nine are detained under embargo. In order to avoid further vessels being arrested for unpaid charter fees and other payments, Hanjin has ordered their ships to stay out at sea until they can clarify matters.
Among the many creditors are container lessors. According to one container lessor, CAI, Hanjin had 750,000 teu leased units, of which CAI itself has some 15,000 containers on lease to the line. CAI’s share is just two percent of the total number of leased units in the employ of Hanjin but even this relatively small share represents USD 40 million worth of equipment. Another lessor, Textainer reckons it has 4.8% of its box fleet on hire to Hanjin. As Textainer has a fleet comprising 3.2 million teu, this means that the US lessor is looking to recover the equivalent of 150,000 teu.
In addition to leased units, Hanjin has its own large fleet of containers with its own prefixes and numbering. Part of this owned fleet may, however, be leased to the ship owner under lease-purchase terms and if the payments have not been met then some of these units will also have to be recovered by their owners. Hanjin’s website claims it has a fleet of 500,000 teu in company livery. This includes not only dries and reefers but a number of more specialist types, such as flat racks, open tops and reefers. All-in-all, we are looking at a recovery of somewhere in the region of 1.25 million teu owned and leased units.
The last major box recovery was back in 1986, when US Lines was declared bankrupt. At the time, the company had an operating a fleet of some 46 containerships with a total capacity of 93,000 teu. In the intervening thirty years, container vessels have grown remarkably large in size with some vessels capable of carrying 20,000 teu. The old boxing adage that “the bigger they are the harder they fall” can well be applied to Hanjin.
Nevertheless, as we saw with the US Lines recovery, the lost US lines slot capacity was replaced by other participants in the market, who took up the slack. The large leased fleet will be recovered by its various owners and the units leased out to other lines. The banks may take control of the Hanjin owned fleet and these units could be absorbed by the market for self-storage units or sold on to smaller shipping lines operating in the fast-growing regional markets.
After all, Mother Nature abhors a vacuum.
John Keir, Ross Learmont Ltd.
28 September 2016
Copyright ©, 2016, John Keir