Hanjin Shipping’s demise no surprise to Platts Ocean Intelligence chief
Monday October 17, 2016
IF ONLY…
Hanjin’s demise hardly came as a crashing surprise to Platts Ocean Intelligence chief Jason Silber.
Consider the following: “Hanjin…is undergoing a restructuring…results for FY 2013 and 1Q FY 2014 continue to be worrying – not surprising given that the container shipping sector is still suffering from severe supply-demand imbalance and high bunker costs (and is) expected to remain challenging in the near term, and we are not optimistic that the company’s current cost-cutting and other measures to improve its bottom line will return it to profitability in the next few years.”
And this: “Hanjin’s strained financial position would affect its ability to pay its counterparties on time, as evident in the delays in payments…Ocean Intelligence recommends a credit limit of USD low-seven figures for the company. This account should be monitored closely, and any deterioration in its payment performance would warrant an immediate credit review.”
Prophecy or intuition? No: merely an Ocean Intelligence report published two whole years before the momentous collapse of Hanjin, the world’s seventh (or eighth or tenth – depends who’s asked) largest container liner and South Korea’s flagship carrier.
Our analyst recommended a relatively modest credit line of low $ seven figures. Now that may seem generous, but given mid-2014 bunker prices of around $700/mt (now $250), and the amount of fuel larger container carriers digest, it’s a very conservative recommendation.
Take the Hanjin Green Earth, a 13,000 ton-container ship. Not the largest of liners, but still very big, the vessel boasts a 12,000-ton bunker fuel tank, plus another 400 tons for distillate fuel used when sailing in certain coastal zones. Filling up the bunker tank alone would cost $8.4 million in 2014, and $3 million in today’s low fuel price environment. A low $ seven figure credit line would suffice for fixing only one vessel a month.
Speaking of prophesy, consider another pungent passage: “Let them not gloat…over me when my feet slip.” That’s from Psalms 38:16. Far be it from me to gloat, some of Hanjin’s largest bunker creditors could have saved themselves a small – no, actually a massive – fortune, eight figure fortunes in fact, by shelling out a few hundred bucks two years ago for that Ocean In...