wolfstreet.com / by Wolf Richter • Jan 30, 2017
Bankruptcy reveals “opaque ownership.” And freight rates surge.
When Hanjin Shipping Co. declared bankruptcy on August 31, 2016, the world’s seventh largest container carrier, and the largest ever to go bankrupt, threw the shipping industry into chaos. Fully loaded ships were stranded at sea and in legal limbo. Supply chains were disrupted. Hanjin had been considered too-big-too-fail for South Korea, and the industry had relied on a bailout, but it was allowed to fail.
Now that Hanjin is being liquidated and that the logistical nightmares have cleared up, what happened to Hanjin’s 98 containerships – and their “opaque” ownership?
And what happened to container freight rates? They’d plunged to historic lows in the spring of 2016, among rumors that they’d collapse to “zero,” and had pushed already listing Hanjin to keel over entirely.
After Hanjin’s bankruptcy, its 98 ships with a combined nominal capacity of 610,000 twenty-foot equivalent container units (TEU) joined the already massive global idle fleet as overcapacity has been dogging the industry. According to Drewry Maritime Research, the total idle capacity soared from 904,000 TEU in August before Hanjin’s bankruptcy to a peak of 1.7 million TEU by mid-November. Nearly 9% of the global fleet was anchored somewhere, waiting for better days!