The fact that the CCFI failed to move vigorously since last March, despite the Hanjin collapse, shows that contractual rates are still bogged down. These rates are still way too low for carriers to survive. The collapse in oil prices in 2015 and early 2016 pushed down the price of bunker – the fuel large ships run on – a saving grace for the industry. But bunker prices have risen sharply recently, driving up costs.

    And Hanjin’s ships aren’t going to evaporate to knock down capacity. The oldest ships might get scrapped. But the rest will continue to ply the routes, most likely under new ownership – some have already been acquired by other carriers.

    That’s the problem with a glut: Bankruptcy removes neither the assets nor the capacity. It only changes their ownership and forces investors to accept big losses.

    There may be a brief period of confusion and price spikes on some routes as shippers in peak season get desperate for their merchandise. But the glut of ships, in the face of weak demand, is such that the pain for carriers is likely to continue, with many more false-hope ups followed by brutal smack-downs, and with more carriers cracking under their debt.

This is one of those things that Tony Sagami has been bleating about for a year, which mk linked to but nobody talked about (including me) but it's a pretty big deal. Call shipping a "leading indicator" of international commerce. Shipping companies built a lot of boats because money was cheap and gas was expensive. Then everyone's economy started to falter so that there was less import/export business. Then gas got cheap, which kept things from grenading in April, but now gas is less cheap, and Hanjin is fucked - literally cargos sitting in international waters so they aren't seized by creditors.

And they won't be the last.


I've had a couple of fascinating conversations about this with several people over the last two weeks or so that Hanjin has been in receivership. (Ha ha.) Mostly stemming from this article about a Vancouver artist who is doing a residency on a Hanjin cargo ship... and is now stuck off the coast of China.

Hanjin has valuable assets, and some other shipping company will buy them for pennies on the dollar.

But all of those ships (and the containers Hanjin owns) are full of products and merchandise that Hanjin does not own. Those were bought and paid for by someone at the receiving port.

And insured by the person who shipped them.

So... the products were not delivered on time... so the insurance pays out.

Now the insurance companies own the contents of the Hanjin containers, but have to pay moorage, docking, lading, and other fees for the whole ship to get the stuff out of the containers. That ain't gonna happen. Very few containers have contents worth that much money. And you can't just get the container from column 19, row 5, aisle 22. You gotta take ALL the containers off the ship.

Maybe an enterprising insurer buys up all the insurance claims from the other insurers at pennies on the dollar, and pays to have the ship unloaded? Into...? An empty warehouse? Where they empty the containers and have an enormous garage sale?

But... that's no good, either. Many of those containers will be filled with components and parts and assemblies that only have value to the original purchaser.

So the insurance company sells the container-full to the original purchaser... except the original buyer has already paid for the items and the shipping so they definitely don't want to pay for them again at any price.

So the best thing (financially speaking) for Hanjin's acquirer to do is just push all the containers off into the ocean so they can resume moving paying cargo loads again.

I've got a lot of international shipping experience, and I've noodled this a hundred different ways. I don't see how this is going to shake out, in the end, without costing enormous amounts of money to whoever purchases Hanjin's assets, before they can make a dollar running the Hanjin fleet again...

posted by kleinbl00: 913 days ago