Hanjin Ordered to Sell Its Ships

cosco
File image

By MarEx 2016-09-20 20:34:19

Hanjin Shipping has to return chartered-in ships to owners and to sell as much of its own fleet as it can, a South Korean bankruptcy judge said Monday. 

Hanjin is still working on a restructuring plan, and it has already begun returning chartered vessels in an attempt to reduce its overhead; its charter fees amount to millions per day. The judge's order to sell vessels means that the firm will be much smaller if it manages to avoid total liquidation – a fate the court will decide sometime in December. 

Mike Radak, chief operating officer of Hanjin Shipping America, told the LA Times that the carrier was giving back chartered vessels as soon as they were unloaded. "Once it's empty, we hand the keys over to the chartering company," he said. 

Radak said that his understanding is that all of the line's owned vessels would be brought back to Busan as they were free of cargo.

The sale of Hanjin's ships is expected to put further downward pressure on weakened prices for older container tonnage, especially smaller, less efficient vessels. In addition, Hanjin-chartered vessels coming off hire may have difficulty finding new employment in a saturated market and many are likely to go into layup, analysts say. 

Hanjin has had some difficulty in getting its containerships into port, offloaded and out again without having them seized by creditors. It has received bankruptcy protection in the United States against further actions by unpaid bunker dealers, and the Hanjin Greece, Hanjin Gdynia, Hanjin Jungil and Hanjin Montevideo are all expected to call at Long Beach and unload in the coming weeks. In all, the firm says that about a third of its fleet has offloaded its cargo since it filed for receivership at the end of August.

In other nations it has not been so lucky. The Hanjin California has been seized in Sydney, and the Hanjin Milano is awaiting orders outside the same harbor in order to avoid the same fate. 

In New York, the Hanjin Miami is unable to come into port because of limits imposed by air draft – not on arrival, but on departure, said Federal Maritime Commissioner William Doyle at an industry event Monday.

After unloading, the Miami would normally load up Hanjin empties as ballast in order to fit under the Bayonne Bridge. Without those empties, the ship "will not be able to depart the harbor because it would not have the air clearance to navigate . . . even at a dead low tide," said Doyle. "There are so many disputes right now attached to empty containers that the terminal is not going to load the empties back onto the ship.”

Yonhap reported Tuesday that South Korea's Ministry of Foreign Affairs has stepped in to provide diplomatic assistance for the troubled line. A top official in Seoul called a meeting with the diplomatic representatives of 16 nations in order to reassure them that the situation was "more or less under control" and to ask for their help in bringing the problems with Hanjin vessels and cargo to an end. 

In the United States, a consortium of dozens of business associations called on Secretary of Commerce Penny Pritzker to work with South Korea to resolve the situation. “We appreciate your actions related to the Hanjin Shipping Company bankruptcy and urge you to continue to engage the South Korean government to bring a swift and economically positive resolution to the situation,” the group wrote. “The impact on small and medium sized companies could be particularly devastating if this situation is not resolved in a timely manner.”

The line’s collapse may be good news for rivals like China COSCO. Sun Jiakang, executive vice president of China's biggest shipping company, told Reuters on Monday that rates had risen in the last month – a boost that should lift the state-owned firm's fourth quarter and continue into next year.

"Shippers are now more keen to choose shipping companies with good credit that can provide stable services, and they may shun companies with poor credit. In this respect, our group is one of the beneficiaries," he said. COSCO Shipping itself is among the most indebted of the global shipping firms, according to Thomson Reuters data, but it is also one of China's largest state-owned firms, employing 330,000 people. Sun said its finances are improving.