Shippers worry about container lines' financials and fear another Hanjin

Date: Thursday, April 2, 2020
Source: Shipping Watch

Several shippers have begun fearing for the financial state of container lines once the world is past the corona crisis. Some fear that a new Hanjin situation will emerge, chair of the European Shippers' Council tells ShippingWatch.

The fear of a new collapse in one of the container lines, as happened with South Korean Hanjin in 2016, is growing with several shippers.

The corona crisis is hitting the container sector hard because demand has slowed down dramatically in the West due to the coronavirus. This has prompted container lines to cancel a high number of sailings, with the number of voided departures on major container routes tripled in only a few days.

This development worries shippers, whose memories of Hanjin's collapse are still fresh.

"The shippers are already thinking about what will be the carriers' financial situation at the end of this first half of 2020 because of these capacity reductions," says Denis Choumert, chair of the European Shippers' Council (ECS).

Choumert says several shippers are particularly concerned about smaller container shipping companies in alliances.

"Some people say that we should pay attention to the smaller carriers within the alliances. Some shippers are fearing that a new Hanjin can happen in 2020," he says.


Hunting for carrier commitment

The many canceled sailings have also created major challenges to European exporters.

Choumert says that many shippers are as such trying to obtain guarantees from container carriers that their goods can be shipped.

"The shippers are trying to establish at least some capacity commitments on both sides of the ocean. They are prepared to pay a little bit more to have these capacity commitments from the liners," he says.

Shippers see capacity challenges coming primarily out of Europe.

But Choumert says that several Asian shippers he has spoken to are also preparing for challenges to come once the many goods piling up in China while the country was hit hard by the coronavirus have been shipped.

"We know as soon as the Chinese goods have been exported, the capacity will be reduced by the shipowners, because they expect a sharp drop in imports from Southeast Asia and China, because of the lock down in many countries," he says.

Several actors fear for shipping lines

Not only shippers worry about the financials of container lines.

Most recently, credit rating agency Moody's lowered its outlook for Maersk and Hapag-Lloyd from 'stable' to 'negative'.

The fast spread of the coronavirus, deteriorating global economic prospects, declining oil prices and drops in asset prices are creating a serious and comprehensive credit shock across several sectors, regions and markets, Moody's explains.

"The shipping sector in general and container shipping sector in particular are dependent on world trade and activity demand for goods from industrial companies as well as consumers. Given the rapid development in terms of countries shutting down production and putting populations in quarantine, it is inevitable that the demand for container shipping will see contracting volumes," Moody's wrote in its report on Tuesday.

Previously, shipping analyst Lars Jensen, CEO of Sea-Intelligence Consulting, has assessed that the escalating consequences of the coronavirus in Europe and the US have the potential to impact the global container industry in the same way as during the financial crisis.

 

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