Korea’s largest shipping company declares bankruptcy but many others sinking too

sinkin

Korea’s largest container transporter Hanjin Shipping has declared bankruptcy. Given the backdrop it isn’t surprising. Normally we should expect lending companies to play a supporting role to prevent excess boats “flooding” (no pun intended) the market and driving beaten prices down on loans to others even further. However even the Korean banks weren’t satisfied with the restructuring plan  of Hanjin. This could well be first blood but I wonder if the Korean government steps in and potentially nationalises it or encourages some zombie lending to save face.

The difficulty here is the state of banks, many German, who lend to shipping companies are on their last sea legs limiting wiggle room. 

3 months I wrote the following piece on that “Sinking feeling” regards to the shipping industry

Clarksons is the world authority on shipping. These are the latest prices in 2016 vs the 5 year average by type. New LNG, grain and oil carriers etc are holding up but the used market is being slaughtered. Ships are generally bought with a 25-yr service span at the very least. Global seaborne trade growth has shrunk from 6%+ growth in 2011 to less than 2% now.

Ship Prixces

Clarksons is the world authority on shipping. These are the latest prices in 2016 vs the 5 year average by type. New LNG, grain and oil carriers etc are holding up but the used market is being slaughtered. Ships are generally bought with a 25-yr service span at the very least. Global seaborne trade growth has shrunk from 6%+ growth in 2011 to less than 2% now.

daily px shi;s

Daily rates are naturally falling fast. 1yr Capesize ships used in the transport of raw materials are now 52% lower than the 5 year average and down 30%YoY vs 2015.

daily px shi;s

 

Now one could have wishful thinking and view this as bottoming out but even with all the liquidity being pumped into world markets, trade is suffering from all that deflation in the system.

None of this is surprising  but it shows how slow our over capacity world is growing. If such news ends up causing some bankruptcies among lenders then this will really start highlighting this financial crisis we keep denying

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