Hanjin's demise hardly came as a crashing surprise to Platts Ocean Intelligence chief Jason Silber.
Consider the following: "Hanjin…is undergoing a restructuring…results for FY 2013 and 1Q FY 2014 continue to be worrying – not surprising given that the container shipping sector is still suffering from severe supply-demand imbalance and high bunker costs (and is) expected to remain challenging in the near term, and we are not optimistic that the company's current cost-cutting and other measures to improve its bottom line will return it to profitability in the next few years."
And this: "Hanjin's strained financial position would affect its ability to pay its counterparties on time, as evident in the delays in payments…Ocean Intelligence recommends a credit limit of USD low-seven figures for the company. This account should be monitored closely, and any deterioration in its payment performance would warrant an immediate credit review."
Prophecy or intuition? No: merely an Ocean Intelligence report published two whole years before the momentous collapse of Hanjin, the world's seventh (or eighth or tenth – depends who’s asked) largest container liner and South Korea's flagship carrier.
Our analyst recommended a relatively modest credit line of low $ seven figures. Now that may seem generous, but given mid-2014 bunker prices of around $700/mt (now $250), and the amount of fuel larger container carriers digest, it's a very conservative recommendation.
Take the Hanjin Green Earth, a 13,000 ton-container ship. Not the largest of liners, but still very big, the vessel boasts a 12,000-ton bunker fuel tank, plus another 400 tons for distillate fuel used when sailing in certain coastal zones. Filling up the bunker tank alone would cost $8.4 million in 2014, and $3 million in today's low fuel price environment. A low $ seven figure credit line would suffice for fixing only one vessel a month.
Speaking of prophesy, consider another pungent passage: "Let them not gloat…over me when my feet slip." That's from Psalms 38:16. Far be it from me to gloat, some of Hanjin's largest bunker creditors could have saved themselves a small – no, actually a massive – fortune, eight figure fortunes in fact, by shelling out a few hundred bucks two years ago for that Ocean Intelligence report. Pity.
Truth be told, more than a few observers were alarmed over the state of the container industry as early as 2012. Major liners were said to be failing to generate enough money to cover interest and capital requirements. Hanjin was seen as being at particular risk.
Strictly by the numbers, Hanjin was never in the tip top tier of international players: the global liner fleet consists of roughly 5,000 active pure container vessels (plus another 1,000 ships of other types employed on regular liner schedules), of which Maersk operates over 10%, Mediterranean Shipping Co around 8%, CMA-CGM 7.5% and COSCO 4.5%. With about 100 ships a few weeks ago, Hanjin had less than 2% of the liner fleet, a percentage now shrinking fast.
Yet Hanjin's small size relative to its rivals belied its influence: it represented a sizeable 7% of all Far East- North American container trade. And like the proverbial ripples of a pebble cast in a pond (or ocean in this case), the Hanjin bankruptcy has created prodigious losses down the supply chain for manufacturers, exporters and importers, freight forwarders, ports, consumers and most importantly (naturally), for its bunker suppliers.
If only they had that Ocean Intelligence report in hand.