Hanjin Shipping’s already numbered days are coming to a rapid end.
Since the South Korean shipper filed for bankruptcy at the end of August, the shipping sector has been doing its best to accommodate, though the unexpected collapse held up supply chains everywhere as ports battled over working with Hanjin ships and who would pay up for the effort.
Last week, reports said Hanjin was looking to lay off more than half of its office staff, retaining only those absolutely necessary to conducting any remaining business. The company is also closing its 10 European offices and may sell off its stake in the Long Beach port terminal in California. Nine of if its ships have to go, too—chartered ships will go back to their owners and owned ships will be sold. The ships, among the best in Hanjin’s fleet, according to The Wall Street Journal, are valued around $90 million each and their sale is a clear indication that Hanjin isn’t expecting to restructure and return to business as it was.
Now, five shippers, including Hanjin’s one-time competitor Hyundai Merchant Marine (the other four have not been disclosed), have bids in to buy assets of Hanjin’s U.S.-Asia shipping route.
Preliminary bids were submitted this week, the Journal reported, and now the companies have until Nov. 4 for due diligence of the assets.
“We hope Hanjin assets will help enhance our competitiveness on major routes,” Hyundai Merchant said in a statement, according to the Journal.
Analysts, however, seem to think Hyundai Merchant won’t end up acquiring Hanjin’s assets as many would overlap with their own, adding to duplication and taking away efficiency at a time when the shipping sector is already struggling.
Freight rates are hardly above operating costs for many carriers and the need to find efficiencies is “paramount,” U.K. shipping consultancy Drewry said in a report earlier this month.
Shippers that aren’t even recovering operating costs have to make concessions somewhere in order to stay afloat and Drewry said that somewhere is often the maintenance budget. The decision for shippers now, will be whether their main driver is price or quality as they look to place high values on these cargo ships.
“We are more pessimistic about the near term outlook than we were six months ago but we can see recovery for this sector, albeit some way off,” Susan Oatway, lead analyst for multipurpose shipping at Drewry, said. “It is not our view that there will be a run of (or even any more) big carrier bankruptcies in the near term, however, those who hold the purse strings might well be inclined to restrict finance to some of the smaller owners.”