MSC Wins Hanjin’s Total Terminals International Stake





Hanjin’s messy bankruptcy in the midst of this year’s shipping industry’s peak season has plunged their stake owned terminals in both Long Beach, California, and Seattle, Washington towards the red as both ports have been suffering declines in overall container traffic now that Hanjin’s ships are no longer feeding a steady volume of business to each terminal.  After Hanjin Shipping missed their Friday, December 23rd, 2016 US court deadline to reveal the assets & liabilities they still currently have – with an attempt of seeking an extension to January 9th, 2017; presiding Judge John K. Sherwood has curtailed the extension and ordered the information to be filed by today, December 28th, 2016, with a scheduled hearing regarding the discussion of this matter on the same day.  The court is expected to hear Hanjin’s request for approval of the same on January 12th, 2017.


As Hanjin struggles to juggle and solve all the issues that have arisen for them ever since announcing their bankruptcy protection back in August, the Mediterranean Shipping Company (MSC) and Hyundai Merchant Marine (HMM) originally submitted a joint bid to take over Hanjin’s part of the 25 year terminal lease, signed back in August of 2002 – but HMM later on withdrew from the joint bid mid-December, stating that they have instead decided to take a minority stake in Total Terminals from MSC if the European shipping line was approved of the deal. For a moment, Korea Line, South Korea’s second-largest bulk carrier, was also poised to throw their bid to take over Hanjin’s stake in the terminal, but that expectation was rebuffed.


The bid has finally been approved last Thursday, with MSC to take over sole control the Port of Long Beach’s “Pier T” container terminal for the long term. The exact value of the deal is still unknown, but approved by the Seoul Central District Court handling Hanjin’s insolvency proceedings since their criteria of this proceeding being endorsed by a U.S. Bankruptcy Court and the U.S. Port Authority was met. Formerly, the 385 acre Pier T was 54% majority held by Hanjin Shipping, with MSC holding the other 46%; however, ever since Hanjin Shipping has applied for receivership at the end of August this year, the company has taken steps to liquidate all their assets to pay back monies owed.


“This decision comes at a very crucial time. With all the changes that have taken place in the shipping industry in recent years, certainty is very important,” says Lori Ann Guzmán, President of the Board of Harbor Commissioners, adding “That while Hanjin’s bankruptcy was unfortunate, the approved agreement is a worthy deal to bring steady business to one of the country’s premier container terminals.” The new pact requires an upgrade installation of two new cranes capable of handling container ships with capacities of 20,000 twenty-foot equivalent units (TEUs) within the next three years; and was greenlighted by the Long Beach Board of Harbor Commissioners on December 22nd, 2016.



Additional Information:

  1. Total Terminals International Tag (WorldMaritimeNews)
  2. Hanjin Sells US Terminal Stake to MSC (MaritimeProfessional)
  3. Mediterranean Shipping Company To Take over Long Beach’s Largest Terminal (GlobalTrade)
  4. Port of Long Beach Approves Sale of Hanjin Terminal Stake to MSC (Seatrade Maritime News)
  5. MSC Buys Hanjin Stakes in Long Beach, Seattle Terminals (JOC)

AND… Jinks!

Prepping for New Mega Ships




Perhaps we tooted our horns a tad too early. All the talk of Asia-Europe and Trans-Pacific contract rates prepped to finally grow in 2017 has been scaled back and seems to be materializing as a temporary bandage on the so-called “new golden age” of container shipping profitability of merging companies and wildly popular acquisitions. A London-based consultancy, Drewry Shipping Consultants, mentions that they have “nagging doubts” about the industry’s return to profitability – due to ocean carriers excelling at self-sabotage that has proven via history so far to only shorten booms and lengthen busts, along with random pop-up companies that seem to materialize overnight. Drewry continues, “Consolidation will assist carriers on their path to becoming profitable, but conditions will still not be ideal for making large sums until the overcapacity situation is dealt with and the barriers to entry rise to deter competition.”


In short, with still so many ships to be built on the books, and a rate of “older” ships not being scrapped quickly enough, overcapacity is still the looming problem in a very small industry that has a feeble demand and is currently still self-inflicting havoc for everyone involved; with many expecting supply and demand to (hopefully) right itself again only in 2022. Drewry adds, “The industry’s profitability depends on the scale and longevity of any newcomers and the expansionist “dreams” of existing carriers.” What makes it worse are state-owned carriers that have their government support with undertones of expanding their country’s shipping trade, further procrastinating the rebalancing of supply and demand. Both the Japanese and the Taiwanese have taken a page out of Korea’s streak this season, with governments from both countries stepping in to financially assist their ailing shipping companies – which makes us pause to wonder how much lee-way the big carriers at the top bend to the will of their governments.


And of course, to top it off in an attempt to save money are mega-vessels. In a shipping container lines desperate attempt to minimize costs and stay afloat, the quarter-mile-ling Benjamin Franklin was born, taking the title of the largest cargo ship ever to dock at an U.S. port, with five more on the books to follow. With global growth and trade faltering and becoming sluggish after 2008, the benefits of sailing and docking bigger and bigger boats are quickly failing on their expected returns – proving that bigger is not always better. Global trade volumes collapsed under the 2008 financial crisis, killing the cargo business and destroying the industry with overcapacity. In addition, these mega-sized vessels have created traffic jams in the water near busy ports, as well as overwhelming workers on-shore struggling to offload thousands of containers. Ports are also struggling to prepare themselves for these new mega ships, upgrading their gantry cranes and mitigating trucks coming in to pick up after unloading. In conclusion, as carriers get together with companies to talk about 2017 contracts, while there does seem to be rising trends of understanding by businesses that contract rates are forecast to go up in 2017, the rates unfortunately have been unsustainable and it seems to be a long road ahead still.



Additional Information:

  1. The Impact of Mega-Ships (Caralb)
  2. Ships Have Gotten Too Big (Bloomberg)
  3. Liners’ Potential ‘Golden Age’ For Profits May Be Shortlived (JOC)
  4. Contract Rates Forecast to Rise in 2017 for the First Time Since 2010 (JOC)

Change is Finally Coming…





As contract bidding for 2017 starts materializing into a full swing, it is clear that shippers can no longer sustain the rock bottom low rates that they have continually slashed for their clients in the past six years. “2017 will be the first year of increasing contract rates since 2010 and this could come as a shock to some logistics managers who had gotten use to deflationary international transportation costs year after year.” said Philip Damas, head of Drewy’s logistics practice based out of London. Nonetheless, many shippers are coming into contract talks prepared with a recent survey conducted by the Journal of Commerce showing 46% of shippers prepping for an increase of 1% – 10% in contract pricing, and more than 20% of shippers prepped for increases in the double digits up to 20% higher than before.


Soren Skou, the CEO of Maersk Group stated that if container lines and ship owners keep their existing fleet, don’t place new orders, and maintain the current rate of scrapping, the industry would nearly match capacity with demand… in 2022. Nonetheless, this is still much too far off for most big shipping containers as overcapacity still plagues the market; and with new competitors eager to enter the market, specifically Korea Line through acquiring Hanjin Shipping’s assets. Of course, with such fierce competition in the trans-Pacific route, many firms that have tried entering the trade in the past have failed. With the selling of the Panamax container ship at the tender age of 7 years old only, Rickmers Maritime Trust has confirmed that it is the youngest vessel yet entering the demolition yard since the widening of the canal has made them obsolete. Of course, as contract bidding starts for 2017’s trans-Pacific trade, all container lines are now resolved to stand as a united front and bring rates back up to workable levels again in order to survive; and shippers know this and are willing to play along after the past couple years of cheap gluttony.


With many BCO customers concerned over the rapid merging of shipping firms in 2016, shaving the “Top 20” carriers down to the “Top 14”, many industry experts predict that this will powerfully change the bargaining power that shipping lines now have due to consolidation. This is clearly seen as all container lines across the board have brought up their 2017 rates back to workable levels for operation and survival. Such is a double edged sword though, with many customers now placing “a greater focus on (the) financial health” of the maritime carriers that they select, to make sure they are not the victims of a Hanjin repeat earlier this year, and thus, willing to open up their wallets for ‘safety’. Dama mentions, “We expect that ocean contract negotiations in the next few months – including the trans-Pacific ones in March – April – will be tougher for shippers and also more complex, so exporters and importers need to be equipped with the best data, sourcing technology, marketing practices and market insight.” With carrier instability, uncertainty of future alliance services, and impact of big ships on port performance are only a few of the “wild card” variables that have yet to play out in 2017.


Ultimately though, at the end of the day, no one knows what will happen as container lines and shippers meet at opposite ends of the contract negotiation table. It took the entire industry a long time to build up to this point, and there may or may not be a possible quick fix way to get out. With everyone muddling through the rest of 2016 and placing greater hope in the hands of 2017, the freight forwarding can only hold its breath and see what 2017 has in store for all of us.




Additional Information:

  1. Big Rate Hikes Elude Trans-Pacific Shipping Lines (Hellenic Shipping News)
  2. Contract Rates Forecast to Rise in 2017 for First Time Since 2010 (JOC)
  3. End of Container Overcapacity? Not So Fast (JOC)
  4. Korea Line Faces Tough Trans-Pacific Entrance (JOC)