ANOTHER bankruptcy of a major container shipping line following Hanjin Shipping's demise is unlikely in the near future according to Alphaliner, which believes industry stakeholders will learn to stave off a similarly disastrous result.
Speaking at the recent Asian Logistics and Maritime Conference (ALMC), Tan Hua Joo, executive consultant at Alphaliner, blamed governmental blunders for Hanjin's fall, while opining that state intervention would only "serve to prolong" the market downturn, according to Container Management.
Hanjin's collapse "gave a very good lesson on how not to handle a debt restructuring exercise," said MrTan. "I think there was also a complete misunderstanding on the part of the foreign creditors on what is driving the Korean domestic and political situation.
"All of the stakeholders involved will end up suffering more than if an agreement had been reached to save Hanjin," he added.
The recent announcement of the Japanese carrier tie-up has created a gulf between the top seven lines and the remaining large firms, leaving Hamburg Süd, Orient Overseas Container Line (OOCL), Yang Ming, Hyundai Merchant Marine (HMM) and Zim vulnerable, Tan stated.
"Something will have to give," he claimed, and more consolidation is the likely outcome.
In Mr Tan's opinion, Hanjin's bankruptcy "was clearly the case of political blundering taking precedence over economic common sense."
"It is becoming increasingly clear by now to any neutral observer that it was a strategic mistake for the Koreans to save HMM but allow Hanjin shipping to fail," he added.
Mr Tan also pointed out that the merger between COSCO and China Shipping would not have occurred if not for political interests getting involved.
The lack of "weaker players exiting the business" is preventing the industry from making a fast recovery, he added, as mass over-supply still plagues the sector.
According to Alphaliner data, the overall capacity of the container shipping market has grown six-fold in the last 20 years at an annual average of 10 per cent.
Although capacity did not increase hugely in 2016, an array of vessels ordered in the previous few years is set to enter the market.
Statistics from Alphaliner indicate that more than 110 container ships with a capacity of more than 9,000 TEU, comprising 1.5 million TEU in total, will enter the sector between the final quarter of this year and the end of 2017.
This represents 7 per cent capacity growth although after scrapping, a 5 per cent increase is expected according to Mr Tan.
Speaking at the same event, Steve Saxon, partner at McKinsey & Company, suggested that capacity additions, although undesired, could become inevitable as the Korean shipbuilding industry would be forced to offer favourable deals to shipowners in order to sustain itself.
Source : HKSG.