Time for boxship bargains?
It was only a matter of time before the inevitable happened and financially pressed container ship operators began to reach the end of the line. For some the process has been quite well managed as in the cases of CAM CGM’s acquisition of NOL and Hapag Lloyd’s merger with UASC but it would seem that this orderly process looks set to end with the current situation at Hanjin. There has been talk of the assets of the struggling Korean operator being acquired by Hyundai or possible even Maersk but while some control may still be exercised over Hanjin’s demise because it has gone into protected bankruptcy, that protection does not extend globally and already creditors are arresting vessels in jurisdictions outside of South Korea. Reports suggest that the 1998-built Hanjin Rome has been arrested in Singapore and the 13,000teu Hanjin Sooho in Shanghai. Doubtless many creditors such as port authorities, bunker suppliers and others will begin looking at ways to secure a higher proportion of the money owed to them that Hanjin’s bankruptcy will deliver and seek arrests of their own in sympathetic jurisdictions around the world. If that happens then the result is likely to be the auction of arrested vessels at some point further down the line. Regardless of the price put on the ships by Hanjin or its bankers, the sale price will be what the market can afford. While it may be in the interests of competitors to gain control of the ships so as to help prop up freight rates, whether they can afford them will be another matter. There are many who believe that the future security of current containership operators lies in mergers and acquisitions reducing the number of players but in reality it is not the number of operators but the number of ships that are the problem and far too many of the big boys have been concentrating on market share rather than profits to worry about the effect of their overloading the supply side of the market. The judicial sale of Hanjin vessels leaves open the possibility of outsiders with sufficient financial support being able to acquire a potential fleet at bargain prices which can then easily compete with current players who still have to finance the full price of their own recent deliveries. There will be some who believe in their ability to find sufficient cargo to make such an operation work but even if it is short-lived it will be another problem for the established players to contend with – some may not survive that pressure and the domino effect will then begin releasing more bargains on to the market.