Hanjin collapse aftermath – Rough seas ahead? Some fear global shakeup of shipping industry
Frustrated crews stranded on the high seas. Retailers livid about overdue shipments. Shippers, handlers and others unsure if they’ll ever get paid — and how.
Welcome to the Hanjin Shipping shutdown, sluggishly making its way through the courts after plunging the International supply chain into a tailspin. Some experts, many who had long seen the demise of the world’s seventh-largest container shipper on the horizon, expect more stormy seas ahead for the industry.
Jon Slangerup, Executive Director, Port of Long Beach, told a supply-chain conference held in USC last week that the issue is far from over. He expressed that there will be continual consolidation and strengthening of the entire ocean-liner business.
Though mostly invisible to Southern California consumers who snatch up cheap TVs and clothing made abroad, the region’s economy depends on the sector, especially the ports of Los Angeles and Long Beach.
A combination of overcapacity and flat global demand pushed the Korean cargo giant to the edge, but it isn’t alone. The market slump has spurred years of losses for many of the industry’s biggest players.
To survive, major carriers were forced to merge or build alliances with rivals.
This year alone:
- Conglomerates China Shipping Group Co. and China Ocean Shipping Co. are in the midst of a complex merger.
- French shipping line CMA CGM acquired Singapore-based Neptune Orient Lines, owner of APL.
- Next in line: German shipper Hapag-Lloyd, which plans to merge with the United Arab Shipping Co.
Hanjin’s shutdown was a just a public signal indicating a deepening cargo crisis, say experts and industry analysts. Shipping companies are projected to lose around $5 billion in 2016.
Everyone from consumer-electronics goliath Samsung — which didn’t need another headache while in the midst of its Note 7 recall debacle — to hometown retailers across the U.S. are trying to sort out how they will get their goods to market in the months and years ahead.
Experts say that operators of major ports also can expect a sea change, too.
Rahul Kapoor, director of financial research at Drewry Maritime Research, said that with the consolidation of industry, the ports haven’t made any money. There will be increasing pressure on terminals.
Kapoor said that ports like Long Beach and Los Angeles must pony up money for maintenance, infrastructure improvements and to build up to prepare for a wave of mega ships requiring taller cranes and bridges. Southern California’s ports have long been competitors, each trying to snare deals with the major shipping lines. If the current crisis results in fewer lines, the business rivalry could intensify.
Michelle Grubbs, vice president at the Pacific Merchant Shipping Association, an industry trade association, said that they do not know who is going to be the winner. The industry is going through a major restructuring in order to become profitable.
Each port authority fights for tenants to keep terminals busy and profitable. Because terminals’ operators are often affiliated with shipping lines — or have a direct interest — the mergers could benefit one port over another.
In Long Beach, Hanjin Shipping Co. owns a majority stake in Pier T, the port’s largest operating terminal. And CMA, CGM and Cosco consistently deploy two other terminals.
And in Los Angeles, China Shipping and APL have forged associations with two terminals.
According to Grubbs, “Where will the cargo go in this new order? They don’t know where that volume is going”.
The bright side
Not everyone is worried.
Port of Los Angeles Executive Director Gene Seroka, said that regardless of the names on the ships, they will keep coming in, and so will the cargo and the revenue they bring. He said that “You are still going to have the same amount of cargo coming through and if we are doing our jobs, we will grow.”
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Source: Long Beach Press-Telegram
