How is Maltese shipping industry weathering the Hanjin bankruptcy?

The collapse of Hanjin Shipping is poised to be one of the worst tales of economic woe in the world of shipping, eclipsing even the 1986 collapse of United States Lines in magnitude.

And ‘Hanjin bankruptcy’ soon morphed into ‘Hanjin receivership’ when it was announced – on August 31 of this year – that the South Korean company could no longer rely on the support of its banks.

That the Hanjin bankruptcy is an un-ignorable problem for the global shipping situation goes without saying, given that the company was a giant in the field.

But we should also put this event in the context of other developments in the field.

A photo of a Hanjin cargo ship loaded with containers

One example is the way shipping lines reacted to a predicted spike in the economy a decade ago. Whereas 12,000 Twenty-Foot Equivalent Units (TEU) were commonly being used back then, as a result of this prediction, new orders were made for vessels of up to 22,000 TEUs, if not more.

With supply outstripping demand – and even with a dip in bunkering prices – initial expenditures weren’t accounted for, so the economic dent was keenly felt.

And ‘keenly felt’ isn’t an exaggeration when discussing the ripple effects of the Hanjin bankruptcy and other problems affecting the global shipping situation. Let’s remember that liner services operate to a schedule determined by key alliances.

As an example, let’s take the case of four ships needing to depart from Shanghai on a weekly basis. In order to secure efficiency and split costs, lines would join up into ‘alliances’ to oversee this particular crossing.

At the time of writing, the world’s four largest alliances were O3, 2M, CKHY, and G6, and these lines were further compromised three years ago, after prices took a sizeable dip from an average of $1500/TEU to around $450 at present.

This has of course hurt the alliances, resulting in a negative spiral on several fronts, with cost-cutting leading to layoffs and the scrapping of vessels. Investing in technology to make leaner operations more viable may have looked like a logical step forward, but in fact it did very little to stem the haemorrhage.

Another new reality in the sphere of the global shipping situation that needs to be considered is the fact that over the past two years, the trend has moved beyond alliances, and into buy-outs, CMA CGM bought APL and NOL, whilst the two giant Chinese carriers, CSCL and Coscon, were bailed out by their own government and merged into a single company.

Even Maersk, the world’s biggest shipping line, has announced that it will be splitting operations… perhaps logically enough, in a way that isolates their loss-making areas.

One might ask, what’s the next step for the global shipping situation following the Hanjin bankruptcy and the effects of other economic realities? While the consumer remains at an advantage, the jury is still out on what would happen in the case that – for example – all but two major shipping lines perish.

On a local level, companies like O&S have the advantage of not being beholden to any one line, and cutting to the chase following recent events – an even more pertinent fact after the Hanjin receivership this summer – we avoided loading any more of our clients’ cargo on Hanjin vessels.

It should be said that these decisions were taken three months before the Hanjin bankruptcy – the signs were there, and we were shrewd enough to be able to read them and act upon them.

An even more dramatic incident took place in local waters in the preceding months, when a Hanjin container carrying foodstuff, that was loaded on the vessel BJORG 1633E, almost got stuck in Malta while in transit towards a connecting vessel in Dubai.

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When the owners of the cargo contacted our offices through our agent in Dubai – who contracted us for the job – we immediately sprang into action.

Since we have access to an A-class bonded warehouse and yard in in Dubai, we could easily warehouse, cross-dock, or manipulate any kind of cargo there. Through our efforts, we obtained the necessary clearances from the terminal and the Hanjin agent, and sorted out any dues pertaining to the container.

When we received the release of the unit from the local Hanjin agent, we commenced a warehousing entry and gated out the unit from terminal under customs control and escort. The container was cross-docked and gated in terminal, then duly loaded on the first available vessel and shipped to its destination.

The whole operation was executed over 48 hours, and we managed to save our client nearly 30% in extra costs compared to the conventional solutions offered by our competitors.

The container might still have been stuck in the Malta Freeport – along with over 500 other Hanjin TEUs that are there to this day – had it not been for the swift and creative response orchestrated by O&S Shipping. Similar incidents were reported at major transhipment ports across the globe.

It is precisely thanks to this ears-to-the ground approach that we can put ourselves in a position to recommend only the best and most reliable lines around.

More to the point, this is why O&S were not in fact affected by the Hanjin bankruptcy all that much, and why we continue to operate serenely and efficiently, without having to deal with clients knocking on our door with questions that we would be in no position to answer.

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