Shares of Hanjin Shipping Co., South Korea’s biggest container line, slumped a limit 30 percent on their first day of trading since filing for court receivership last week after lenders deemed the company’s restructuring plans as insufficient.
The stock fell 370 won to 870 won, giving it a market value of 213 billion won ($192 million) in Seoul trading. Hanjin Shipping shares had tumbled 24 percent on Aug. 30, when trading was halted. The Seoul Central District Court accepted the company’s filing for receivership on Sept. 1 and has asked for a revival plan to be submitted by Nov. 25.
Vessels of Hanjin -- the world’s seventh-largest container carrier with a 2.9 percent market share -- are getting stranded at sea and ports after the box carrier sought protection, roiling the supply chain of televisions and other consumer goods ahead of the holiday season. Hanjin’s woes show the container-shipping industry hasn’t recovered from the troubles it has been facing since the 2008 global financial crisis hurt trade.
Hanjin on Sept. 2 filed for bankruptcy protection under Chapter 15 at the Bankruptcy Court in Newark, N.J..
As of Sunday morning, 68 Hanjin vessels were stranded out at sea or at port in 23 countries, including one ship arrested in Singapore, according to the company. The Korean liner owns 59 of the 132 container and bulk ships in its fleet.
For U.S. retailers, Hanjin’s filing brings fresh concerns about delivery of goods ahead of the holiday shopping season. The chains are working to minimize delivery disruptions from cargo waiting to depart Asia, traveling on the ocean or arriving at ports, Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation trade group, said last week.
About 70 percent of South Korea’s overseas shipments is through sea, of which Hanjin Shipping accounts for about 6 percent, according to Cheong Seung Il, a trade ministry official. While the government doesn’t expect a large impact on exports, there could still be some issues with machinery and textiles shipped via Hanjin, he said.
Hanjin Shipping is part of Hanjin Group, which also owns Korean Air Lines Co., the world’s third-largest cargo airline. Korean Air loaned funds to Hanjin Shipping and bought shares in the container line in 2014 to become the biggest shareholder with 33 percent. Korean Air said last week it estimated as much as 383 billion won losses on its Hanjin investments. Cho Yang Ho’s Hanjin Group also counts airport services, logistics and mineral water among its businesses.
Buying Assets
Meanwhile, Hyundai Merchant Marine Co., the second-largest container shipping company in South Korea, said it plans to add four vessels to the U.S. starting later this week, and nine on Europe routes later this month.
Hanjin’s $1.8 billion in vessels also offer a takeover opportunity.
“Hyundai Merchant Marine seems to be the most likely buyer,” said William Bennett, analyst at VesselsValue.com. Such a deal may also boost the A.P. Moeller-Maersk A/S-led 2M vessel-sharing alliance that Hyundai is due to join in April, he said. Hyundai Merchant has said it will consider buying some of Hanjin’s assets, including vessels.
Here’s a brief timeline of key developments as Hanjin filed for court receivership.
Sept. 1: Seoul court accepts receivership filing, revival plan needed by Nov. 25
: Hanjin ships get refused at ports, disrupting supply chain.
: Hanjin’s biggest domestic rival Hyundai Merchant Marine Co. adds more U.S. routes.
: Hanjin bonds tumble after company seeks court protection.
Aug. 31: Hanjin board decides to file for court protection.
: Hyundai Merchant shares jump 26 percent after Hanjin’s decision.
Aug. 30: Hanjin’s lenders reject restructuring plan.
: Hanjin stock halted for trading after 24 percent plunge.
Aug. 29: Hanjin says foreign banks to help extend ship loan maturities.
Aug. 25: Restructuring plan submitted, including raising 400 billion won of new funds.
Aug. 16: Announces second-quarter operating loss.
July 15: Talks continue with shipowners to adjust charter rates.
June 17: Seaspan opposes Hanjin’s request for cut in charter rates.
June 14: Shares rise on optimism of merger with Hyundai Merchant.
By: Kyunghee Park (Bloomberg News).
Photo: Seatrade Maritime News.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
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