Container lines appear to be setting up for strong third-quarter cash flows thanks to the ongoing fallout from Hanjin Shipping’s bankruptcy, according to a report from credit rating agency Moody’s Investors Service.
Senior analyst Maria Maslovsky said in the report: "Hanjin's woes are occurring at a time traditionally considered the busiest time of the year for the industry.”
While Hanjin’s bankruptcy will have little impact on the larger oversupply issue hitting boxships, the temporary removal of Hanjin's ships from operation pushed up spot freight rates as other operators step in to plug the capacity gap, Maslovsky says.
Even a few weeks of operations at improved freight rates during liners' busiest quarter when retailers prepare for the Christmas season will be a plus for the third quarter results of container liners.
For example, rates rose by 42% per forty-foot equivalent unit (FFE) on the Shanghai-Los Angeles route, 19% on the Shanghai-New York route and by 39% on the Shanghai-Rotterdam route according to Drewry following the announcement of Hanjin's receivership filing. The increases follow consistent declines in freight rates in 2016, as measured by the China Containerised Freight Index (CCFI).
She says Maersk Line, Hapag-Lloyd and CMA CGM will profit the most in the near term.
However, Moody's says Hanjin’s woes are likely to be credit negative for vessel owners that charter out their ships to the company at least in the short term. Moody’s says Navios Maritime Partners has a little over 10% of revenues coming from Hanjin, but the agency did not change its rating at this time.
