Alphaliner: Korean Carriers are in Serious Crisis

Hanjin has operated at a loss for 11 consecutive quarters

Shipping analyst Alphaliner says the major South Korean carriers, Hanjin Shipping (Hanjin), Hyundai Merchant Marine (Hyundai), and STX Pan Ocean (STX), are facing a crisis that could prevent their efforts at expansion, industry news site ShippingWatch reports.

"The cash-strapped Korean companies have seen their debt load spiral out of control while their equity base has been eroded due to persistent losses in their shipping operations even as they continued to take on newbuildings ordered both before and after the Lehman crisis in late 2008," Alphaliner said.

Fleet valuation and mapping service VesselsValue.com currently values STX's owned fleet of 83 vessels at $2.52 billion, with a further 30 newbuildings worth $1.10 billion in on its books.

STX has been deferring payments since June and is selling off its container fleet, while Hanjin and Hyundai have both seen their stock value drop.

Hanjin lost $285 million in the third quarter of the year, marking its 11th consecutive quarter in the red, and it now carriers $8 billion in debt and has a liquidity of only $872 million.

Yet Hanjin is still on a growth path, with 10 newbuildings in its pipeline and other possible expansion plans.

"Despite its current precarious position, Hanjin has been linked to additional newbuilding orders," Alphaliner said.

"Broker reports suggest that a Turkish owner is finalizing an order for 4 x 9,200 teu at Hanjin H.I. against a long term charter to Hanjin Shipping for 8 years with delivery at the end of 2015 and the beginning of 2016."

Alphaliner said it does not anticipate mergers or acquisitions among Korean carriers in the near future.

"Apart from the fierce rivalries amongst the Korean carriers, neither Hanjin Shipping nor Hyundai M.M. are in a position to acquire other carriers at this point, as both groups face their own liquidity issues while the smaller Korean carriers (KMTC, Heung-A, Sinokor, Nam Sung and CK Line) are focused only on short-sea intra-Asia trades and are not attractive acquisition targets," it said.

STX has been working to emerge from court receivership, and it won a 200 billion won ($179 million) loan from Korea Development Bank in August.