Dive Brief:

• American Shipper reported on Monday that Xeneta CEO Patrik Berglund said that Hanjin Shipping's bankruptcy has 'turned the market on it's head' and he could not forecast an end to the current turmoil in the container vessel market.
• Xeneta, the Oslo, Norway based ocean freight intelligence firm, noted that shippers continue to be hurt by stranded cargo on Hanjin ships, increased freight rates, and under-capacity from the remaining cargo carriers. Hanjin's bankruptcy immediately caused a industry wide capacity reduction of 8 percent, providing an opportunity for the remaining carriers to shore up their operations with additional freight. 
• The company noted that the container shipping industry has experienced overcapacity, with customer demand trailing ship capacity. Coupled with weak global economic growth, this overcapacity has caused downward pressure on freight rates and created financial strain on the market segment, and the bankruptcy of Hanjin Shipping in particular. Yet, the turmoil is now creating rising rates, capacity constraints, and higher prices. 

Dive Insight:

It has been said that economics drives the supply chain, yet, many in the supply chain management processes do not pay attention to specific economic drivers that could impact their business. That lack of attention, coupled with a save money at any cost fever, makes the Hanjin failure to seem like such a surprise, when in fact the shipping data was clearly firing warning signals in the industry of overcapacity and strained finances.

While the Hanjin problems have caused some to take stock of the financial health of their carriers, those carriers in trouble seem to have taken hold of an immediate lifeline. The American Shipper article indicated that the industry had an overcapacity of 8.1 percent at the start of 2016. With Hanjin Shipping offline, supply is close to meeting demand. Shipper Maersk’s profits were down 90 percent for the second quarter of the year compared to last year, but they have recently launched some new service to take advantage of business opportunities.

It seems as if the Hanjin Shipping problem has created an opportunity for their competitors, allowing them to increase freight rates and market share. Shippers need to realize that when the dust settles rates may indeed be higher, capacity more aligned with demand, and shipping companies actually in better financial condition then they have been. In the long run, that is a win for shippers.