The South Korean ocean carrier’s results for the quarter were hindered by continuously falling freight rates and the imbalance of supply and demand.
Ocean carrier Hanjin posted a net loss of 261.1 billion South Korean won (U.S. $221 million) for the first quarter of 2016, compared with a net profit of KRW 22.9 billion for the first quarter of 2015.
In addition, the South Korean carrier experienced an operating loss of KRW 115.7 billion for the quarter, compared to an operating profit of KRW 139.8 for the first quarter of 2015, primarily due to the sluggish container segment, which saw a decline of total sales due to record breaking low freight rate levels and the increased gap between the supply and demand within the market. The bulk business also posted an operating loss, due to low iron ore and coal demand during the quarter.
Meanwhile, total sales for the quarter tumbled 25.1 percent year-over-year to KRW 1.6 trillion.
Just last week, Hanjin was granted approval for a voluntary reconstruction from its creditors, temporarily delaying all interest and principal payments on its outstanding debt for three months, according to the Wells Fargo Global Shipping Weekly.
As part of the deal, Hanjin must join one of the major liner alliances. The carrier will also look to renegotiate its outstanding charter contracts at lower day rates.
Seaspan’s Hanjin exposure accounts for 6 percent of its contracted revenues, while the independent containership owner and manager also has indirect exposure via its 10.5 percent stake in GCI JV, in which Hanjin charter contracts account for 15 percent of contracted revenues.
However, Seaspan has refused to offer charter rate cuts to Hanjin for its chartered-out vessels, according to the shipping publication Lloyd’s List.
Hanjin has plans to join the proposed “THE Alliance,” which is scheduled to commence operations in April 2017 with Hapag-Lloyd of Germany; Japan’s Mitsui O.S.K. Line (MOL), Nippon Yusen Kaisha (NYK) and Kawasaki Kisen Kaisha (“K” Line); and Taiwan-based Yang Ming.
As far as Q2 of 2016, Hanjin explained container freight rates are slowly recovering as the annual peak season begins in the second quarter. In regards to the bulk market, the ongoing demolition of vessels is likely to mitigate over supply within the market, which will lead to an improvement of current conditions, the carrier said.
Hanjin reports weak Q1 results
