News / Hanjin and MOL the latest to eye asset sales as box lines become more prudent

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It is probably too early in the year to call, but there is certainly good evidence to suggest that 2014 might be the year that sees ocean carriers return to a more judicious management of their assets, and thus sustainable profitability to justify their billion dollar investments.

With the exception of economy-of-scale-beating Maersk Line and its P3 partners, almost every container line had a miserable 2013. Indeed, carrier shareholders have seen a return on their investment only once in the past five years: in 2010, when global demand rebounded in a restocking surge in the immediate aftermath of the financial crisis.

Clearly a number of household name carriers feel backed into a corner with little room to manoeuvre.

One of the last remaining options has been to sell non-vessel assets and other forms of family silver to prop up the balance sheet – China Shipping, Cosco and Evergreen Line all sold assets in 2013.

South Korean carrier Hanjin is latest carrier to join this club, with reports out of Korea that it is in negotiations to sell all or part of its terminal operation in Algeciras, Spain.

Korea’s KDB Infra Asset Management, the country’s largest infrastructure fund, is undertaking due diligence on the terminal, and Hanjin has reportedly hired the Korean office of PwC to advise on the sale of other portions of its terminal business to financial investors.

At the same time, having previously warned that it would not hesitate to cull unprofitable routes in its quest to improve results, it has announced a May withdrawal from the joint CKYH alliance-Evergreen NTA transatlantic service.

Hanjin deploys one panamax ship on the NTA, with Cosco, Yang Ming and Evergreen providing three others. It said the decision to exit came “in light of continuing dismal market conditions which do not support operational costs”.

Hanjin is also ending its slot charter agreement on the Asia-Black Sea Express (ABX) service, leaving partners CSCL, K Line, Yang Ming, PIL and Wan Hai to cover the shortfall.

Meanwhile, the G6 Alliance has announced the cancellation of two more sailings from Asia to Europe in the weeks following the Chinese new year – blanked voyages in addition to those the G6 members announced in October.

Also, G6 member OOCL, which prior to last year was protected from the malaise on Asia-Europe by only having a 17% exposure to the troubled tradelane, is individually skipping a raft of sailings after the Chinese holiday under the guise of a “vessel maintenance scheme”, leaving its partners to take up the slack and thus further squeeze capacity to reinforce December and Janauary GRIs.

Meanwhile, G6 member MOL is also seeking to shore up its balance sheet with the possible sale of a 49% stake in its North America terminal operating arm, TraPac, to Canadian infrastructure investor Brookfield Asset Management.

Brookfield already has a burgeoning port portfolio – it owns and operates Teesport-based PD Ports in the UK and has a network of bulk and general cargo facilities in mainland Europe. TraPac runs facilities in in the US ports of Los Angeles, Oakland and Jacksonville.