Fears persist of potential Yang Ming failure

5/17/2017

Some freight forwarders that fear a repeat of the chaos surrounding the collapse of Hanjin Shipping last year are said to be wary of using Taiwanese container carrier Yang Ming, despite its recent restructuring round and the resumption of trading of its shares.

Freight forwarding sources in Asia told Lloyd’s Loading List that some smaller forwarders in particular, whose businesses could potentially be threatened in the event that containers are caught up in any possible future bankruptcy event, are preferring to use other carriers, where possible, because of concerns about the carrier’s debt levels and recent financial performance.

As reported in Lloyd’s Loading List, shares in Yang Ming resumed trading on 4 May on the Taiwan Stock Exchange at more than twice their value before their suspension on 20 April, thanks to progress in its financial restructuring. Yang Ming said then it expected to complete the second stage of its recapitalisation by June 2017.

Some analysts maintain there is little or no chance that Yang Ming will go the same way as Hanjin, chiefly because they expect that the Taiwanese government would intervene and bail out Yang Ming, if necessary. Analysts including Drewry and SeaIntel have also pointed to the decision by Yang Ming and its fellow partners in the new container shipping consortium The Alliance (Hapag-Lloyd, K Line, MOL, NYK and Yang Ming) to create an independent trust fund to safeguard cargo in the event of any member lines going the same way as Hanjin.

But Patrik Berglund, CEO of the benchmarking and market intelligence platform Xeneta, questioned whether the Taiwanese container line was financially stable yet, despite the line’s assertions that it will be profitable in 2017 – and how easily consortium members of The Alliance would cope with any future bankruptcy among one of its members.

He commented: “Although The Alliance has said it will work to move any distressed boxes in case of a member’s bankruptcy, YML is the world’s ninth-largest box carrier, and moving 585,000 marooned TEUs could completely overwhelm the already badly confused East-West shipping schedules.”

He said the current strong market meant that low-priced boxes “are being rolled-over repeatedly as higher-priced boxes are shipped in their place”, questioning: “Which of The Alliance carriers will drop their own paid cargo and take a big slug of YML’s boxes without the payment confirmation of a bankruptcy court?”  

Nevertheless, Berglund noted that many lessons had been learned from the summer of 2016, and he was hopeful that a repeat of last year’s Hanjin disruptions would not happen. “This year has seemingly recovered for the carriers, with much stronger prices being clocked for the main trade routes,” he noted.