Sunday, September 11, 2016

The Hanjin Non-Event - A More Interesting Take

OK, the Hanjin Greece got unloaded first, not the Boston.  The Boston did get up to 10 knots for the time it takes to get to the port, and then 12 hours later do it again.  I took it to mean it was the one unloaded first. I wonder where it went on that trip?  Is the Boston unique since it has a lien on it?  is it not odd we have no press reporting details, the only solid news is speculation on blogs, which is better than the speculation in what news is presented? Anyway, point is the same, the problem is over, Hanjin ships are getting unloaded.

But this is an interesting tidbit:
Hanjin is the majority owner of Total Terminals International, which operates Long Beach’s largest shipping terminal.
That is some prime real estate.  In a bankruptcy, that goes to pay creditors...  or is it owned but carries a mortgage?  A real problem with globalism is the complexity of the titles.  This makes the Hanjin problem political as well as economic.  And far more interesting than some T shirts might be a week later than anticipated.  (And all indications are, retailers have ordered too much for the upcoming season.  We'll know in January.)

A friend with a long term relationship with Hyundai tells me Hyundai is sending in extra vessels into the demand vacuum the Hanjin demise has created.  Just as I said.  And of course, at these new higher rates, mothballed ships or ships gaining less revenue elsewhere are directed to where the revenue is best.  The solution to high prices are high prices.

Naturally, the regulators get it exactly wrong, and enforce policies that harm the industry:
The Federal Maritime Commission warned the industry not to take advantage of the situation by price gouging.
Sheesh.  that which is most needed will be sanctioned.  Nice work, fellas.  Gouging will last only for as long as it takes for those vessels in search of a better buck make it to the shipping lanes.  Then it is back to over-capacity super low rates.  Hyundai is urging customers to sign long term contracts given the Hanjin issues.  Of course.  But why lock in lower rates relative to today's rates when the rates will drop way down again.  No sale.

So to my mind the question is why are they bankrupting Hanjin over a mere $225 million loss first quarter?  A couple of years ago, big deal..  now they liquidate in a disorderly fashion?

Ocean shipping too is an example of the misallocation and malinvestment that comes with ex nihilo credit at interest.  The regime is clearly over, and as I have said, the damage was done in the boom, the bust is simply where they decide who pays.  The ships are not worth much, but marked to market they would be a huge asset competing against ships that are on the books at false economy valuations.  That is a huge opportunity, but tricky.

The more direct play is Hanjins' long beach port operation.  But wait, what about the Mexican port projects being developed to compete with LA/Long Beach?    Who knows...

Taiwan is letting the chips fall, and now Korea.  It is Econ 101, but bad politics, to be the first to let the bust clean out the malinvestment and misallocation.  China has said they will not bail out, but that is yet to be seen.  In any case, expect Taiwan and Korea to recover first economically if they let the chips fall, which they seem to be doing.  That is the news.

Zero Hedge points out that the Hanjin blip will be just another excuse by USA dinosaurs ( so Tyler, why help them by overblowing the event?)

Update:  the Hanjin Boston is on the move as of 8am Friday...   looks like unlading is LA vs LB... And now on its way up to Oakland, 4pm pacific time.

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