Shipping Industry Shakeup: Higher Cargo Rates for Suppliers?

For years, the shipping industry has been facing a crisis of overcapacity. Too much space and too little freight has caused a pattern of plummeting freight rates. While this may benefit US suppliers’ bottom lines in the short run, the issue of overcapacity has caused billion dollar losses across major cargo lines, creating industry monopolies through alliances, mergers, and buyouts. With less competition, shipping rates could skyrocket.

Concerns for the shipping industry’s future came to the forefront back in February of 2016, when South Korean courts declared Hanjin Shipping, the world’s seventh largest container line, bankrupt. The court determined the firm’s liquidation value greatly exceeded their value as an ongoing concern. Many shipping companies began vying for Hanjin’s Asia-US assets. SM Line, a newly formed subsidiary of Samra Midas Group (SMG), came out as the victor.

Though SM Line stands out as a new player in trans-Pacific container trade, shipping line Yang Ming’s debts of more than five times the industry average leave many international shipping industry players wary. Yang Ming has reportedly racked up $1.2 billion dollars in losses since 2009 and $400,000 in the first three quarters of 2016 alone. Yang Ming has a lot of work to do if the company wants to avoid bankruptcy.

Earlier this year, Hanjin’s sale of $78 million in Total Terminals International LLC (TTI) shares was approved despite container companies’ objections. While this gives the Mediterranean Shipping Co. (MSC) full control of the TTI shares, Hyundai Merchant Marine should gain control of some shares as the deal comes to completion.

Berg Mill Supply Co. closely monitors all aspects of the recycling industry, from commodity market prices to domestic and international shipping costs, so recycled material suppliers can make sound financial decisions. If you’d like to stay up-to-date on the latest market news, subscribe to our e-mail newsletter, where we provide vital information from across the recycling industry.