Hanjin Shipping Slumps to Record Low Amid Restructuring Concern

  • Finance minister wants to restructure shipping industry
  • Low rates have eroded cash at South Korean shipping lines

Hanjin Shipping Co., South Korea’s largest container carrier, fell to a record low in Seoul trading after the nation’s finance minister said the industry needs to be restructured after years of weak demand eroded cash at companies.

Shares of Hanjin Shipping dropped as much as 8.2 percent to 2,580 won, the lowest price since their debut in December 2009, and traded at 2,630 won as of 10:31 a.m. in Seoul. The stock has plunged 64 percent in the past 12 months, compared with a 6 percent decline in the benchmark Kospi index.

South Korea’s shipbuilding industry, home to three of the world’s biggest ship manufacturers, and the cargo carriers may also need to be restructured, Finance Minister Yoo Il Ho said Thursday. Liners worldwide have been cutting workers and considering consolidation to stem losses as years of slowing global trade and overcapacity bring down transportation rates.

“Investors are concerned about the government’s plan to restructure in the industry,” said Shin Ji Yoon, an analyst at KTB Securities Co. in Seoul. “What’s more concerning is that there are no details about what those measures will be.”

Shares of shipbuilders also declined in Seoul trading earlier Friday. With oil prices plunging and China’s growth slowing, orders for offshore projects and new vessels are hard to come by for Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co., the world’s three biggest shipbuilders.

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Shares of Hyundai Merchant Marine Co., South Korea’s second-largest container-shipping company, have been halted since April 20 as it’s in the process of a capital reduction.

Hanjin Shipping has been unprofitable in four of the past five years. The company’s cash on hand fell 56 percent from a year earlier to 241 billion won ($211 million) at the end of last year, according to data compiled by Bloomberg.

Hanjin Shipping has 389 billion won in bonds maturing this year, including 238 billion won due in June, according to the company. The company plans to roll over 48 billion won of the 238 billion won.

Hanjin Group, whose units include Hanjin Shipping and Korean Air Lines Co., said in 2013 that it plans to raise 3.5 trillion won by selling shares and other assets as part of its efforts to reduce debt. Under the plan, Hanjin Shipping sold its bulk-shipping and some terminal operations. 

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