Lessons from bankruptcy of Hanjin Shipping Company in chartering

Abstract

This paper aims to analyze the charter contract management of major container shipping companies in response to fluctuations in shipping market conditions in terms of contract duration using data of containerships between 2010 and 2016. Duration analysis was conducted to examine the relationship between charter duration and shipping market conditions. Moreover, this paper explores the causes of Hanjin Shipping Company’s bankruptcy, drawing managerial implications. Test results from Cox PH (Proportional Hazard) model show that most container shipping companies in Europe having net earnings purchased large vessels instead of chartering vessels, while some ocean carriers featuring poor financial performance, in particular the Hanjin Shipping Company, chartered bigger ships with higher charter rates and longer duration. Contract charter rates and duration of Hanjin Shipping Company featured greater risk compared to competitors.