This week we learned Hanjin Shipping Co. has filed for receivership, capping off months of decline for Korea’s largest shipping company.
What does this mean and what’s the longshore investing angle?
- We can finally settle the “debate” about industry employers being fat-cats flush with cash. This is not a healthy industry. Healthy industries are rising tides which, pardon the pun, don’t let ships sink. Despite the constant negative newsflow about the finances of shipping companies worldwide, this the-employers-are-so-rich claim has been a constant refrain. Let’s put that to rest.
- Consolidation will continue. All signs point to Hyundai picking at the healthy Hanjin pieces while other weak hands are likely to give way to takeover offers, allowing the few strong operators (Maersk, MSC and CMA-CGM) to be left with more power as an effective oligopoly. It will be much easier for a small, concentrated committee of employers to remain coordinated in the fight against labor
- While it’s not easy to see right now, a Hanjin bankruptcy is a reminder to each remaining surviving shipping line and terminal operator that liabilities are very real, and they carry consequence. What else is a liability to these employers? A union pension. It’s even more important now for holders of those pension benefits to further ratchet expectations lower as it would be unwise to believe one industry can forever survive what is the slow eradication of pension promises nationwide.
Summary: Hanjin’s troubles are a reality check for all parties involved. Remaining employers will eventually have stronger bargaining power, with cross hairs set on financial liabilities like pension plans. These events are transpiring amidst a major economic expansion – the BLS reported the 78th straight month of job growth today – but it’s a scary thought to imagine industry health if we were slowing or already in an economic recession.
It’s now up to members to react accordingly, which means making sure their individual financials are in order in case overall industry deterioration does continue. The time to plan for unknowns is when things are going relatively well, not when they’ve already turned bad. (If only there was a resource to learn about how the longshore 401(k) plan is designed to hinder those efforts. Or maybe even a calculator)