TOO many ships, too little trade. On August 31st Hanjin Shipping, South Korea’s biggest container carrier and the seventh-largest in the world, filed for receivership, after five years of losses and another deficit in the first half of 2016. Hanjin was holed by shipping’s prolonged global slump, the product of vast overcapacity and slow trade growth. Its creditors, led by state-owned Korea Development Bank (KDB), have had enough.

Shipping’s malaise is both broad and deep. An earnings index compiled by Clarksons, a research firm, covering the main types of vessel—bulk carriers, container ships, tankers and gas transporters—reached a 25-year low in mid-August. The average for the first half of 2016 was 30% down, year on year, and 80% below the peak of December 2007. Stephen Gordon of Clarksons adds that new orders at shipyards are the lowest in 30 years.

As KDB’s loss of patience shows, the industry’s troubles hurt lenders as well as shippers. According to Petrofin, another research group, Asian banks have expanded their shipping loans in recent years. With China’s economy slowing and world trade in the doldrums, they may...Continue reading