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Hanjin Shipping, South Korea’s biggest container shipping line, filed for court receivership on Wednesday, succumbing to the woes swamping the oversupplied global shipping industry.

The move was decided at a board meeting a day after lenders withdrew financial support for the debt-laden container shipper.

The company has been hit hard by dire industry conditions including persistent overcapacity and sluggish demand, and has been trying to reschedule mounting debt with creditors since May after suffering a net loss each year from 2011 to 2014. 

Hanjin’s predicament underlines the severity of the industry’s deepest and longest downturn in six decades, which has already sunk many smaller firms and sparked consolidation among global shipping companies to cope with lower freight rates. 

France’s CMA CGM took over Singapore’s Neptune Orient Lines for $2.4bn earlier this year while Germany’s Hapag-Lloyd agreed in June to merge with United Arab Shipping Company to form more globally competitiveness businesses.

China’s biggest shipping groups have also combined in a multibillion-dollar government-engineered deal. However, the listed arm of China’s Cosco Shipping — Asia’s biggest shipping company — racked up a record $1.1bn first-half loss

Hanjin’s demise “would mean one less player in the fragmented market but the industry landscape would not change much”, said Shin Ji-yoon, analyst at KTB Investment & Securities. “The fundamental problem of a supply glut is still there with most of Hanjin’s vessels unlikely to be scrapped.” 

In Seoul, financial regulators want cross-town rival Hyundai Merchant Marine to acquire some of Hanjin’s healthier assets such as its vessels, overseas networks and staff — a prospect that lifted Hyundai Merchant’s shares by more than 25 per cent on Wednesday. Hanjin stock remained suspended.

If Hanjin’s application for receivership is accepted, its assets will be frozen while the court deliberates how to revive the company under new management. Its debt totalled Won6.1tn ($5.5bn) as of end-June, while it had just Won180.4bn in cash and cash equivalents.

Hanjin is the world’s seventh-largest shipping line by capacity with a 2.9 per cent market share, according to maritime consultant Alphaliner. It operates about 60 regular routes with 132 container and bulk ships and about half its fleet chartered. 

However, analysts warned it would not be easy for the company to turn around even under court protection. Several ports in China and the US have already denied entry to Hanjin’s ships on concerns it would not be able to pay the required fees, while one of its vessels was seized on Tuesday in Singapore by a creditor.

Hyundai Merchant said it would talk with state-run Korea Development Bank, its largest shareholder and Hanjin’s main creditor, about acquiring Hanjin assets.

“If [Hyundai Merchant Marine] acquires part of Hanjin, the increased scale could help the company improve its competitiveness by cutting costs and enhancing pricing power somewhat,” said Kim Sang-hoon, analyst at Shinhan Investment. 

But analysts cautioned that the next several years will remain stormy as a revival in demand remains elusive with the global economy stagnant, while industry leaders such as Maersk deploy ever-larger vessels to cut the cost of carrying each container. 

“Second-tier shipping lines would have to continue their uphill battle against industry giants, which have cut costs with economies of scale,” said Mr Shin. “Things are unlikely to get better for the next couple of years, at least, with few signs of a global economic recovery.”

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