After Hanjin Shipping’s collapse in late August 2016, many carriers and alliances have taken financial measures to prevent bankruptcy, but Orient Overseas Container Line (OOCL) says that Ocean Alliance will not have to take financial measures, as its partners are strong.
In the Ocean Alliance, customer look at the four players and are generally aware of their financial sistainability. We don’t have an emergency fund, largely because we don’t think we need to have one”, said Alan Tung, chief financial officer of OOCL, whic is one of the members of the soon-to-launch Ocean Alliance along with Cosco Shipping Lines, CMA CGM and Evergreen Line.
Strength is in the eye of the beholder
However, despite the declaration that the Ocean Alliance doesn’t need an emergency fund as a financial backup, all but one Ocean Alliance carrier posted a profit loss in 2016, and the single carrier that hasn’t posted a loss hasn’t posted their financial results yet.
Since the collapse of Hanjin, financial measures are smiled upon, specially by cargo owners, who appreciate transparency from carriers, since no one wants to see their conatiners stranded in the middle of the ocean or stuck in ports as authorities sort out what is owed to whom. Let’s remember that Hanjin’s bankruptucy managed to strand some 540,000 containers, equating to roughly US$14 billion in goods.
That is why contianer lines and alliances are developing financial safeguards, such as emergency funds, to help recover stranded cargo if one of the members collapses.
Ocean Alliance has made clear they will not take part in the financial safeguard trend, as well as members of 2M Alliance –Maersk Line, Mediterranean Shipping Co., and Hyindai Merchant Marine- who have remained silent on the matter.
Will Ocean Alliance survive without a safety net? In the current volatile environment the industry is in, maybe it’s not such a wise idea to discard the option. After all, the saying goes “better safe than sorry”.
Supply Chain 2017
Primer Seminario Internacional en Gestión Estratégica de la Cadena de Suministro, Abastecimiento y Logística