Company Origins and Early Growth (1945-1977)

• Hanjin Group founded 1945 by Cho Chung-hun with few trucks
• Initial contracts from US Army trucking military supplies
• Transportation focus from beginning, expanded with American contracts post-Korean War
• Received generous state bank loans under President Park Chung-hee's economic growth plan
• Vietnam War (1960s) provided logistics opportunities
• Cho witnessed containerization future in Vietnam 1966 through Sealand service
• Hanjin Shipping founded 1977 alongside Korean Air (acquired 1969)
• Positioned as business group's crown jewel

Container Shipping Industry Context

• Maritime shipping carries 80% of world trade by volume
• Three categories: container, bulk, tanker
• Container shipping most competitive due to valuable goods
• South Korea had only 3 container vessels in 1972
• 90% of Korean container trade carried by foreign liners
• 1976: Korean government began subsidizing container carriers (<$1M USD annually)
• Korea Maritime and Port Administration established for industry development

Early Expansion and First Crisis (1977-1986)

• 1978: First Middle East service launched
• 1979: Partnership with Sealand for Pacific service
• 1979 oil crisis hit shipping industry hard
• Korean government consolidated shipping lines from 70 to 20
• Hanjin didn't receive public bailout but Korean Air provided temporary support 1986
• Company recovered and turned profitable thereafter

Supply and Demand Dynamics in Shipping

• Demand tied to macroeconomic factors, seasonality, random shocks
• Supply adjustment options limited and risky:
  • Acquire competitors (integration challenges)
  • Commission new ships (2-3 year build time, timing critical)
  • Charter ships (weeks to 20 years contracts)
• Wrong capacity decisions can be disastrous

Korean Export Boom Era (1987-1997)

• 1987-1997: South Korean international trade tripled
• Korean shippers positioned as low-cost alternative to Western lines
• Government managed industry like "bonsai tree" - controlled routes
• Korea Marine Transport and Hanjin got lucrative Korea-US West Coast lanes
• Hyundai restricted to Japan/Taiwan routes
• 1986-1990: Hanjin capacity doubled from 24,856 TEU to 53,140 TEU
• 1988: Acquired Korea Shipping Corporation, became 13th largest globally
• 1997: Acquired DSR-Senator (Germany's second largest), became 4th largest worldwide
• Only Sealand, Maersk, Evergreen were larger

Asian Financial Crisis Impact (1997-2002)

• Korean export boom ended with Asian financial crisis
• Korea required IMF bailout with neoliberal policy strings
• Key changes affecting shipping:
  • Forced liberalization, market opened to foreign players
  • Debt-to-equity ratios mandated below 200%
  • Hanjin forced to sell 29 ships, charter them back
  • Sale-leaseback improved debt ratios but increased operating costs
• Combination of higher costs + foreign competition led to long-term decline

Leadership Transition and Family Split (2002)

• Founder Cho Chung-hun died 2002 age 82
• Media praised as great industrialist despite tax evasion investigations from 1970s
• Five children split empire:
  • Eldest Cho Yang-ho: Hanjin Group chairman, Korean Air
  • Son Cho Su-ho: Hanjin Shipping
  • Others: shipbuilding, securities, insurance divisions
• Shipping could no longer rely on sibling company support
• Note: Cho Yang-ho's daughter involved in 2014 "nut rage" incident

Global Financial Crisis and Fatal Expansion (2007-2008)

• 2007-2008: New recovery opportunity seen
• Decided to invest in mega ships following Maersk's lead
• November 2008: Committed to nearly 0.25M TEU worth of ships (40% fleet increase)
• Ordered at exact wrong time - 2 months after Lehman Brothers bankruptcy
• Global financial crisis sparked shipping overcapacity crisis
• US-Asia trade declined 10%
• Major losses: Maersk $2B, CMA-CGM $889M

Debt Crisis and Asset Stripping (2012-2016)

• 2012: 195 billion KRW ($165M USD) debt
• 2014: 440 billion KRW ($375M USD) debt
• Stripped profitable assets to pay debt:
  • Sold domestic/overseas terminals
  • Sold LNG tanker divisions
  • Sold bulk shipping division
• Only volatile container shipping remained
• Korea Development Bank (KDB) largest creditor

Final Collapse (2016)

• KDB demanded 700 billion KRW ($615M USD)
• Hanjin could only provide 500 billion KRW ($440M USD)
• Government bailout denied despite other countries' support:
  • Denmark: $6B to Maersk (2011)
  • Germany: $1.8B to Hapag-Lloyd
  • France: $660M to CMA-CGM
  • China: $9.5B to COSCO and China Shipping
• KDB chose Hyundai Merchant Marine over Hanjin
• Hyundai met restructuring demands, Hanjin could not

Collapse Impact and Aftermath

• August 2016 insolvency roiled markets, caused global shipping chaos
• 159 companies unable to retrieve cargo
• $4B worth of goods stranded at sea
• Hanjin shipped 40% of Samsung electronics, 20% of LG products
• Walmart had 3,000 containers stranded
• Tens of thousands of shipyard jobs lost (Korea and Philippines)
• Subic Bay Shipyard affected
• Final liquidation: 1.3 trillion KRW ($1B USD) in charter fees owed
• Last ship sold March 2017 for demolition

Government Policy Comparisons

• Singapore: Sold Neptune Orient Lines to CMA-CGM for $2.4B USD before crisis
• Taiwan: Bailed out Evergreen and Yang Ming Q4 2016
• Korean government stood firm on no-bailout decision