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Hanjin Shipping to Wind Down Europe Business as Demand Falls (1)

(Bloomberg) -- Hanjin Shipping Co., South Korea’s largest container line that has put its Asia-U.S. business on sale after filing for bankruptcy protection late August, will wind down its European operations as demand for its services on the Asia-Europe trade lane slumped.

Hanjin will close all its 10 branches in Europe, including its regional headquarters in Germany, the container line’s spokeswoman said Monday. The Seoul-based company expects to start the process as early as this week after obtaining approval from the Seoul Central District Court, she said.

The decision to shut down its Europe business is part of the breakup process of Hanjin kicked off by the Seoul court, which earlier said it would consider selling the company entirely. Hanjin is also seeking separate bids for its Asia-U.S. network as well as the investment in a terminal in Long Beach, California. The closure may benefit bigger rivals, such as A.P. Moeller-Maersk A/S and CMA CGM SA, as competition eases on one of the world’s biggest trade lane.

“The biggest shipping lines will be the biggest gainers because they have the ability to move in much faster,” said Rahul Kapoor, a director at Drewry Financial Research Services Ltd. in Singapore. “The European lines like Maersk Line have already moved in to increase market share and they will continue to do so.”

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Index’s Worst

Shares of Hanjin fell as much as 14 percent to 982 won, the lowest intraday price since Sept. 27, and traded at 1,000 won as of 11:21 a.m. in Seoul. The stock was the worst performer on the benchmark Kospi index for the day.

Hanjin had about 4.3 percent the market share on the Asia-Europe trade last year, according to the company. The company hauled 1.27 million 20-foot containers last year, accounting for 27 percent of the total 4.62 million. The company’s representative declined to say how many employees Hanjin had at its Europe business, and how many of them would lose their jobs.

The Seoul Central District Court is receiving initial bids for the marketing network of Hanjin’s Asia-U.S. operations by the end of this week and expects to sign an agreement by mid-November in efforts to raise funds for the indebted company. The South Korean company is also in talks to sell its 54 percent stake in the Long Beach port container terminal .

The South Korean shipping company filed for court receivership as losses piled up after a global slowdown in trade and excess capacity depressed freight rates. Creditors decided to halt all financial support to Hanjin in August, causing its box carriers to be stranded at sea and disrupting the global supply chain ahead of the year-end holiday season. On the court’s advice, Hanjin has been returning vessels to owners as soon as they are unloaded.

Of the 97 container vessels it operated, unloading of cargo from 79 ships have been completed as of Oct. 20, according to Hanjin’s website.

(Adds analyst’s comments in fourth paragraph.)

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Sam Nagarajan

©2016 Bloomberg L.P.