Hanjin bankruptcy causes global shipping chaos, retail fears

Hanjin Shipping, which represents approximately 7.8% of the transpacific trade volume for the US market, filed for bankruptcy yesterday. As Hanjin Shipping is the world’s seventh largest sea carrier, its fallout has caused turmoil not only in Korean cargo, but also for global trade. “The Korea Development Bank, the largest shareholder, is mulling over providing assistance in the form of loans”, said a high-ranking government official. Hanjin’s collapse has come during the shipping industry’s busiest season ahead of the year-end holidays.

The failure of South Korean worldwide containerline Hanjin is having an effect in Australia, as it is elsewhere in the world.

Hanjin had been in economic trouble for years due to competition from other shippers, and less demand from global traders.

Shipments bound for USA retailers are either sitting in Asia, onboard Hanjin ships now stuck out at sea, or in United States docks.

“Some of them are being impounded, others being barred from docking or discharging”, he said.

Through the first half of the year, suppliers had been enjoying a almost 25 percent reduction in ocean freight costs – approximately $17 million – due to a glut of container ships, a fall-off in goods coming from China, and a major pullback in Chinese demand consumer goods and for commodities like iron ore, oil and other bulk items.

Given the gravity of the case, the bankruptcy court will likely decide the fate of Hanjin Shipping within the next week on whether to liquidate the company or freeze assets for give it time to normalize.

Taylor said importers trying to fetch their containers already on the docks were told they would have to pay at least $400 extra to guarantee that the terminals get paid.

As Hanjin has stepped closer to bankruptcy, other shippers and ports began turning its ships away, leaving some vessels stranded and many customers stuck without their merchandise.

Rate assessment has increased to $1,674 per 40ft container on the Shanghai-Los Angeles route, and by 19% to $2,151 on the Shanghai-New York route and by 39% to $1,826 on the Shanghai-Rotterdam route. According to spokesmen, no Evergreen Line cargo will be loaded on the vessels operated by Hanjin and Hanjin cargo will not be allowed to load on the vessels operated by Evergreen Line.

A weakened economy since the 2008 recession hurt global demand and trade at the same time that steamship lines continued to build more and larger vessels huge ships that were conceived as cost-effective when freight costs were higher several years ago. Hanjin Shipping has a fleet of 98 ships directly run by itself, including its own 37 vessels. Hanjin ships have made up 25 percent of the shipping business at the Port of Seattle in the past. Hanjin said its relations with the alliance would end if the company ended up in bankruptcy.

Analysts say shipping rates are recovering somewhat, with the approach of the pre-Christmas rush.

However, prices will have to rise somewhat in order to be sustainable, he said perhaps to about $1,000 per container.