The cost of transporting containers from ports in Asia to Northern Europe and the United States jumped this week after the collapse of South Korean Hanjin Shipping Co Ltd.
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“It’s going to be exceptionally hard to turn it around as cargo owners are going to be very wary of booking with Hanjin, for fear that their boxes may be stuck in port if Hanjin vessels get arrested by the creditors”, said Alan Murphy, CEO of consultants SeaIntel Maritime Analysis. The suspension means Hanjin can no longer load its cargo onto allied ships.
The failure of the world’s seventh-largest container shipping company comes during the industry’s busiest season ahead of the year-end holidays, and has also sent manufacturers scrambling as they worry about the fate of their cargo and surges in freight rates.
The failure of the world’s seventh biggest containerline, one that controls almost a tenth of transpacific trade, has the US National Retail Federation (NRF), the world’s largest retail trade body urging Washington to liaise with Seoul to minimise disruption, particularly in ports and reports that US trucking might suffer due to cancelled haulage contracts.
It said the bankruptcy is rippling through the global supply chain and could cause significant harm to consumers and the US economy.
US National Retail Federation vice president for supply chain and customs Jonathan Gold commented: “Retailers’ main concern is that there is millions of dollars worth of merchandise that needs to be on store shelves that could be impacted by this”.
Since last last month, Hanjin’s vessels, sailors and cargo have been stuck in a maritime limbo as ports, wary they will not be paid for their services, refuse to let them dock, as well as refusing to handle or free cargo already landed.
“Ports will not have these vessels because they are anxious port and other fees won’t be paid”, said Rahul Kapoor, a Singapore-based director at Drewry Maritime Services Pvt.
Nexen Tire Corp. also exported 24.9 percent of its total goods to North America past year using Hanjin Shipping’s freight service.
Hanjin filed for court receivership on Wednesday after creditor banks made a decision to end financial support. Among other businesses, it owns South Korea’s biggest airline, Korean Air Lines. Since vessels already are operating at high capacity, shippers may wind up paying a premium to squeeze their cargo containers on board, said Jock O’Connell, global trade adviser to Los Angeles-based Beacon Economics.
The price of shipping a 40ft container from China to the USA jumped by up to 50% in a single day, said Nerijus Poskus, director of pricing and procurement for Flexport, a licensed freight forwarder and customs broker based in San Francisco, who predicted the higher prices would last a month or two. Shipping rates have soared as a result, increasing to $2,300 per container by Thursday, up from $1,700 four days earlier.
As to whether Hanjin’s situation alone could alter the fundamentals of the current overcapacity situation long-term, FTR senior partner Larry Gross said that is not likely as Hanjin’s vessels will still be there and ultimately find a new home.
Global demand and trade have suffered since the 2008 recession, while steamship lines continued to build more and larger vessels – vast ships that were conceived as cost-effective when freight costs were higher several years ago.
Because Hanjin is part of an alliance of six shipping companies, the problems are even more widespread.
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Hanjin Shipping’s local-currency notes due June 2017 tumbled to 13.4 percent of face value as of 3:29 p.m.in Seoul, according to Korea Exchange prices, after fetching 90 percent in March. But he said prices would have to rise in order to be sustainable.
