Ships remained stranded off the twin Los Angeles-Long Beach port complex and, across the nation, unclaimed container boxes began to pile up, cargo rates jumped and ports rejected cargo from the South Korean vessel company since it filed for bankruptcy Wednesday.
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South Korea’s Hanjin Shipping company saw ships left at sea or seized at ports after a filing for bankruptcy protection, with press reports saying the company faces a cash shortage. Because assets are being frozen, ships from China to Canada are being refused permission to offload or take aboard containers because there are no guarantees tugboat pilots or stevedores will be paid.
That is because Hanjin is one of the largest shipping lines in the world and, as Talton points out, is the “biggest container-ship company receivership in history”.
The port also said that Hanjin containers now in transit by rail to the port would be accepted until Labor Day.
The potential for cargo to be stranded, perhaps indefinitely, is unnerving for many – particularly as industry insiders and analysts believe that Hanjin has little chance of being rehabilitated and its assets will eventually be liquidated.
Hanjin’s banks chose to end financial support for the shipper this week and many of its vessels were denied entry to ports or left unable to dock as container lashing providers anxious they would not be paid.
South Korea’s ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring. One ship had been seized, in Singapore.
In this Wednesday, Aug. 31, 2016, photo, the container ship Hanjin Montevideo is escorted from the Hanjin Terminal in the Port of Long Beach, in Long Beach, Calif. Hanjin has filed for bankruptcy and the ship Hanjin Montevideo is to be anchored inside the breakwater.
Hanjin accounts for 7.8 per cent of trans-Pacific trade volume for the USA market and has a global client base. The chains are working to minimize delivery disruptions from cargo waiting to depart Asia, traveling on the ocean or arriving at ports, said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation trade group.
The port said that effective Thursday, it will not load any cargo from Cosco Container Lines, “K” Line, Yang Ming Line and Evergreen Line – the other alliance members – on to a Hanjin vessel. Hanjin Shipping spokesman Park Min did not confirm any other seizures.
Ocean freight shipping fees between China and the USA have soared as much as 50 percent since the bankruptcy was announced, although experts expect the increase to be temporary. “Truckers haven’t been able to return their empty containers or chassis at the Hanjin terminal and now they are trying to figure out what to do”, she said.
“Our business relations with Hanjin Shipping are very limited – most notably, we have a vessel-sharing agreement on the trade between North East Asia and the East Coast of India”, the company said in a statement.
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.
From a capacity perspective, should Hanjin exit the market for good, it is not likely to have a major impact on the excess capacity situation that ocean cargo market has been in over the last several years, according to Ben Hackett, founder of maritime consultancy Hackett Associates.
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Hanjin, which succumbed earlier this week to a crippling combination of lackluster global trade, a glut of container ships and brutal competition from rivals, is among many shipping giants that have struggled since the financial crisis.
