Shipping Giant’s Bankruptcy Throws Trans-Pacific Trade Into Disarray
South Korean shipping giant Hanjin filed for bankruptcy in the U.S. and South Korea last week, freezing its ships and containers in limbo. The world’s seventh-largest container shipping line—representing about eight percent of the trans-Pacific trade to the U.S.—has stopped accepting new cargos, and its ships are unable to offload over payment concerns. On Monday, Hanjin said it would seek similar protections in 40 other countries to protect its fleet from repossession.
Estimates from South Korea’s maritime ministry suggest Hanjin’s problems could delay up to 540,000 TEUs (Twenty-foot Equivalent Units) and cause difficulties and disruptions in shipping for at least three months. Hyundai Merchant Marine, a competing carrier, has stepped up its operations to minimize disturbances. As of Friday, 27 ships carrying the company’s cargo had been refused entry into ports, with one ship in Singapore seized by its owner.
South Korea’s government is reportedly considering aiding the company with a loan of $91 million to float its operations should Hanjin provide sufficient collateral. Industry observers note that while a loan could resolve the immediate problem—the ships waiting at sea only have food and fuel for a matter of weeks—the company still faces the unfavorable economics of the slumping cargo shipping industry, which led to its current $5.4 billion debt.
Hanjin’s difficulties also have retailers and importers on edge. In a letter to U.S. Secretary of Commerce Penny Pritzker and Federal Maritime Commission Chairman Mario Cordero, the Retail Industry Leaders Association (RILA) has urged federal action. RILA President Sandy Kennedy says, “While the situation is still developing, the prospect of harm is significant and apparent … The impact on importers and exporters is having a ripple effect throughout the global supply chain. U.S.-bound cargo is already being delayed at origin ports and Hanjin ships loaded with cargo idle, unable to enter U.S. ports. Containers are being detained on arrival, clogging already congested ports and preventing merchandise from reaching store shelves. Further, the inability to return empty containers is causing backups and interfering with chassis availability. Finally, given that Hanjin is part of a larger shipping alliance, uncertainty about its future is effecting the ability to move cargo unassociated with Hanjin. We understand that U.S. exporters are experiencing similar disruptions, as outbound cargo is turned away for the same reasons.”