Hanjin Shipping Update

Hanjin shipping has been ordered to return chartered-in ships to owners and to sell as much of its fleet as it can, according to Maritime Executive on September 20, 2016.   This poses a problem when several ports in the U.S. won’t even agree to allow the vessel to dock or unload containers with fear they won’t get paid for handling those containers, not to mention, what they will do with all the empties.  Normally the empty containers would be re-loaded and exported on the same vessel.  The entire situation has a domino effect on U.S. buyers and shippers.  Although, Reuters just reported on September 21, 2016 that Hanjin Shipping received a $54 million loan to unload stranded cargo, this seems like a minimal amount considering Hanjin estimates it will take $155 million to get the goods offloaded all vessels. Splash 24/7 reported on September 23, “Korea Development Bank, the main lender to Hanjin Shipping, has agreed a conditional credit line of KRW50bn ($45m) in a bid to help get the line’s cargoes unloaded.”  Just recently on September 26, American Journal of Transportation reported,

“Financial institutions that provided money to Hanjin specifically to buy carriers have approached Hyundai Merchant for sale of its vessels, mostly container ships, people with direct knowledge of the matter said, asking not to be identified, as the talks are private. Korea Development Bank—the largest shareholder of Hyundai Merchant and the biggest lender to Hanjin—and the Seoul Central District Court have been pushing to find a solution to the troubles at Hanjin, whose filing for bankruptcy protection last month has roiled the global supply-chain industry.

“The government is trying to make Hyundai Merchant more competitive by buying some of Hanjin’s assets,” said Park Moo-hyun, an analyst at Hana Financial Investment Co. in Seoul. “If a purchase happens, we will have to wait and see how it can really help Hyundai Merchant.”

Maritime Executive states:

“Hanjin has had some difficulty in getting its containerships into port, offloaded and out again without having them seized by creditors. It has received bankruptcy protection in the United States against further actions by unpaid bunker dealers, and the Hanjin Greece, Hanjin Gdynia, Hanjin Jungil and Hanjin Montevideo are all expected to call at Long Beach and unload in the coming weeks. In all, the firm says that about a third of its fleet has offloaded its cargo since it filed for receivership at the end of August.

In other nations it has not been so lucky. The Hanjin California has been seized in Sydney, and the Hanjin Milano is awaiting orders outside the same harbor in order to avoid the same fate.

In New York, the Hanjin Miami is unable to come into port because of limits imposed by air draft – not on arrival, but on departure, said Federal Maritime Commissioner William Doyle at an industry event Monday.

After unloading, the Miami would normally load up Hanjin empties as ballast in order to fit under the Bayonne Bridge. Without those empties, the ship “will not be able to depart the harbor because it would not have the air clearance to navigate . . . even at a dead low tide,” said Doyle. ‘There are so many disputes right now attached to empty containers that the terminal is not going to load the empties back onto the ship.’”

As of September, 19, 2016 and according to American Shipper, about one-third of Hanjin’s ships had dishcharged cargo.  Chris Dupin states, “About one-third of Hanjin Shipping’s 97 containerships have finished unloading cargo at ports around the globe as of Sunday, and another 34 of the South Korean liner carrier’s containerships are still stranded at sea, Yonhap News Agency reported.”

As soon as the steamships are free of cargo, they are to be sent back to Busan for the sale of those ships.  The crews on those ships will also be looking for new jobs.  Check out this quick video CNBC posted.

 

 

Since the Hanjin Shipping crisis has begun, shipping prices have increased by at least 50% just in the first week of September.  Carriers have announced another increase set for October starting at $1000 per 40’ container in most cases.  The bankruptcy could also and already has impacted other shipping lines due to overcapacity.

CNBC reports, as of September 13, 2016 that there were 90 vessels and over 540,000 containers holding $14 billion worth of cargo.  As mentioned before, Hanjin estimates it will take $155 million to get the goods offloaded, after which it is supposed to send its vessels back to Korea.  This means that any U.S. export that was booked on a Hanjin ship, may be sitting at the terminal as it has been refused to load a Hanjin ship, could be routed to another carrier, sitting in storage, or sent back to its original location.

 

Experts believe the Hanjin crisis won’t be outlived for another 2-3 months.

 

Exports being affected the most are agricultural goods.  Many agricultural shippers are exporting their goods by air at a loss just to ensure a future order with their overseas customers.  American Shipper states that despite the issues, import volumes will remain at near-peak levels.  Moreover, “The National Retail Federation, along with a coalition of 120 retail, manufacturing and agriculture groups, sent a letter to U.S. Secretary of Commerce Penny Pritzker asking her to continue to work towards a swift resolution for shippers.”  Read more here.

 

Scarbrough continues to monitor the situation. For any questions, please email info@scarbrough-intl.com.

 

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Other sources:

 

Yahoo Finance

Hanjin Shipping Update