As South Korea’s largest port turned away its ships and as some manufacturers scrambled for freight alternatives, the collapse of country’s Hanjin Shipping sent ripples though global trade on Thursday.
While ports from China to Spain, the United States and Canada have refused entry to Hanjin vessels and after its banks decided to end financial support, and in what is traditionally the industry’s busiest season ahead of the year-end holidays, Hanjin filed for court receivership on Wednesday.
Since container lashing providers deny service on concerns that they will not be paid, Hanjin Shipping’s vessels were not entering the southern city’s port, an official with Hanjin the company in Busan confirmed. The worry that its ships may be seized by the creditors has been expressed by the company.
LG Electronics was seeking alternatives to ship its freight and was in eh process of cancelling orders with Hanjin, the world’s No.2 maker of TVs reportedly told Reuters.
Cargo owners worried about the fate of their shipments in transit to the United States and Europe had flooded an executive at the Korea International Freight Forwarders Association with calls seeking confirmation, the executive reportedly mentioned.
While larger electronics like home appliances are shipped by sea, smaller and lighter ones like mobile phones and semiconductors are carried by air.
“This will have an impact on the entire industry,” the official said.
With about 540,000 TEU of cargo already loaded on Hanjin vessels and facing delays¸ Hanjin’s woes would affect cargo exports for two or three months said South Korea’s maritime ministry on Wednesday. Given the high seasonal demand from August to October, it would be difficult to find alternative ships.
While also seeking help from overseas carriers, the local rival Hyundai Merchant Marine would be asked to supply vessels to cover some of Hanjin’s routes to the United States and Europe, the ministry said.
In the event that the vessels of Hanjin that are carrying their cargo are seized, LG Electronics was in the process of setting up contingency plans for cargo already on board Hanjin, the company said to the media.
According to consultancy Alphaliner, the 1986 collapse of United States Lines would be eclipsed by a bankruptcy of Hanjin and would be the industry’s largest ever in terms of capacity as it is world’s seventh-largest container shipper.
Hanjin had booked a net loss of 473 billion won ($423 million) in the first half of the year as the entire global shipping firms have been swamped by overcapacity and sluggish demand.
In the midst of a wrenching restructuring, the ailing shipbuilders and shipping firms of South Korea have been for decades the engines of its export-driven economy.
While fees for Korea-Panama-U.S. East Coast rose 50 percent, container rates from Busan to Los Angeles jumped 55 percent, reported the Korea Economic Daily citing shipping industry officials.
Korean exporters would have to shell out an additional shipping costs of about 440.7 billion won per year as the estimated shipping rates on Busan to U.S. routes would rise 27 percent and Busan to Europe routes would rise 47 percent in the near term, said the state-run think tank Korea Maritime Institute.
(Adapted from CNBC)