Bankruptcy of Hanjin Shipping threatens global supply disruption

Bankruptcy of Hanjin Shipping threatens global supply disruption

Hanjin Shipping - the largest container carrier of South Korea, included in the top 10 container lines of the world - has filed a judicial motion to impose external management and freeze assets. This creates a real risk of breaking the global supply chains: the inevitable bankruptcy of Hanjin will become the largest in the history of container traffic (containerized), Vedomosti writes with reference to Zerohedge.com

Industry News 3617 03 сентября, 2016 retail-community.com.ua

On Tuesday, Aug. 30, 2016, a consortium of banks led by the Korea Development Bank (KDB) withdrew funding for Hanjin, recognizing as inadequate the proposal of the parent company to restructure the debt, which by the end of 2015 already reached $ 5 billion. Now the court must decide the fate of the company , which the government decided not to support anymore. The most likely outcome is the dissolution of Hanjin with the purchase of good assets, including container ships and key personnel, a competitor - Hyundai Merchant Marine (HMM). 

However, the bankruptcy and transfer of assets of Hanjin will take time, the newspaper notes. There are 540 000 TEU of cargo in transit on the vessels of Hanjin and container ports are already refusing to process them for fear of not receiving port and other charges, the company representative said. This includes including the key ports of Busan, Shanghai, Xiamen and Savannah (USA), he said. One of the container ships - Hanjin Rome - was arrested Monday in Singapore at the request of the lender, the port operators refuse to accept containers shipped from the enterprises for shipment to Hanjin. The Ministry of Sea Transport of South Korea estimated the possible delay in the delivery of Hanjin cargo in two or three months.

Such a delay threatens to disrupt global supply chains, CNBC reports with reference to the largest producers of South Korea. It is primarily about large household appliances. A representative of LG Electronics told Reuters that the company is looking for alternative supply options. A representative of the logistics consultant working in Singapore, Drewry Maritime Services, estimated the duration of logistical violations in a few weeks.

Shipping companies around the world in recent years have suffered because of the fall in international trade and the resulting sharp drop in freight costs with excessive capacity of lines. So, if in 2010 the delivery of a 40-foot container from Shanghai to the West Coast cost about $ 2,000, now it will cost only $ 600.

After Hanjin actually withdrew from the game, prices for the direction of Busan - the United States grew by about one and a half times, reported Korea Economic Daily. In the medium term, experts expect a 27% increase in the cost of shipping containers in the US and 47% in Europe, which means an additional 440 billion won ($ 393 million) a year for South Korean exporters.

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