Hanjin, which is a big customer at Seattle’s Terminal 46, files for bankruptcy protection, as ships are stranded over payment worries.
Hanjin Shipping’s vessels are getting stranded at sea after the South Korean container mover filed for court protection, roiling the supply chain of televisions and consumer goods ahead of the holiday season and worrying retailers.
LG Electronics is trying to find new carriers for its goods, the world’s second-largest manufacturer of televisions said. Shipments through Hanjin account for between 15 percent and 20 percent of LG’s deliveries to America.
Hyundai Merchant Marine, the nation’s second-biggest container line, stepped in saying it plans to add 13 more vessels to ease the squeeze.
Hanjin is the key user of Seattle’s Terminal 46. The Port of Seattle agreed to millions of dollars in improvements to the terminal in 2012 to assure Hanjin remained a customer.
Most Read Stories
- Huskies get commitment from Coeur d'Alene 4-star QB Colson Yankoff
- Aerospace firm Electroimpact agrees to pay $485K after AG finds ‘shocking’ discrimination against Muslims
- $225 million more needed to build light rail across I-90 bridge
- Poutine is the new nachos: where to find the best versions in the Seattle area
- 'I'm amazed tourists ever come back': Your comments on Seattle's poor tourism survey
Woes at Hanjin, South Korea’s largest sea container shipping firm and the world’s seventh-biggest with a 2.9 percent market share, are derailing the supply chains of companies that need to send goods well in advance of the year’s biggest shopping season as Thanksgiving and Christmas holidays approach. TVs, cars and sneakers sail about 10 days to reach Los Angeles from Asia while they could take as many as 30 days to Rotterdam. Hanjinowns 59 of the 132 container and bulk ships in its fleet.
“Ports will not have these vessels because they are worried port and other fees won’t be paid,” said Rahul Kapoor, a Singapore-based director at Drewry Maritime Services. “This is going to play out for the next few weeks.”
The Hanjin bankruptcy has retailers worried. It’s unclear how much the world’s largest e-commerce retailer, Amazon.com, depends on Hanjin shipments; the company didn’t immediately respond to a request for comment.
But the National Retail Federation, a trade group in Washington D.C., said in a statement that retailers are concerned about “millions of dollars worth of merchandise that needs to be on store shelves” and could be “impacted by this.” Some of the merchandise, the federation said, is in Asia, and some is aboard ships waiting to dock.
“It is understandable that port terminal operators, railroads, trucking companies and others don’t want to do work for Hanjin if they are concerned they won’t get paid. However, we need all parties to work together to find solutions to move this cargo so it does not have a broader impact on the economy,” Jonathan Gold, the trade group’s vice president for supply chain and customs policy, said in a statement.
Major U.S. ports are forecast to handle 1.61 million 20-foot equivalent units this month, down 0.6 percent from the same month last year, according to the retail federation.
Another group, the Retail Industry Leaders Association, urged U.S. Secretary of Commerce Penny Pritzker and Federal Maritime Commission Chairman Mario Cordero to step in.
“While the situation is still developing, the prospect of harm is significant and apparent,” RILA President Sandy Kennedy said in a statement. “We urge that Department of Commerce and the Federal Maritime Commission work together with all stakeholders, including ports, cargo handlers and the South Korean government, to resolve the immediate disruption and mitigate the harms posed by the current situation.”
Wal-Mart Stores, the world’s largest retailer, said it was too early to see what effect the Hanjin situation will have. “We are waiting to hear the final determination on bankruptcy proceedings and the implications to their current assets before we will be able to assess any impact,” said Marilee McInnis, a spokeswoman for Wal-Mart.
On Thursday, the Seoul Central District Court accepted the receivership application Hanjin made Aug. 31. A revival plan must be submitted by Nov. 25, said the court, which also named the company’s Chief Executive Officer Seok Tae Soo as the manager.
Three of Hanjin’s vessels were stuck off the Los Angeles-Long Beach port complex, while one was stranded near the Port of Prince Rupert in British Columbia. Workers in the Korean port of Busan refused to work on a ship because the company hasn’t paid dues, forcing the cancellation of a berthing. Another was seized in Singapore late Monday.
About 10 more were impounded at Chinese ports, including Tianjin and Shanghai, for failing to pay service providers, the Korea International Trade Association said.
“The company is internally looking into measures in case our cargo gets stranded while it’s being shipped,” LG said in the email in a response to a Bloomberg query.
About 70 percent of South Korea’s overseas shipments is through sea, of which Hanjin accounts for about 6 percent, according to Cheong Seung Il, a trade ministry official. While the government doesn’t expect a large impact on exports, there could still be some issues with machinery and textiles shipped via Hanjin, he said.
“Some of their clients would be worried about getting their cargo if the vessels can’t enter ports,” said Shin Ji Yoon, an analyst at KTB Investment & Securities in Seoul.
Hyundai Merchant plans to add four vessels to the U.S. starting Sept. 9, and nine on Europe routes later this month. Japanese shipping companies Kawasaki Kisen Kaisha and Nippon Yusen said they are working to limit delays to clients’ cargo.
Freight charges from South Korea surged about 50 percent after Hanjin filed for court receivership Wednesday, Korea Economic Daily reported, citing shipping industry officials it didn’t identify. The fees on Hanjin’s main shipping route between Busan and Los Angeles have jumped 55 percent to $1,700 per 40-foot equivalent box from $1,100, it said.
Hanjin filed for court protection Wednesday after lenders rejected its restructuring proposal, scuttling revival efforts by the firm that’s been trying to reschedule debt under a voluntary creditor-led program since May. Hanjin’s woes reflect those of an industry that’s been operating at a loss since the end of 2015, and set to lose about $5 billion this year amid an oversupply of vessels, according to Drewry.
The possibility of a liquidation can’t be ruled out, though a court will determine the fate of Hanjin, said Yim Jong Yong, chairman of South Korea’s Financial Services Commission, in comments emailed by the regulator.
Hanjin Shipping is part of Hanjin Group, which also owns Korean Airlines, the world’s third-largest cargo airline. Korean Air loaned funds to Hanjin Shipping and bought shares in the container line in 2014 to become the biggest shareholder with 33 percent. The group, which also counts airport services, logistics and mineral water among its businesses, is headed by Chairman Cho Yang Ho.