The largest bankruptcy of a shipping line in history has ramifications for Seattle, Tacoma and the American freight logistics system.
It didn’t take long for Hanjin Shipping’s bankruptcy Wednesday to reach the Northwest Seaport Alliance, which handles seaborne cargo for the Port of Seattle and Port of Tacoma.
Alliance spokeswoman Tara Mattina said this morning that Terminal 46 at the North Harbor (Seattle), Hanjin’s main home here, is not accepting any Hanjin deliveries. Husky Terminal in the South Harbor (Tacoma) is prepared to unload imports but not accepting any exports or empty containers. Both terminals have private operators.
No Hanjin Shipping vessel is in port here now, although one was scheduled to arrive Saturday. It might not make it, Mattina said. “We’re hearing reports of ships anchoring in open water because pilots, terminal operators and others along the supply chain are asking for cash up front before anyone will work the ships or touch Hanjin cargo.” Indeed, reports elsewhere say the company is afraid its ships might be seized by creditors, or it’s already happened.
“We’re working with the terminal operators, railroads and cargo owners to better understand the impact this situation might have and how to keep the cargo moving,” Mattina said.
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T-46 usually sees about one Hanjin container vessel per week. Last year, 58 ships called. So far this year the number is 35.
The effects could be profound. Hanjin Shipping, one of the world’s largest lines with 98 ships, is now also the biggest container-ship company receivership in history. U.S. retailers are among those voicing concerns. Freight rates have risen as shippers rush to seek room on other carriers. That may not be as easy as it might seem. Yes, many ships are idle because of the worldwide shipping slowdown, but most can’t be quickly brought up to operation-ready status.
The South Korean government declined to step in and prevent the collapse, an unusual setback for a unit of a powerful Korean conglomerate. According to Bloomberg, Hanjin Shipping’s debt reached the equivalent of 152 years of pre-tax earnings as of the end of last year. It faced refinancing $900 million in obligations between now and the end of next year, with virtually no liquidity.
The situation has been made much worse by the deep slowdown in world container trade. A year and a half of container-line mergers hasn’t prevented the collapse. The Baltic Dry Index, a key indicator of seaborne trade, began a sharp collapse in 2014 and is off 22 percent for the year. The biggest cause is China’s slowdown, but worldwide stagnation is at work, too. Also, shipping lines overbuilt.
It’s a problem for export-dependent South Korea. CNBC reports that “rival Hyundai Merchant Marine will also deploy at least 13 of its ships to two routes exclusively serviced by Hanjin, while the South Korean government also plans to reach out to overseas carriers for help.” Yes, but none of this will fix the underlying problems of too many ships and too little demand.
So the trouble is far from over.
Today’s Econ Haiku:
I get panhandled
By young, able-bodied dudes
Spare change can’t fix that