The Collapse of Hanjin Shipping and What It Means For the Industry

The Collapse of Hanjin Shipping and What It Means For the Industry

In October 2016, it was reported by the ITF (International Transport Workers’ Federation) that the Hanjin Seattle’s crew has finally been granted shore leave upon the arrival of the vessel at the US port of Seattle allowing them to come ashore.

Hanjin Shipping was once South Korea’s largest container line and considered the world’s 7th largest. However, in August 2016, its financial collapse was announced as they could no longer compete against global rivals. According to Fortune, “Hanjin became the biggest casualty of the shipping industry’s worst-ever downturn, which started after the 2008 global financial crisis as an excess of ship capacity and slowing trade dragged down freight rates.”

Hanjin’s dissolution may go down in history as the most significant bankruptcies that the container transport industry has seen to date. It is causing a global disruption as their cargo ships are stuck at ports which has resulted in the stranding of $14 billion in cargo. They were unable to load or offload containers and furthermore, their seafarers were recently denied shore leave by US authorities.

Turning back to the sailors, the ITF were outraged by this decision as the rejection of shore leave for the Hanjin ship seafarers was a denial of human rights highlighting that the crew carried bona fide visas and it was their right to come ashore.

But, the denial of their crew to step on US shores was only the beginning of Hanjin’s problems as customers clamor to collect their cargo. Many companies have Christmas and other retail goods that are stranded on those ships and not getting them in time during the critical Christmastime buying season will not only be an enormous hassle but – for some retailers – a catastrophic loss of sales and profits.

What does this mean for customers?

Companies may have to go directly to the ports to claim their containers. However, certain ports are denying Hanjin to unload for fear that they would not get paid. Furthermore, some ships have been seized by creditors in an effort to cover their losses, forcing Hanjin to pay more for unloading despite already struggling with tremendous debt.

It is highly unlikely that the situation will improve for Hanjin as creditors are confiscating their assets. It is predicted that the South Korean government and stakeholders will dissolve Hanjin, and we will likely see its offices shut down across the world, the mass layoff of their employees, and the auctioning off of their remaining assets.

What does it mean for new container shipping customers?

With Hanjin once being one of the largest ship lines in the world, there is now far less competition in the shipping industry without it. This may result in rates for ocean shipping to go up.

However, it is also possible for ocean shipping rates to remain flat. Despite Hanjin’s imminent demise, its ships are still here. These ships may be purchased by its competitors thus leaving the net capacity of ocean freight to go unchanged.

Time will only tell if rates improve for carriers.

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