Hanjin Shipping bankruptcy causes ripples in maritime sector
As the maritime sector continues to assess the fallout from container shipping’s biggest bankruptcy case, the Seoul Central District Court has approved Hanjin Shipping’s application for receivership.
As the maritime sector continues to assess the fallout from container shipping’s biggest bankruptcy case, the Seoul Central District Court has approved Hanjin Shipping’s application for receivership.
News reports say that management of the South Korean line now have until November 25 to present a rescue plan to the court to avoid liquidation.
"We decided quickly to begin court receivership for Hanjin Shipping, the country's leading shipper and one of the world's major container shipping liners, given its presence in the local shipping industry and its impact on the economy as a whole," said the Seoul Central District Court, according to Korean news agency Yonhap.
This latest development however is unlikely to calm the fears of cargo owners and shippers anxious about the fate of their cargoes.
It has been reported that since Wednesday, 45 of the carrier’s ships, including 41 container ships have been stranded at sea, unable to call at ports.
Additionally, some services from alliances which Hanjin Shipping was part of, are also reported to have been cancelled, and more lawsuits are being filed to arrest the company’s ships.
Spot container freight rates on the major routes from Asia soared yesterday, September 1, following the collapse of Hanjin Shipping, according to World Container Index (WCI).
WCI said rates jumped by 42% to $1,674 per 40 foot container on the Shanghai to Los Angeles route, by 19% to $2,151 on the Shanghai to New York route and by 39% to $1,826 on the Shanghai to Rotterdam route.
“Unpredictable freight rates are not new phenomenon in the container industry, however a major upheaval of supply like this is likely to cause extreme short-term price volatility. Shippers should expect increasing freight costs and tight allocation for several weeks at least,” said Richard Heath, general manager of WCI.
“The Hanjin bankruptcy means a shock to the market – some of our shipper customers are making contingency plans and asked us to assess the impact of this on their supply chains,” said Philip Damas, director at Drewry, which jointly owns WCI alongside Cleartrade Exchange.
The US Retail Industry Leaders Association (RILA) has urged the US government to work together with stakeholders, including ports, cargo handlers and the South Korean government, to resolve disruption and mitigate the harms posed by the current situation.
In a letter to US Secretary of Commerce Penny Pritzker and Federal Maritime Commission Chairman Mario Cordero, RILA said the impact on importers and exporters is having a ripple effect throughout the global supply chain.
There is no doubt Hanjin Shipping’s bankruptcy will have far and wide implications across the maritime sector, and there is a lot of uncertainty among the different parties involved.
UK legal firm Holman Fenwick Willan notes that in some instances, freight forwarders will have paid hire to Hanjin in advance, and forwarders will now be concerned about recovery of these sums, while cargo interests which have paid freight in advance to Hanjin will be considering claims to recover such sums.
The International Maritime Bureau is speaking with its members affected by the ongoing case.