Hanjin ships, cargo and sailors stranded at sea

[ahojunk]

sad to hear this.

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Hanjin ships, cargo and sailors stranded at sea
By Andreas Illmer BBC News

With South Korea's biggest shipping company filing for bankruptcy protection, the vessels, sailors and cargo of Hanjin Shipping are stuck in limbo, stranded at sea.

Ports, fearing they will not get paid, refuse to let them dock or unload.

That means the ships are forced to wait for Hanjin, its creditors or partners to find a solution.

It's a case of unprecedented scale, with experts expecting the deadlock to last for weeks, if not months.

"[It is] a major disaster for the shipping companies and for the companies that own the goods in those containers," Greg Knowler, maritime and trade analyst with IHS Markit, told the BBC from Hong Kong.

Peak season

Not only are ships not allowed to unload, containers waiting to be picked up are also being held back by the ports as collateral over unpaid bills.

And even if the ports did allow them in, Hanjing would probably not as the vessels could expect to be immediately repossessed by the firm's creditors.

Beyond the ships and containers, there is of course the cargo within those containers - in many cases part of a tight chain of supply and delivery.

By September, the global shipping industry is already into what is its busiest time of the year ahead of the Christmas season.

"Just imagine, there are some 540,000 containers with cargo caught up at sea," explains Lars Jensen, chief executive of Sea Intelligence Consulting in Copenhagen.

That means that a lot of the goods en route to the US are geared at the busy year-end holidays and any disruption will be a major headache for the companies that have entrusted their products into the hauls of the Hanjin freighters.

Who owns what?

Let's break down the somewhat confusing ownership structure at play here.

Hanjin operates partly with its own ships, and partly with vessels it leases from others. So some of the vessels stuck at sea are owned by other companies who now can't get them back and on top of that have to assume they won't get paid for leasing them in the first place.

The containers on board the ships are also not all Hanjin's own. As the company is part of an alliance with five other cargo firms, there will be a mix of containers on each vessel - some belonging to Hanjin, the rest to the other four partners.

And lastly, there are the firms who own the content of the containers, for instance an Asian electronics firm sending its goods to the US market.

Hanjin's bankruptcy is the largest ever to hit the shipping industry so there's no roadmap as to what will happen now, no precedent of comparable scale.

Stuck in ports

There are the containers stuck at ports.

Let's take a container brought from, say, the Philippines to Hong Kong, to then be picked up from there and taken to the US.

Berthing and handling of that cargo at the Hong Kong port costs money. If Hanjin can't pay that, the port will hold on to those containers as collateral until someone will be willing to pay.

A possible solution would be that the companies who own the contents of those containers ask other shipping companies to step in and pick up where Hanjin left off. The cost of this would be immense, and would come on top of anything they had already paid to Hanjin beforehand. Part of it might be covered by insurance but it would still be an extremely costly endeavour.

Stuck at sea

The containers stuck on board the ships are the next problem. While at sea, there is no way to get the cargo off board.

Ships that are only leased by Hanjin could see their actual owner take back control and bring them into a harbour. They would still need to be cleared of their cargo but could then be leased to other companies.

Given that the owners of any leased vessels would probably not want to foot the bill themselves they may try to draft in the four partner lines that have containers on the ship or maybe even the companies whose cargo is inside those containers.

The ships owned by Hanjin itself would most likely have to be sold before anyone would bring in the money to get them into a port and cleared. The fact that they would have to be sold as is, i.e. at sea, and with a load of overdue containers on board would probably weigh down the price of the vessels.

Stranded sailors

Each stranded ship has about 15 to 25 crew on board. Unable to call at any port, they will have to depend on the supplies they have with them until a solution can be found. While food should last long enough, they will eventually need fuel.

In a worst-case scenario, should they find themselves unable to pay for fuel being delivered by a shuttle, they would risk running into serious trouble. In that case though, nearby ports would likely be forced to accept them.

Aside from the prospect of being stuck for weeks at sea, the sailors will also face uncertainly over their wages. Most of them are not actually hired by Hanjin but by crewing agencies. Those agencies are unlikely to get paid by Hanjin and therefore won't be able to pay the crews.

"Unless someone steps in very quickly - and there is no sign of that - this will last a very long time," according to Mr Jensen.

Ships, cargo and crew might find themselves stuck for weeks, if not months, without knowing when and where their current voyage will end.

 

[ahojunk]

More news on Hanjin.

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South Korean shipping giant Hanjin to enter receivership
31 August 2016

South Korea's biggest shipping group Hanjin is set to enter receivership after its creditors refused to provide further funding to the indebted firm.

Hanjin's board unanimously agreed to make the court filing at a meeting on Wednesday, a company spokesman said.

It faces a cash shortage after failing to persuade key lenders to reschedule debt under a new restructuring plan.

Shares of Hanjin remain suspended in Seoul after plunging by as much as 29% on Tuesday.

Hanjin, which is also the world's seventh-largest container line, has been unprofitable for four of the last five years.

Potential buyer?

Hanjin may get some financial relief courtesy of rival Hyundai Merchant Marine (HMM).

Shares of HMM jumped by as much as 22% after Korea's financial regulator said the firm may buy some of Hanjin's assets.

However HMM hasn't been spared from the woes bedevilling the sector. It recently announced a reorganisation plan too.

South Korea's shipping and shipbuilding industry is one of the hardest-hit by a prolonged downturn in global trade.

Troubled waters

A drop in orders has led to overcapacity and depressed freight rates, as well as an increase in debts.

"Korean shipping companies have suffered large losses largely because charter rates on leased vessels were fixed in 2010 at a high level while actual shipping rates have fallen," Nomura analyst Young Sun Kwon said.

The South Korean government is now looking to undertake a painful reorganisation of the entire industry, which will require major retrenchments.

The ongoing restructuring is one of several reasons why we expect growth to be weak this year and next, Krystal Tan from Capital Economics said.

"The loss of tens of thousands of jobs certainly won't help economic sentiment," she added.

"But it is a relatively small number when set against the 26m people in employment in Korea so we're not likely to see a big spike in the unemployment rate."

 

[Furqan Sarwar]

Hanjin Shipping's Collapse - Manufacturers scrambling as cargo in doubt

SEOUL: The collapse of South Korea's Hanjin Shipping Co Ltd sent ripples though global trade, as the country's largest port turned away its ships and as some manufacturers scrambled for freight alternatives.

Hanjin filed for court receivership after its banks decided to end financial support, and ports from China to Spain, the United States and Canada have refused entry to Hanjin vessels in what is traditionally the industry's busiest season ahead of the year-end holidays.

An official with Hanjin Shipping in Busan confirmed that its vessels were not entering the southern city's port as container lashing providers deny service on concerns that they will not be paid.

The company was also worried that the ships may be seized by creditors.

LG Electronics Inc, the world's No. 2 maker of TVs, told Reuters it was cancelling orders with Hanjin and was seeking alternatives to ship its freight.

An executive at the Korea International Freight Forwarders Association said on Wednesday he had been inundated with calls from cargo owners worried about the fate of their shipments in transit to the United States and Europe.

While mobile phones and semiconductors are carried by air, other electronics like home appliances are shipped by sea. "This will have an impact on the entire industry," an official said.

South Korea's maritime ministry said on Wednesday that Hanjin's woes would affect cargo exports for two or three months, with about 540,000 TEU of cargo already loaded on Hanjin vessels and facing delays.

It would be difficult to find alternative ships given high seasonal demand from August to October.

The ministry said it would ask local rival Hyundai Merchant Marine to supply vessels to cover some of Hanjin's routes to the United States and Europe, while also seeking help from overseas carriers.

LG Electronics told Reuters it was setting up contingency plans for cargo already on board Hanjin ships in the event the vessels are seized.

Hanjin is the world's seventh-largest container shipper, and a bankruptcy would be the industry's largest ever in terms of capacity, according to consultancy Alphaliner, exceeding the 1986 collapse of United States Lines.

Global shipping firms have been swamped by overcapacity and sluggish demand, with Hanjin booking a net loss of 473 billion won ($423 million) in the first half of the year.

South Korea's ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring.

The Korea Economic Daily said container rates from Busan to Los Angeles jumped 55 percent while fees for Korea-Panama-U.S.

East Coast rose 50 percent, citing shipping industry officials. State-run think tank Korea Maritime Institute estimated that shipping rates on Busan to U.S. routes would rise 27 percent and Busan to Europe routes would rise 47 percent in the near term, causing Korean exporters additional shipping costs of about $391 million