Major Steamship Line Goes Bust:  Hoosier Businesses Prepare Now

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It’s unprecedented. This week, one of the major steamship lines based in South Korea filed for receivership. This move by Hanjin Shipping will impact capacity, rates and peak season bookings for Hoosier manufacturing companies.

About the Hanjin filing:

This filing and potential bankruptcy is creating a mass scramble of canceled bookings, container re-routing and an immediate space crunch.

Hanjin’s filing for court protection could be setting the stage for the largest steamship line failure in history potentially taking out the world’s seventh largest carrier with: 98 ships, some 44 bulk carriers and tankers, and 11 dedicated container terminals. Ships carry over 600,000 TEU (20-foot container) capacity.

Companies that have containers on Hanjin’s vessels will most likely experience delays. Within hours shipments were blocked at ports including: Shanghai and Xiamen, China; Valencia, Spain; and Savannah, Georgia.

Containers on carriers that are members of the CKYHE steamship line alliance riding on Hanjin ships could also experience delays.  The CKYHE alliance carriers include COSCO, K Line, Yang Ming and Evergreen. 

What actions do our companies need to take now:

It seems logical, but a solid first step is to immediately find out if your company has Hanjin containers on the water.  Also find out if you have any CKYHE carrier containers on Hanjin vessels. 

Start to plan for delays in receiving impacted containers.

Communicate with your international freight forwarder or service provider on a plan of action moving forward on how to handle the space crunch with your current carriers and what alternative services could be utilized to spread out your import supply chain over multiple services including Canadian ports of entry and U.S. East Coast ports of entry.

Prepare for rate increases over the next few months.

Prepare for port delays, container-rollings and longer transits.

Communicate the Hanjin situation and the possible impact it will have on your imports to upper management so they understand what’s going on with your supply chain moving into the busy shipping season.

Industry implications:

Container re-routing. Starting yesterday, there is now a massive re-routing of current container bookings away from Hanjin vessels.

Expect immediate space tightening. Anticipate it for all services on the Trans-Pacific routes eastbound to the United States including these ports: U.S. West Coast; Canada; and U.S. East Coast. 

Assume high demand. Space was already beginning to fill due to the muted peak season increase. Starting now space with be in even higher demand as large importers such as Wal-Mart and Target scramble to route containers to alternative carriers in order to keep goods moving.  The cascading effect will be over 100 percent capacity for most TPEB services causing major container-rollings at Asian ports.

Rate increases. Rates will be going up quickly and potentially way up for the next few months as customers fight for cargo space during peak season. Be prepared for multiple peak season surcharges and general rate increases as carriers play the pay for space game.

Next steps in Hanjin’s filing for receivership:

The court will decide if Hanjin Shipping should remain as a going concern or be dissolved.

This court process usually takes one or two months, but it is expected to be accelerated, according to a judge’s comment as reported in Reuters.

Reuters is reporting Hyundai Merchant Marine Co. Ltd., South Korea’s second largest shipping line, will look to acquire this rival’s healthy assets—vessels and key personnel.

John Rowe is the managing director of Cargo Services Inc., an Indianapolis-based freight forwarding company.

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