Hanjin bankruptcy causing huge ripple globally
.jpg?w=728)
A container terminal is shown above in Singapore, Sep. 3, containing seized cargo from Hanjin Shipping. Analysts say that Hanjin’s court receivership could be just the tip of the iceberg for the shipping industry as the long-running global economic downturn has left it drowning in excess capacity. / AFP-Yonhap
Shipping company faces lawsuits from customers
By Yoon Ja-young
Hanjin Shipping’s filing for court receivership is inflicting far larger-than-expected negative impacts both at home and abroad as major routes for trade are being suspended.
The government and creditors are facing growing criticism that they are responsible for having thrown global ports and traders into confusion.
About half of Hanjin’s fleet is stuck in ports around the world as the authorities there fear the shipper whose assets have been frozen is unable to pay fees.
The government will not be able to avoid criticism for underestimating the fallout of the bankruptcy of the world’s seventh largest shipper.
It is still pondering over contingency plans to contain the backlash, creating a task force to ensure there are no delays in the flow of cargo.
The Ministry of Oceans and Fisheries will lead the task force along made up of ranking officials from nine related ministries and agencies.
“The government will make sure that the fallout from Hanjin Shipping doesn’t lead to chaos in logistics or a transmission to the real economy including exports,” said Oceans and Fisheries Minister Kim Young-suk, after an emergency meeting held Sunday.
“We will closely cooperate to support damaged industries, taking all possible policy measures,” he said.
However, officials from the shipping industry criticize the government for allowing the shipper to go bankrupt without having drawn up proper countermeasures.
The most urgent problem is that exports may fail to arrive at their final destination on time as 68 of Hanjin Shipping’s vessels are stranded at sea worldwide as of Sunday.
Hanjin has been shipping much of the country’s export items. Samsung Electronics, for instance, is known to have contracted 45 percent of its shipments with the shipper while LG Electronics contracted 23 percent.
The ministry decided to ask Hyundai Merchant Marine (HMM), the country’s second largest shipping company, to operate on some of the routes of Hanjin Shipping.
Four HMM ships will be running Hanjin’s route linking Korea and western coast of the United States from Sept. 8, while nine ships will be sailing on Hanjin’s European routes starting from the second week of this month.
The measure comes amid growing concern among Hanjin’s customers. Some of the company’s vessels are failing to get departure permission or are being denied entry to ports after it filed for court receivership. Container lashing companies are refusing to work with Hanjin out of concern that they may not be paid, and a vessel of Hanjin was denied passage through the Suez Canal for fear that it could not pay the toll.
The vessels are also having problems in purchasing oil and one of its vessels was seized in Singapore following a creditor’s claim at a local court.
Hanjin is seeking “stay orders” at courts in 43 countries to avoid the seizure of its ships. The country’s customs office said it will facilitate procedures for freight, and the government plans to ask for support from shipping companies in an alliance with Hanjin.
However, analysts point out that CKYHE, the global alliance Hanjin belongs to, has already notified that its membership has been suspended.
The government is facing criticism that it lacks the capability to handle the situation while it overlooked warnings from the private sector.
The industry has been showing concern that Hanjin’s entry into court receivership will lead to utter chaos, including suspension of cargo flows. Despite government plans, it isn’t certain whether exporters can meet delivery dates they promised to buyers.
Some point out that Hanjin may face a lawsuit from customers around the world.
Unless Hanjin tackles the problem of 610 billion won in overdue payments, its vessels are likely to continue to be stranded; but it is having difficulty getting funding as creditors announced that there won’t be any further support.
The financial regulator said it will consider measures to support the shipper with funding, but it stressed that the company and its major shareholder must take responsibility first.
Meanwhile, global freight fees are soaring following the chaos over Hanjin. The Shanghai Container Freight Index marked 763.06 on Friday, soaring 27.9 percent from the previous week.