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Maersk Calls Hanjin Situation “Controlled Chaos”

What has been more like utter chaos on the heels of Hanjin Shipping’s recent bankruptcy filing has been downgraded to what Maersk is calling “controlled chaos.”

When South Korea’s largest shipper—and the world’s seventh largest—filed for court receivership at the end of August, supply chains stalled, companies panicked and Hanjin goods got stuck because no one was willing to risk not getting paid for their part in the handling.

Since then, Hanjin goods have slowly started to make their way off stranded ships to their rightful owners, but the drama hasn’t abated yet.

Speaking on a trade panel Tuesday at Sourcing Summit 2016, Mario Giannobile, senior director of North America sales for Maersk Line said, “As you can imagine, with a half a million containers and $15 billion of product stuck on the ocean, it can cause some panic in the industry. I’d like to say today it’s more of a controlled chaos.”

Companies have started talking to other carriers, like Maersk, about contingency plans and how to protect their goods that still need to move.

Addressing the delays while noting that he isn’t speaking on behalf of Hanjin, Giannobile said, “What I can say from a consultative perspective is that they are releasing advisories daily, sometimes more than daily, and you should check their websites and see what the status are of those containers and what the status is of their position in the terminals.”

Pop-ups on the Hanjin website detail how to trace outstanding cargo.

But beyond figuring our where goods are and when they’ll get where they’re going, the capacity strain has added to container shipping costs rising. Drewry Shipping said earlier this month that container rates have jumped as high as 42 percent for major routes from Asia since Hanjin’s bankruptcy filing.

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“Prior to this happening with Hanjin going into receivership, we were all faced with a fully utilized networks, including Hanjin. We’re in peak season so our network was full,” Giannobile said. “And then you take the capacity of Hanjin out of the marketplace and that has a significant change in the supply and demand curve, and change in the supply and demand curve drives rates up.”

What the market isn’t paying attention to however, as Giannobile explained, is that pre Hanjin bankruptcy, shipping rates were at a five-year low. And what’s more, rates are flat on the West Coast this September compared to last and rates on the East Coast are lower.

“So yes, the rates have increased from all-time five-year lows, but they’ve really just stabilized back to where they were last September,” Giannobile said. “So the questions is really, what is the sustainable rate?”

The Hanjin issue has been top of the list of things to attend to at the American Apparel & Footwear Association (AAFA) as well.

Steve Lamar, AAFA executive vice president said the organization has been working with the U.S. government to share the real time impact of the Hanjin situation as well as how companies are reacting. The goal is to make sure the government has the right info to take back to policy and other stakeholders they interact with so that necessary moves or decisions can be made.

“We’re trying to make sure that folks know what’s happening so we can target those financial resources to free up those ships as they dock so the containers can be released,” Lamar said.

Nicole Rosso, supervisory import specialist at the Apparel, Footwear & Textile Center of U.S. Customs & Border Protection, who also spoke on the Sourcing Summit panel, said “From a CBP perspective, there will be no delays as long as the proper procedures are followed.”

The CBP website outlines a handful of different scenarios companies could be facing with their Hanjin loaded goods and how to deal with them accordingly.

Hyundai Merchant Marine, the second-largest container line in South Korea, and once Hanjin’s rival, has reportedly started looking at some its bankrupt counterpart’s assets for possible acquisition.

According to Bloomberg, financial institutions that have funded Hanjin to help it buy carriers have approached Hyundai Merchant for the sale of its vessels. The news sent Hyundai Merchant’s shares up as much as 6 percent to 8,700 won ($7.84) at the close of the market Monday. That’s the highest it’s been since Sept. 8. Hanjin’s shares, by comparison, fell nearly 12 percent to 955 won (86 cents).