When it comes to Hanjin Shipping and its present supply chain debacle, the one question weighing on most companies’ minds besides how long will their goods will be delayed is: How much is this all going to cost?
The short answer: quite a bit.
The longer answer is that container freight rates have nearly doubled since South Korea’s largest shipper filed for bankruptcy last week, container consignees are being asked to pay up for what Hanjin can’t pay for, and in some cases, companies trying to get their goods are having to pay twice for the same service just to make their deliveries.
In looking at container freight rates on the major routes from Asia, Drewry Shipping Consultants said costs are up as much as 42 percent since Hanjin’s bankruptcy filing.
To ship a 40-foot container from Shanghai to Los Angeles cost $1,674 as of last week, a 42 percent jump on the week before, according to the World Container Index (WCI). Rates for Shanghai to New York are up 19 percent to $2,151 and Shanghai to Rotterdam is up 39 percent to $1,826.
“The Hanjin Bankruptcy means a shock to the market—some of our shipper customers are making contingency plans,” Drewry director Philip Damas said.
And those rates don’t even factor in the terminal fees freight forwarders are having to pay on behalf of Hanjin because the terminals, truckers and rails don’t want to risk not getting paid by a company with its finances up in the air.
One Los Angeles-based freight forwarder said Tuesday that it had to pay terminal fees of $376.37 per container for imports and $150 per container for export on a container that was already freight prepaid, because the ports of Long Beach and Los Angeles won’t chance invoicing Hanjin for those fees.
What’s more, Hanjin sent around an email notice Tuesday saying there will be no more door moves, meaning that all shipments—regardless of whether payments have already been made to rail them inland to a warehouse or customer DC—will remain at the ports they come into and, naturally, no reimbursements will be made for those prepaid inland rails that will no longer be happening.
For those customers who have prepaid freight on containers all the way from shipper to DC, they will likely incur a second cost to rail the same goods from the ports where Hanjin is grounding them, even though those costs have already been paid.
“This is for all shipment, so please be patient as diversions are being worked on ASAP. Revised arrival notices will be sent once diversion is completed,” Hanjin noted in the email.
Though U.S. Bankruptcy Judge John Sherwood agreed Tuesday to bring Hanjin under the scope of U.S. bankruptcy laws, which could see the company’s ships soon able to dock at American ports, at least, Hanjin may be yet unable to pay the workers it needs to get the goods unloaded, and there’s still no telling how soon product would likely be able to get to stores. So far, delay estimates as a result of the disorder are as high as three months.
Hanjin Shipping parent company Hanjin Group said this week it would contribute roughly $91 million to help get the shippers’ supply chain moving, but costs are expected to continue rising.
“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,” Richard Heath, general manager at WCI told Drewry. “Shippers should expect increasing freight costs and tight allocation for several weeks at least.”