More than half of Hanjin Shipping’s goods around the world are sitting idle somewhere.
Since the South Korean shipping company filed for court receivership (the country’s version of bankruptcy) last Wednesday, terminals, truckers and companies are opting out of doing any business with them for fear they won’t get paid their due. Expected shipping delays are up to three months.
Hanjin has had most of its goods on container hold in what was likely an effort to protect them from seizure by creditors, a Los Angeles-based freight forwarder who requested anonymity said Tuesday. Terminals haven’t been releasing Hanjin’s goods either—even the ones that had freight prepaid.
The freight forwarder, which does the bulk of its business out of the Los Angeles and Long Beach ports said the company had a container at Long Beach that was ready for pick up last Wednesday when Hanjin announced its bankruptcy. Even though the freight was prepaid, the terminal wouldn’t release the container because Hanjin hadn’t paid the owed terminal fees. The freight forward paid the terminal fee just to get the goods released, and they became available briefly but reverted back to being on hold and have been on hold since.
Terminals aren’t even allowing truckers to use their chassis (the special trailer used to transport ocean containers) to pick up Hanjin goods. Not all truckers have their own chassis as they tend to use those available at the ports, but those that do aren’t willing to use them to collect Hanjin goods because the ports aren’t accepting the empty containers post unloading.
“Even if we get it off hold, we still can’t pick it up because nobody wants to get stuck with the empty,” the freight forwarder said.
Add to that, the Hanjin office in Los Angeles can’t be reached for aid.
“Every time we call, there’s nobody to answer the phone,” the freight forwarder said. The company spent all day Friday trying to get through to the office that typically answers after a few rings and keypad selections, and when someone finally answered at 4:30 p.m., they said there was no one available in the import department. The office’s phone messaging system now says “We are unable to take your call at this time.”
But many of Hanjin’s containers aren’t even reaching the point of facing that problem as vessels aren’t being allowed to berth and are instead hovering near ports, including in the U.S., Canada, China and Spain.
According to The Wall Street Journal, of Hanjin’s 141 ships, 128 are operating and so far 79 have been denied port access.
The port of Long Beach sent a notice to stakeholders Tuesday morning saying Hanjin had started releasing some of its container holds but that container consignees would have to pay Hanjin’s terminal fee (as they aren’t expecting to be able to collect it from the reeling shipping company) and supply their own chassis in order to collect the goods. For imports, consignees are having to incur terminal fees of $376.37 per container for imports and $150 per container for exports, which they aren’t typically required to pay.
In an effort to help quell some of the chaos, Hanjin filed for court protection in the U.S., U.K. and Germany among other countries, to keep its assets from being seized by creditors. A U.S. court hearing is on the matter is scheduled for Tuesday.
Hanjin Group, the parent company of Hanjin Shipping, is expected to contribute 100 billion Korean won ($91.4 million) to help get the shipper’s supply chain moving. Sixty billion won will be raised using Hanjin Group’s stake in a terminal at the Port of Long Beach, the Journal reported, and the other 40 billion won will come from company chairman Cho Yang-ho’s personal wealth.
The money isn’t expected to pull Hanjin from bankruptcy, but just minimize the negative impact on the global shipping sector.
On Monday, South Korea’s Financial Services Commission (FSC) said Hanjin Shipping would receive financial assistance “in a bid to minimize spill-over effects of Hanjin’s bankruptcy filing into small local contractors.”
Some of the same creditors that cut off funding to Hanjin Shipping because of its inability to get back on its feet after years of financial support, including the Korea Development Bank, will extend maturity on Hanjin’s repayment of outstanding loans by one year. The Korea Credit Guarantee Fund (KODIT) and the Korea Technology Finance Corporation (KOTEC) will reduce the guarantee fee on debts by 0.2% for small and medium-size shippers suffering from cargo delays.
For now, Hyundai Merchant Marine (HMM), Hanjin’s rival shipper, will help pull some of Hanjin’s weight.
According to a statement from the FSC Thursday, “HMM will immediately go into emergency management to minimize disorder in cargo delivery and damage to shippers. HMM will add to its sea routes the ones which used to be services exclusively by Hanjin Shipping—one in America, one in Europe—and start servicing of more than 13 additional ships as soon as possible. HMM will maintain freight rates for the newly-established routes to an appropriate level to ensure shippers should not face excessive increase in freight rates.”
Hanjin could very likely face liquidation, despite the 100 billion won infusion, and the Seoul Central District Court will soon decide whether to accept Hanjin’s court receivership filing.
Because liquidation can’t yet be ruled out, the FSC said last week that Hyundai Merchant Marine will “immediately” form a task force to review its possible acquisition of Hanjin’s “healthy” assets, like profitable vessels and key work forces.