Hanjin Bankruptcy: Tip of the Iceberg for Increasing Shipping Rates

The recent bankruptcy that sank South Korea Hanjin Shipping, combined with port congestion, driver shortages and new ocean alliances has led to aggressive price cuts and fierce competition, seriously impacting the bottom line not only in the U.S but also around the world. Approximately 80 percent of goods and commodities traded globally are transported by ocean. Hanjin's departure constituents 89 ships globally covering over $14 billion worth of cargo. The company had been struggling financial for years and now creditors for Hanjin are afraid they won’t be compensated. There is no doubt that this will complicate plans to get merchandise from Asia to U.S. merchants' stores prior to the holiday season. Being that Hanjin Shipping Co. is one of the top ten players in terms of volume, shippers are encouraged not to get too content with transportation costs.

As one of the leading shippers serving an export dependent South Korea, this change has agitated supply chains and global trade. Hanjin ships are being seized by terminals and in other cases simply rejected. As a member of the CKYHE Alliance, Hanjin and its partners have announced the rejecting of all new bookings aboard Hanjin owned and operated vessels. Immediately, vessel space has become relatively tight. As a direct result of reduced capacity, it is expected that the GRI for September 1 will be implemented effectively.

Unfortunately, Hanjin is not alone. In the last quarter, 11 of the 12 largest shipping companies have published results revealing huge losses. Although the shipping industry has faced crisis before, none have been as severe as this one. Tackling the problem of overcapacity is recommended but alliances between shipping companies have failed to reduce congestion. A possible solution to resolving the crisis is strongly considering mergers. But it is difficult to determine if it would be enough to change market dynamics.

Tips for Shippers:

• Contact their logistic provider promptly to discuss available options if they have freight on Hanjin vessels
• Redirect all new bookings to an NVO partner or carrier not associated with Hanjin vessel sharing if they have freight on Hanjin vessels
• Consider carriers that will place priority on containers that they can load at market rates, rather than fixed rates and BCO cargo
• Prepare for rolling bookings
• To help guarantee space, pay premium market container rates
• Diversify their carrier mix

If you would like additional information on how this may affect your freight, or if you have any other supply chain questions, please contact Allyn at (239) 489-9900 or you can email us at sales@allynintl.com.