South Koreas largest container line and the worlds seventh largest, Hanjin Shipping, has filed for bankruptcy. The company has millions of dollars worth of assets stranded at sea, which disrupted supply chains worldwide. Authorities and creditors have either seized some vessels while others have been refused entry into ports. This comes at a bad timing not only for Hanjin but also for American retailers who are worried their Christmas stock will not arrive in time for their busiest season. Ports around the world denied Hanjin vessels to dock because the company could not pay the unloading fees. Neither did they want creditors holding Hanjin vessels on their facilities and occupying valuable moorings.
Hanjin represents nearly 8% of trans-pacific trade volume for the US market and the bankruptcy has affected the entire global supply chains, which can also hurt consumers and the US economy.
Businesses that need to move their products by sea are concerned that other shipping companies will follow Hanjin. The container shipping industry is set to lose about $10 billion dollars in revenue this year. The worlds second largest shipping company in Denmark has announced its restructuring and break itself up to be able to compete. There are other Japanese companies that aren’t looking very hopeful and investors are suggesting for companies to merge rather than following the same fate as Hanjin.
The low performance of all the companies comes from the fact that there is an over capacity in the shipping industry. Not enough vessels are being scrapped which will lessen the capacity and increase the freight rates, by doing this businesses will be able to break even. Until more scrapping of ships are done other companies will struggle to survive.