Hanjin Shipping , one of the largest container shipping company from South Korea, has gone bust as its main creditor decided to withdraw support. Global trade is in a state of panic as several million dollars worth of cargo is now floating aimlessly at sea before the major shipping season.
We have also learned over the past few months that, the Baltic freight index is sinking to lower levels and Maersk Line is making a loss over the last quarters. However, we have to realize the most important fact in global shipping, which is that the price of shipping goods across the globe have fallen but the volume of things being shipped has actually increased.
Even with the current cargo load, there is 30 percent more space on ships than cargo to fill them thus signaling a consolidation in the industry. The Korean carrier is the largest container-shipping failure in history by far, says shipping consulting firm Alphaliner.
Hanjin shipping moves 3 percent of containers globally and up to 10 percent of those shipped between Asia and Europe. But 61 of its 98 ships are chartered, not owned. However, the news of Hanjins demise has shot up shipping rates as much as 40 percent on the Asia-America trade lane according to Drewry Shipping Consultants. Although the industry expects these rates to fall back down soon.
The South Korean government has signaled that it sees no future for Hanjin Shipping.
The bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion, with giant container ships marooned and merchants worrying whether hundreds of tons of goods being carried by the South Korean company will reach shelves. With its assets frozen, ships were refused permission to offload or take aboard containers because there were no guarantees that tugboat pilots or stevedores would be paid.
There were reports that some Hanjin ships had been seized in China on behalf of creditors.
While consumers think that lower input prices are just absolutely great. As that is what’s happening, yes this bankruptcy of Hanjin included, the global economic future is still bright. Though something that has become apparent from Hanjin’s demise is the immense pressure the major Freight Forwarders such as DHL and Kuehne+Nagel have on the shipping lines. There is a massive push to reduce rates for shipping by these large companies which leaves very little room for growth and profitability.
On the contrary, these large forwarding companies are increasing their rates to their customer to increase their bottom line. A transparent eco-system is required where everyone can benefit from the global shipping business and we don’t have to see other shipping companies going bankrupt.