It will still be many weeks before the total effect of Hanjin’s bankruptcy can be measured. Not only are the vessels, their cargos and crews affected, but ports and labor have also been embroiled in this chaos.
On September 12th Hanjin reported that six vessels have been arrested worldwide, in the ports of Shanghai, Yantian, Singapore, Prince Rupert, Seattle, and in the Panama Canal. An additional five ships were embargoed in Ningbo, Shanghai, Xingang, Sidney, and Chittagong. In Hamburg and Long Beach the Hanjin Europe and Montevideo have been detained while their dispositions can be determined. An arrest warrant was issued against the Montevideo but her status remains open on Hanjin’s report.
Their corporate website further reported that fifty ships are still waiting in the open sea for further instructions. In all, there are 93 ships worldwide in some stage of operation.
Bankruptcy and Bailout:
Approximately $14 billion worth of cargo has been tied up in the bankruptcy. Provisional protection granted to Hanjin on Friday by U.S. Courts will prevent further seizure or embargo of vessels while in the process of docking and unloading at U.S. ports. Worldwide, Korea’s Chapter 15 reorganization will allow Hanjin to release cargo to owners in an orderly fashion. The Korean government has offered Hanjin $91 million in loans to ease their efforts to pay immediate operating costs. Korean Airlines, Hanjin’s largest principle, has also pledged $54.16 million in emergency funds against controlling interest in TTI Long Beach. To date Hanjin is still working out details of assets for cash exchanges with its principles. It’s unclear at this point where Hanjin will get the funds necessary to work all of its vessels.
FMC reviews the Fallout but can provide no immediate relief to cargo owners:
At the outset the agency publicly stated, “The Federal Maritime Commission has no jurisdiction when it comes to resolving bankruptcy claims and does not intercede in legal actions between third parties that will be heard by the courts.” Guidelines were put into place to monitor the conduct of U.S. companies that would have to work with Hanjin. Today the commission has scheduled a closed session briefing to discuss Hanjin’s bankruptcy and related disruption to the shipping community. Under court ordered bankruptcy protection the FMC will take no further action unless grievances are received regarding misconduct in dealing with the carrier.
U.S. Ports and Labor react to Hanjin Bankruptcy:
Within the last few days most terminals have made arrangements with the carrier to handle current and incoming vessels. Worldwide Hanjin has been forced to divert some of its ships to friendly ports such as Singapore and Hamburg where cargo could be discharged without detention. Initially many ports in the U.S. refused to work Hanjin ships fearing that terminal charges would not be paid. In Long Beach the ILWU said that disruption of service at Total Terminals International could affect 200 to 300 local jobs. The initial work stoppage by the International Longshoremen’s Association Friday was reversed and the union will now off load vessels along the East and Gulf Coast. There were some initial reports of container mishandling which appeared to show intentional damage but reports of further “mishaps” seem to have stopped quickly. Ports in the U.S. working with labor have for the most part announced this week that Hanjin vessels will be worked and cargo released to owners without incident. In the Ports of New York and New Jersey arrangements have been made for truckers to return empties to several depots to facilitate a smooth turnaround of boxes. The VPA announced Friday that cargo owners may take delivery of import loads at Norfolk regional facilities without financial considerations for terminal handling, demurrage, or chassis charges. Further, export boxes may be picked up for reassignment without charge and outstanding empties may be returned to PPCY. On the West Coast Hanjin announced the suspension of Intermodal and Store Door Delivery services stating that containers in route to inland destinations will be terminated at the final rail ramp. Additionally, all containers currently being discharged from Hanjin vessels will be terminated at the port of discharge regardless of the designation on the bill of lading.
Where do we go from here?
It remains to be seen whether Hanjin can secure enough low cost loans and bail out money to reorganize and remain in business. The Wall Street Journal reported that it would take over $895 million to settle all of the carrier’s existing debt. Charter parties have already begun to reassign ships and Hanjin will eventually be forced to sell off assets to pay creditors.
Then again, even if Hanjin could survive, would it generate enough confidence in the market place to attract cargo?