Hanjin Shipping Shutdown Causes Chaos

By Shawn J. Dake

Container shipping giant Hanjin Shipping Co. Ltd. lost its last hope of continued funding last week on August 31st and abruptly shut down operations leaving ships, crews, ports, suppliers and retailers worldwide struggling to sort out the mess.  The company subsequently applied for Chapter 15 bankruptcy protection in the U.S. after filing for receivership in its home country, South Korea.  Hanjin was the eighth largest container line in the world and is estimated to be responsible for 7.8% of all goods shipped across the Pacific from Asia.

HANJIN MONTEVIDEO (commons attribution share alike 2.0 generic)
HANJIN MONTEVIDEO (commons attribution share alike 2.0 generic)

The bankruptcy, designed to protect ships from seizure came just hours too late for one vessel.  The 40,542 gross ton, 50,497 Deadweight Ton, HANJIN MONTEVIDEO was seized by U.S. Marshals off the Port Of Long Beach on behalf of two fuel suppliers who claimed they are owed approximately $775,000.  The partially unloaded ship was escorted away from her berth last week and anchored off one of the oil islands that dot Long Beach harbor inside the breakwater.  The 4,250TEU ship will be allowed to dock again and unload the remainder of her containers, but will not be allowed to leave the port.  It appears that the HANJIN MONTEVIDEO had the misfortune to be the only ship of the line to be arrested in the United States.  Hanjin Shipping owns the majority shares of the largest container terminal at the Port Of Long Beach further complicating matters.

HANJIN CONSTANZA at San Pedro, CA © Martin Cox 2014
HANJIN CONSTANZA at Los Angeles © Martin Cox 2014

At the adjacent Port Of Los Angeles the slightly smaller HANJIN CONSTANZA was allowed to dock and offload.  Built in 2011 and flying the flag of Malta, the ship was operating under charter to NYK Line and not directly affected by the bankruptcy, at least as far as cargo handlers were concerned.  Two other ships the HANJIN BOSTON and the HANJIN GREECE remained off the Southern California coast unable or unwilling to dock.  The latter made an interesting move to avoid being seized before the court order went into effect.  Running low on fuel the HANJIN GREECE drifted south on the prevailing currents until it reached Mexican waters where its engines could be restarted without using the low-sulfur fuel required by U.S. regulations near the coast.

HANJIN CALIFORNIA approaching Angeles Gate, Los Angeles Harbour. © Martin Cox 2014
HANJIN CONSTANZA approaching Angeles Gate, Los Angeles Harbour. © Martin Cox 2014

The only other vessel reported arrested thus far is the HANJIN CALIFORNIA which was seized at Port Botany in Sydney, Australia, although the HANJIN ROME is being detained in port at Singapore.  Hanjin lists liabilities of $5.4 billion, and says they have 61 container ships and seven bulk carriers currently stranded at sea.  In the main South Korean ports of Incheon and Busan servicing of the ships has resumed after the government guaranteed payments to suppliers.  Hanjin is part of a large conglomerate of logistics companies that includes Korean Airlines.  They also own shipping terminals in several countries, in addition to 104 container ships and bulk carriers, chemical tankers and LNG ships.  South Korea’s second largest cargo carrier, Hyundai Merchant Marine is also struggling under a huge debt load at a time of declining profitability.  An amalgamation of the two companies has not been ruled out, although that possibility may be remote and not do much good at this point.

A container ship outside the breakwater, © Martin Cox.
A container ship outside the breakwater, © Martin Cox.

Even as container companies are building larger and larger ships the industry has been beset by falling prices and overcapacity.  As a whole it has never really recovered from the recession which began in 2008.  The problems at Hanjin come at a particularly bad time of year as this period is when retailers are shipping most of their goods for the Christmas holiday shopping season.  Samsung electronics products appear to be among the hardest hit although every type of consumer goods, toys, clothing and shoes are being  negatively affected.  The Korea International Trade Association estimates that the ships stuck in limbo are carrying cargo valued at more than $14 billion and owned by over 8,300 cargo shippers whose containers are not reaching their intended destinations.  Port operators throughout the world are turning away the ships which is understandable since the likelihood is that they and their workers won’t get paid.  Even when the ships do reach land it will be a struggle to recover all the goods and containers, many of which will be stranded in foreign ports.

Shawn Dake

Shawn Dake

Shawn J. Dake, freelance travel writer and regular contributor to MaritimeMatters, worked in tourism and cruise industry for over 35 years.  A native of Southern California, his first job was as a tour guide aboard the Queen Mary.  A frequent lecturer on ship-related topics he has appeared on TV programs.  Owner of Oceans Away Cruises & Travel agency, he served as President of the local Chapter of Steamship Historical Society of America.  With a love of the sea, he is a veteran of 115 cruises.
Shawn Dake
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