Hanjin’s Bankruptcy Filing Affects the Shipping Sector

by San Antonio Attorney

The bankruptcy of South Korean shipping line Hanjin may have provided a relief to an industry beaten up by a worldwide decline in trade.  However, there is still a big problem in the shipping industry: the ships have 30% extra space that needs to be filled due to the current state of global trading.

According to experts, the government of South Korea indicates that Hanjin is heading for liquidation.  If that happens, it would be the biggest container-shipping company that failed.

The shipping industry is reeling and shipyards have been dwindling.  The largest companies have been reducing expenses by making alliances that enable them share networks, ships and port calls.

A change in rates after Hanjin’s bankruptcy filing might cause a fleeting relief to major European companies like Hapag-Lloyd AG and CMA CGM SA.

However, Hanjin’s troubles mean problems for individual owners of ships that lease to the company, which includes Seaspan Corp., Navios Maritime Partners and Danaos Corp.  The three have a total of $1 billion exposure to Hanjin, the shipping executives said.

Navios spokeswoman said they are still waiting for the outcome of Hanjin’s case.

The South Korean shipping is causing concerns among retailers in the United States and other countries because it’s the season of holiday stocking.  The National Retail Federation predicts that “millions of dollars” of merchandise could be marooned.

Hanjin transports 3% of containers worldwide and about 10% of the shipments between Europe and Asia.  However, around 62% of its vessels are chartered.

In case Hanjin decides to sell its assets instead of reorganizing, those vessels are going to find homes with other shipping companies.

The bankruptcy filing of Hanjin caused shipping rates to increase up to 40% on certain routes.  But experts say that Hanjin’s bankruptcy filing will have minimal impact as rates will eventually stay lower than sustainable range.

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