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| "Busan, we have a problem." |
The oversupply of shipping vessels in the wake of world trade slowing down in recent years has resulted in the bankruptcy of one of Korea's most venerable firms, Hanjin Shipping. For years it has brought Korean-made goods to the rest of the world, but that didn't stop it from declaring bankruptcy earlier this year as its financial position became untenable. Its ships have not been able to
dock at the world's major ports--those large enough to accommodate these large ships--over legal complications. What's more, shipments meant for the Christmas season have been stranded at sea together with these vessels:
With South Korea's biggest shipping company filing for bankruptcy protection, the vessels, sailors and cargo of Hanjin Shipping are stuck in limbo, stranded at sea. Ports, fearing they will not get paid, refuse to let them dock or unload...
Not only are ships not allowed to unload, containers waiting to be picked up are also being held back by the ports as collateral over unpaid bills. And even if the ports did allow them in, Hanjin would probably not as the vessels could expect to be immediately repossessed by the firm's creditors.
Beyond the ships and containers, there is of course the cargo within those containers - in many cases part of a tight chain of supply and delivery. By September, the global shipping industry is already into what is its busiest time of the year ahead of the Christmas season.
Busan is better known worldwide as the home of a US Navy base. However, it too has been Hanjin's main port for the longest time. As goes Hanjin, so goes the port city of
Busan, and things aren't going too well at the moment:
A group of companies in South Korea’s port city of Busan said about 11,000 jobs are at risk if the troubled container line Hanjin Shipping Co. isn’t rescued.
With no Hanjin ship berthing at its terminal in Busan, the world’s fifth-busiest port, the city’s shipping industry is headed for a crisis, Lee Seung Kyu, chairman of Busan Port Development Association said. About 1,000 tractor drivers are unemployed, and many contractors may be forced to shut down their businesses, said Choi Chul Hee, a port executive. Hanjin handles about 50 percent of the facility’s container volume, he said, dealing a blow to an industry that accounts for 30 percent of the city’s economy.
“The lost volume will find its way to China and Busan will lose its competitiveness,” said Choi. “The economy of Busan will be hit if Hanjin Shipping fails.” Some companies that provide services to Hanjin Shipping and their workers haven’t been paid a total 42 billion won ($39 million), while about 10 percent of the 10,000 workers at the port haven’t received their wages for about three to four months, according to Kim Young Deuk, president of Eastern Marine Service Co. and also the head of Busan Marine Industry Association. Hanjin Shipping declined to comment.
At the other end of the world, the
port of LA is clogging up with empty Hanjin containers that will not be making a return trip to Busan:
As Hanjin Shipping Co. vessels drop off containers after weeks stranded at sea following the company’s bankruptcy, ports are dealing with a new problem: what to do with the empty boxes they leave behind.
Since the South Korean ocean carrier filed for bankruptcy five weeks ago, roughly 15,000 Hanjin containers have trickled in through the Ports of Los Angeles and Long Beach, often weeks after they were due to arrive. Now emptied of their goods, many are cluttering warehouse yards and parking lots across Southern California. With Hanjin’s ships no longer making the trans-Pacific trip, the company’s containers aren’t needed to carry goods back and forth.
While the stranded containers themselves are a nuisance, logistics companies say the bigger issue is that many are still attached to the wheeled trailers that trucks used to get them off the docks. These pieces of equipment, known as chassis, are vital to port operations, and putting thousands out of commission can delay the container deliveries for all shipping companies—not just Hanjin—people in the industry say.
The interesting thing to ponder is Hanjin's fate alongside that of Korea, Inc.: Is the problem particular to this company only and not the larger Korean export machine? Certainly it's an important cog whose demise may raise shipping costs for producers. Given the potentially vast spillover effects, will the Korean government bail it out...or ask another company to help shore it up? Or, will an erstwhile competitor like Hyundai Merchant Marine be
encouraged to purchase part of its operations? For the rest of Korea Inc., the show must go on.
