One of the weaknesses of today’s vast, interconnected shipping economy is that when one component fails, it can have a ripple effect on the industry that stretches thousands of miles around the globe. Such is the case in the recent bankruptcy of the South Korean firm Hanjin Shipping Co. After spending years putting pressure on other shipping companies to reduce their carrier rates, Hanjin drove its own rates so low that the company’s losses forced it into bankruptcy.
Now, with Hanjin’s crews out of work and customer shipments stranded in ports across the globe, other ocean carriers are struggling to pick up the pieces. According to a recent article in the American Journal of Transportation (AJOT), Hanjin’s bankruptcy could cause a “boomerang effect” in shipping costs resulting in price increases as high as 54 percent on imports to the United States.
In their article, the AJOT identifies four key impacts that the Hanjin bankruptcy will have on the global supply chain.
We’ve already touched on one of these impacts – the shipping containers that are now stranded with no place to go. It will cost a great deal of time and money to transfer these containers to other carriers who can deliver them to their destinations. Second, trucking and rail companies who relied on Hanjin for business will see a reduction in cargo, and consequently a decrease in revenue. Terminal operators who were owed money by Hanjin will have to eat these expenses and adjust their budgets accordingly. Finally, customs brokers and freight forwarders who worked with Hanjin will lose their business as well.
There is one ray of hope: Hyundai.
According to the AJOT article, some industry analysts have speculated that Hanjin’s assets could be transferred to another Korean carrier – Hyundai Merchant Marine. Currently, Hyundai is deploying a fleet of 13 ships to help manage the shipping delays caused by Hanjin’s bankruptcy. If Hyundai were to completely absorb Hanjin’s assets, it could effectively mitigate most of the long-term negative effects of the company’s bankruptcy. So far, however, Hyundai has only expressed interest in absorbing a limited number of “key assets” from Hanjin.
It will take time for members of the shipping industry to assess the total extent of the damage, but many retailers are already concerned that the void left by Hanjin could have a negative effect on upcoming holiday sales in the U.S.
Stay tuned for more updates on the global shipping and logistics industry from Western New York’s premier source for warehousing, freight forwarding, cross-border shipping and more – SPEED Global Services.