Following the news of Hanjin’s collapse, it’s safe to say that the situation leaves us ‘all at sea’. Vessels are stuck at sea or at anchor with crew still on board whilst ports fear they won’t get paid resulting in them refusing to allow Hanjin vessels to berth or discharge. The result is that shippers and cargo owners are justifiably worried about the whereabouts of their cargo and when, in fact, their shipment will eventually be delivered.
Nothing on this scale has happened before in recent times – ports worldwide are refusing entry to Hanjin vessels, other vessels are returning to Korean waters, whilst a number are believed to have been arrested in China and the USA. The “Hanjin Montevideo”, for example, is reported to have been seized in Long Beach by US marshals acting on behalf of a fuel supplier who are owed US $775,000.
The issue is further compounded for cargo interests and freight forwarders as a result of the various shipping alliances that have been formed since the Far East Freight Conference was disbanded in 2008.
Although it’s hard to say exactly what the outcome of these events will be, and without wanting to repeat what most have already heard or said, here’s what we do know…
Despite a large number of BIFA Members feeling that “the £460 fee and £2,000 deposit payable to the Port of Felixstowe (PoF) is either arbitrary and/or unfair”, most North European base ports are taking a simliar tack as Felixstowe in allowing landed containers to leave the port if the agent/cargo owner pays a fee. Arguably, this is in the port’s favour and BIFA’s own Association Lawyer thinks that the “£2,000 deposit would be likely judged fair and reasonable as that would be the value lost should the container not be returned”. However, a recent article in the Mail on Sunday revealed that customers with cargo due to dock at the Port of Felixstowe feel the charge is unjust, with David Snell (head of Atlantic International Freight Services) stating that Felixstowe are “profiteering from the situation.”
With regard to the £460 fee, BIFA state that “this probably covers the stevedoring cost and any necessary administration incurred by the PoF.” To take action against the PoF may be uneconomic, as they are sure to have carried out careful calculations to justify the charge. Again, BIFA’s legal advice would be that “insurers should be informed and customers asked to pay the release charges to obtain their goods and authorise the collection on the terms offered by FDRC”.
Meanwhile, London Gateway has now agreed a fee of £130 per container for handling, and a deposit of £500 per 20’, £700 per 40’ & £1,500 per reefer container. London Gateway is still planning to charge quay rent beyond the allowed free time.
Feedback direct from Hanjin has been very slow in coming. On the Asia/Europe trade Hanjin is part of the CKYHE alliance which consists of Coscon, K-Line, Yang Ming & Evergreen, so even though customers may not have a Hanjin B/L, their shipments with any of these lines could be affected if they’re on a Hanjin vessel.
According to recent developments, the Hanjin Group still seems to hope that the South Korean government and/or banks will come to its rescue. Other than their initial announcement to put US $90 million into getting their ships and their clients’ containers released, the Group continues to offer the same financial packages which the creditors rejected on two separate occasions, leading to the bankruptcy. Korean Air, Hanjin’s biggest shareholder, said it will provide US $54 million in funding – but only if Hanjin pledged its ownership share of a terminal at Port of Long Beach as collateral.
There are a reported 500,000 TEU affected by the situation with cargo value in excess of £120 billion currently stuck at sea or in ports around the world. This includes Christmas stock and also vital components needed to keep production lines going. The knock on affects are going to be huge. Some firms are utilising airfreight to combat the delay which is an expensive, necessary solution compared with the cost of seafreight.
Take the two vessels: ‘Hanjin Greece’ and ‘Hanjin Gydnia’ off Long Beach, for example. Of these two alone, Samsung reportedly possess 612 containers of electronic goods and home appliances worth US $38 million, Hewlett Packard has some 125 containers of computer peripherals, and Ashley Furniture has 850 containers of furniture. Each have told the court that they need their cargoes ‘now’, otherwise they will suffer major financial and competitive losses.
Overall, Hanjin appears to have eighty-one vessels arrested, detained, or embargoed worldwide. Twelve vessels are off Busan, with nine more in transit. Six have been arrested. Both the Suez and Panama Canals have refused transit to Hanjin vessels. Two ships are sitting off Japan, with ten more off the Chinese coast. Five vessels are in the Mediterranean, while two are in Hamburg / North Sea. The situation is becoming increasingly concerning.
Like many freight forwarders, and mindful of the seemingly precarious financial position of the two major Korean carriers earlier in the year, John Good Shipping carefully chose to limit its exposure in the best interest of its customers. It is somewhat ironic that at the beginning of this year reports suggested that Hanjin were on the road to recovery and it was in fact Hyundai that was more likely to be in serious trouble.
We have advised the majority of our customers to contact their marine insurers to notify them that they have cargo that will be affected. We have kept in close contact regarding updates and potential other solutions to allow the release of containers as quickly as possible.
We expect the fall out to rumble on for some months and, only a few days ago, a group of bunker suppliers and tug operators, together with one of the world’s largest container leasing companies, launched a joint request to a US bankruptcy court to allow them to arrest Hanjin-operated vessels due to call at US ports.
This group, initially comprising towage service providers Moran and MacAllister and bunker suppliers OcaenConnect, Glencore Singapore and Chemoil, have been joined by Textainer in the application to the US bankruptcy court of New Jersey.
Consequently, this event could also now signal a change in terms of pricing as Hanjin’s demise serves as a stark warning to the rest of the world’s shipping lines who have been operating at a loss for far too long on the main Asian / Europe trade lane in particular.
We have already seen the likes of APL, UASC and CSCL being acquired by other Lines over recent months, however it is difficult to see a way back for Hanjin at this point. Three new alliances had already been agreed for 2017 with all of the major players involved, but the Hanjin situation will undoubtedly cause a further re-think and potential re-shuffle as Lines jostle for position. First and foremost, the industry needs to bring stability back to a market that has been in turmoil for too long.