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article imageSouth Korea withdraws support for Hanjin shipping line

By Karen Graham     Sep 2, 2016 in Business
South Korea has withdrawn its support for shipping giant Hanjin, signaling it sees no future for the ailing company. With bankruptcy the only option left, 45 loaded container ships have been left stranded at sea.
It's a bad time all around for South Korea's largest shipping company to file for bankruptcy, but that is exactly what has happened with Hanjin. The ripple-effect of the shipping business's failure will be unprecedented in its scope on an already shaky global economy.
Alphaliner, a shipping consulting firm told the Wall Street Journal Hanjin Shipping Co.’s bankruptcy would be the largest container shipping failure in history. There is no precedent for a business failure of this magnitude, and this leaves everyone worried about the outcome.
Hanjin filed for bankruptcy protection on Wednesday, according to the Associated Press, and stopped accepting new cargo. Now that its assets are frozen, a long chain of events has been set in motion, beginning with ships not being allowed to unload at ports, and containers waiting to be picked up at ports being held back as collateral for unpaid bills.
Hanjin shipping containers awaiting pickup.
Hanjin shipping containers awaiting pickup.
Daryl Mitchell
Major blow to the world economy
While Hanjin is not the world's largest container shipping company, it is still a big player in the world economy. All the shipping containers on ships at sea as well as those sitting in ports around the world are now in limbo, waiting to be seized by creditors. Looking at the bigger picture, much of the merchandise in the containers is part of a tight chain of supply and delivery, says the BBC.
September is the time when retailers begin stocking their shelves with fall fashions or Christmas toys. It is such a big deal that the National Retail Federation wrote to federal authorities Thursday, warning the failure of the container shipping company would have "a ripple effect throughout the global supply chain" that could cause significant harm to both consumers and the U.S. economy.
"Just imagine, there are some 540,000 containers with cargo caught up at sea," explains Lars Jensen, chief executive of Sea Intelligence Consulting in Copenhagen.
Trucks used to transport containers are seen at the Hanjin Shipping container terminal at the Busan ...
Trucks used to transport containers are seen at the Hanjin Shipping container terminal at the Busan New Port in Busan
Lee Jae Won / Reuters,
Sorting out ownership
First of all, Hanjin doesn't own all the ships it uses. Some are leased from other companies. This means that ships stuck at sea owned by other companies will have to stay there and they probably won't get paid for leasing them, either. Hanjin did belong to the CKYHE Alliance, a group of six shippers that use each others carriers to move their goods. Hanjin was suspended from the alliance on Friday.
But even with the suspension, the stranded containers on each ship are a mix of Hanjin's and five other container shipping companies, and the alliance members can't touch them right now. And we must not forget who owns the merchandise in the containers. LG Electronics, Samsung and other manufacturers have been placed in limbo, unable to get their merchandise to retailers.
Needless to say, this bankruptcy is huge and comes at a very bad time. Most experts are fearful it will last for at least three months and possibly longer, reports CNBC.
More about hanjin, Bankruptcy, shipping industry, global repercussions, South Korea
 
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