Hanjin Shipping bankruptcy

World’s seventh-largest container shipping company Hanjin Shipping files for receivership!

Hanjin Shipping, one of the world’s largest container shipping companies has filed for bankruptcy as banks are no longer willing to maintain existing lines of credit. According to our research Hanjin Shipping has a debt of approximately five billion USD and recently faced serious liquidity problems.

Hanjin Shipping

Hanjin Shipping

There are multiple reasons for the economic decline: shipping rates plummeted over the last few years while competition for cargo shipping steadily increased. Shipping rates were under pressure due to declining oversea trade and slower economic growth in countries such China, Brasil and Russia.

Top 10 International Container Shipping Companies by TEU (TEU = twenty-foot equivalent units)

Hanjin Shipping - Top 10 Container Shipping Companies

Hanjin Shipping – Top 10 Container Shipping Companies

Already strong competition increased as competitors such as MAERSK upgraded parts of their fleet with E-Class ships. These mega-ships have more than 165,000 tonnage and length of 400m+ (1,312 ft). The shipping companies MSC and CSCL immediately responded with recently launched ships that are even larger. For those who are following Serena Williams at the US Open: the length of such a ship is 17x of an entire tennis court.

The value of early-warnings

riskmethods customers that were monitoring Hanjin Shipping would have received an early-warning signal far sooner than when the insolvency information became public: back in April we informed customers about Hanjin applying to its creditors for debt restructuring. Debt restructuring is often a strong early-warning signal of enterprises to avoid formal insolvency proceedings. Many other, even earlier signals were detected from riskmethods Risk Intelligence as well. Valuable time for designing alternative scenarios and mitigate the impact could be saved.

Some US ports even stopped operating Hanjin ships and have began turning away its ships after Hanjin filed for bankruptcy protection. We bet there are still many of enterprises in the market that are not aware that their containers won´t be operated by US ports (i.e. Savannah) or Hanjin´s vessels have dropped anchor off the coast and canceled plans to berth in the ports as reported from L.A. and Long Beach. Other ports—including those in Shanghai and Xiamen in China, Valencia, Spain had blocked access to Hanjin ships too – they are concerned that Hianjin wouldn’t be able to pay fees.

 

Shipping rates (12 month timeframe based on HARPEX Index)

 

Harpex Index 12 months

Harpex Index 12 months

Consequences of a single supply disruption can be huge and easily lead to 3m-digit revenue losses: Volkswagen recently couldn’t produce 20,000+ cars as the supply of seat-parts and transmissions was disrupted. We guess there will be some hard hits as Hanjin accounts for around 7 % of the Asia-U.S. cargo trade.

Affects from the fallout are already reverberating throughout the market. Vancouver’s Seaspan Corporation, the world’s largest independent container-ship leasing company will be significantly impacted:

According SEC filings, Seaspan´s charters for Hanjin alone represent $ 363.7 million in contracted revenue. LG Electronics told Reuters it was canceling orders with Hanjin and was seeking alternatives to ship its freight. Reuters reports that LG is also making contingency plans for cargo already on board Hanjin ships in the event that the vessels are seized. The effect on smaller electronic devices such as mobile phones or semiconductors will be minimal as they are usually transported by air, but electronics such as home appliances are transported by sea and will be impacted significantly.

But, there is always a silver lining – for someone: Hyundai Merchant Marine Co. might profit from Hianjin’s disaster as the Korean government stated that Hyundai may buy healthy assets from the troubled rival.

 

One of the most important rules in Risk Management is: Time is money!

Did you receive early warnings about the evolving situation? Did you leverage the 4-month advantage and mitigate the threat? How do you measure the value of beating your competition to the remaining supply, meeting your deadlines while increasing your revenue? Being a hero in procurement and supply chain has never been easier. Ignorance concerning supply chain disruptions costs money and reputation – knowing the relevant risks creates competitive advantage.

 

Webinar Hanjin Shipping bankruptcy

We have set up a Webinar for Friday 09th at 3pm CET | 9am EST to share an update on the event. Additionally we will use the example of Hanjin Shipping’s filing for bankruptcy, how our solution helps you to identify crises earlier and mitigate risks before your competition get aware of it.

Please register here: https://attendee.gotowebinar.com/register/2663301213498617857

Or contact us now: info@riskmethods.net

Get more information about the Hanjin bankruptcy and stay up to date.

Heiko Schwarz is the Founder and Managing Director of riskmethods, responsible for Sales, Marketing and Business Development. Heiko has been working in the software business for 16 years, with 13 years in different areas of the strategic purchasing market. He has excellent knowledge in procurement, supply management and risk management and has been successfully helping supply chain and procurement organizations implement solutions to increase performance, reduce costs and minimize risks.

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