Hanjin Shipping Endangers Holiday Shopping in the US
U.S. retailers are anxious their supplies and stock of goods are in peril after Hanjin Shipping, a major South Korean shipping company filed for bankruptcy protection CNN Money reported.
Hanjin Shipping, one of the biggest shipping company in the world, took in nearly 8% of transpacific trade for the U.S. market. Its possible collapsed can spell danger for US retailers. The worst case scenario for retailers would be to run out of stock during the upcoming holiday shopping season.
The development "presents an enormous challenge ... [and] the prospect of harm is significant and apparent," according to a letter to the U.S. government from Sandra Kennedy, the president of the Retail Industry Leaders Association, CNN Money said
The association's letter urgently requesting the U.S. Department of Commerce and the Federal Maritime Commission to work with ports, cargo handlers, and the South Korean government to "immediately resolve the cargo disruption and mitigate the harms posed on all concerned parties."
Hanjin is requesting for help to make sure its ships are allowed to leave ports and deliver their cargo.
The company recently announced that "terminal operators, ports and other cargo handlers are refusing to release cargo without assurances that payments will be made."
Earlier this week Hanjin buckled over to a devastating combination of weak global trade, oversupply in container ships and brutal competition from rivals.
Hanjin is among many shipping giants that have struggled since the 2008 financial crisis.
The South Korean behemoth had been working hard on a debt restructuring program in recent months to try to shore up its battered finances. However, its plans failed to satisfy its Korean bank creditors who decided Tuesday to turn off the money tap endangering the company from not having enough cash to operate its day to day activities.
Some Hanjin vessels have already been detained or turned away from ports, the company said. Going into receivership, under which a court will decide the firm's fate, will add to the headache. "It is very likely that all our assets will be frozen in less than a week," a company spokesperson said Tuesday.
CNN Money opined that nearly 90% of the world's cargo are transported by sea, and when demand drops, shipping companies are among the first to get hit. A major factor in the current crisis is China's massive economic slowdown which is the world's largest goods exporter. Another is overcapacity because in recent years major shipping companies produced bigger vessels to increase efficiency and boost profits. Unluckily, the strategy backfired as the extra competition actually forced down prices in cargo shipping services. Some ships are even now hanging out in international ports, empty and waiting for cargo.