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South Korea Throws a Lifeline to Hanjin Shipping

By 24/7 Staff / / Sept 6th, 2016

South Korea's government has said it might provide Hanjin Shipping with loans to keep the bankrupt giant afloat.

According to the BBC, officials said Seoul could give 100bn won ($91m; £68m) or more in long-term funding at low interest rates if Hanjin provided the necessary collateral.

The shipping company's shares rose more than 20% on the news of a lifeline.

Hanjin's collapse has left much of its fleet stranded at sea, unable to dock over fears that vessels be seized by creditors.

Parent company Hanjin Group on Tuesday also said it would inject 60bn won in fresh funds to resolve the disruptions to the cargo transport currently stuck at sea.

Chairman Cho Yang-ho would contribute another 40bn won from private funds, according to a company statement.

Hanjin Group is a huge, family-dominated conglomerate which also includes Korean Air (and Korean Air Cargo).

Hanjin bankruptcy gives shippers crash course in risk mitigation
The bankruptcy of Hanjin Shipping will have shippers scrambling for transport alternatives during Peak Season, as global seaports also struggle to find ways of mitigating the impact of this colossal event.

Rick Bridges of Roanoke Trade Insurance

“logistics managers should be cancelling bookings with Hanjin Shipping”Rick Bridges,
Roanoke Trade Insurance

Hanjin operates 98 container ships totalling 600,000 twenty-foot equivalent units (TEUs), 11 port terminals and 74 deployments.

The largest container line bankruptcy in history already has other carriers scrambling to accommodate shippers, too.

CKYHE Alliance partner, Evergreen Line, for example, is activating a “contingency plan.” According to spokesmen, no Evergreen Line cargo will be loaded on the vessels operated by Hanjin and Hanjin cargo will not be allowed to load on the vessels operated by Evergreen Line.

“Evergreen Line, as the Carrier to issue the Bill of Lading for the shipment under Evergreen Line's custody, will not prejudice to cargo owner's rights,” added spokesmen. “Evergreen Line undertakes all carrier's obligations and responsibilities under the governing Bill of Lading clauses will remain binding in all circumstances.”

As reported in Logistics Management, the seventh largest maritime container line had been enduring a long period of economic distress before this collapse. Shippers who had not anticipated the event are now being schooled in risk management.

According to Rick Bridges of Roanoke Trade Insurance logistics managers should be cancelling bookings with Hanjin and look for space with other container lines.

Meanwhile, they should take the following precautions:

  • The shipper should take all reasonable measures to protect the cargo and to ensure it is delivered to the intended destination should Hanjin fail to complete the voyage(s). In such cases, the shipper will likely be reimbursed for charges properly and reasonably incurred via the cargo insurance provider. 
  • The shipper should confirm that insured cargo will continue to be covered for physical loss or damage even if insolvency is the cause of physical loss or damage.

“It is also suggested that your company consider the possibility of abandonment of freight and how to best protect against non-payment of demurrage and storage charges,” said Bridges.

Patrick Burnson, Logistics Management, Executive Editor


Government officials in Seoul said that more than $90m of public funds could be available to the stricken company if it could also raise money from other sources. This would be to help the company in the longer-term.

The immediate problem, though, is the company's ships out at sea because ports say they won't accept them without being sure that port-fees will be paid.

These vessels only have fuel and food for crews for a matter of weeks. Hanjin Shipping's parent company says it will try to raise the $90m needed to sort this out.

Whatever funds are raised, the economics of the industry is unlikely to change soon. Nobody is forecasting a big rise in demand for container shipping.

The question may be whether the South Korea Government is prepared to bail out a company which would find it hard to survive otherwise.

Source: BBC - 24/7 Support including Chat

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