from Zero Hedge:
The fallout from last week’s historic bankruptcy of one of the world’s biggest shipping lines, Hanjin Shipping, continued with little resolution with as much as $14 billion worth of cargo stranded at sea according to the WSJ, sending cargo owners scurrying to try to recover their goods and get them to customers. Since Hanjin’s bankruptcy protection filing, dozens of ships carrying more than half a million cargo containers have been denied access to ports around the world because of uncertainty about who would pay docking fees, container-storage and unloading bills. Some of those ships have been seized by the company’s creditors.
As Bloomberg adds, 85 Hanjin ships that have been effectively marooned offshore as ports in the U.S., Asia and Europe have turned the company’s ships away. The worry is that Hanjin ships won’t be able to pay port fees or their contents might be seized by creditors, which would disrupt port operations. The global shipping disruption comes just as companies are shipping merchandise to fill shelves and warehouses for the end-of-year holiday season.
Earlier this week, South Korean authorities rushed to piece together a capital injection. Hanjin Group will provide 100 billion won ($90 million), including 40 billion won from Chairman Cho Yang Ho, to help contain disruptions in the supply chain. At the same time, South Korea’s ruling Saenuri Party asked the government to offer about 100 billion won in low-interest loans to the shipping line if Hanjin Group provides collateral, in what is effectively a government funded DIP loan.
Some have calculated that the funding package won’t be enough: South Korea’s Ministry of Oceans and Fisheries estimates Hanjin Shipping needs more than 600 billion won to cover unpaid costs like fuel, including about 100 billion won immediately for payments such as to port operators to unload cargo from stranded ships.
Meanwhile, in addition to the stranded cargo, there are other more pressing problems:“Our ships can become ghost ships,” said Kim Ho Kyung, a manager at Hanjin Shipping’s labor union.
“Food and water are running down in those ships floating in international waters.” As a result, The company has started providing food, water and daily necessities to crews on six Hanjin ships anchored at ports including Rotterdam and Singapore. About 70 container movers and 15 bulk ships are stranded at 50 ports in 26 countries, according to Hanjin. One Hanjin captain operating a ship in international waters near Japan said his vessel has been given permission to enter a Japanese port Wednesday to unload cargo, but will be required to head back out soon after.
However the biggest threat is that being faced by Hanjin’s clients, who now find themselves with no products, and recourse.
About 95% of the world’s manufactured goods—from dresses to televisions—are transported in shipping containers. Though Hanjin accounts for only about 3.2% of global container capacity, the disruption, which comes as retailers prepare to stock their shelves for the holiday season, is expected to be costly, as companies scramble to book their goods on other carriers.
Analysts don’t expect the snarl to leave U.S. retailers with inventory shortfalls for the holidays, but the longer the logjam drags on, the greater the risk.
Some of those most reliant on Hanjin, such as Samsung Electronics, which has said it has cargo valued at about $38 million stranded on Hanjin ships in international waters, are taking alternative measures: the company said it is considering chartering 16 cargo planes to fulfill its shipment contracts, mostly to the U.S. “We’re passengers on a bus, and we’re being told we can’t get off,” Evan Jones, a lawyer for the company, said Tuesday.
For now US retailers aren’t feeling too much pain, as Nate Herman, a senior vice president for the American Apparel & Footwear Association, said: “This is not impacting store shelves now,” however he added that “It will impact store shelves if the situation isn’t resolved.” On Tuesday, the association, which represents manufacturers and retailers, held a conference call with 150 members. “People are still trying to figure out how to get their boxes off the boat and move them,” Mr. Herman said
The problem retailers face is that there is little precedent how to deal with the fallout. While Hanjin was granted protection by bankruptcy courts in Korea and the U.S.,conditions are “bordering chaos,” said Lars Jensen, chief executive of SeaIntelligence Consulting in Copenhagen.
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