Hanjin’s ships adrift as food, water dwindling
SOUTH Korea’s cash- strapped Hanjin Shipping Co. is adrift at sea – and in more ways than one.
Hanjin is one of the world’s biggest shipping lines and filed for bankruptcy protection on Sept 4 in Seoul. That’s created a bizarre situation on the high seas for 85 Hanjin ships that have been effectively marooned offshore as ports in the US, 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 South Korean shipping company operates 97 container ships, the giant workhorses of global trade that deliver everything from computers and clothing to televisions and toys. The global shipping disruption comes just as companies are shipping merchandise to fill shelves and warehouses for the end- of-year holiday season.
“Our ships can become ghost ships,” said Kim Ho-kyung, a manager at Hanjin Shipping’s labour union. “Food and water are running down in those ships floating in international waters.”
Last Tuesday, South Korean authorities rushed to piece together a capital injection. Hanjin Group will provide 100 billion won ( RM360 million), including 40 billion won from Chairman Cho Yang-ho, to help contain disruptions in the supply chain, the group said in an emailed statement. 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, Saenuri law maker Kim Gwang Lim said in a statement.
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
Our ships can become ghost ships. Food and water are running down in those ships floating in international waters.
stranded ships, Kim said in the statement.
Hanjin Shipping shares have tumbled 63 per cent this year, compared with a 5.4 per cent gain in the benchmark Kospi index.
The company, meanwhile, 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.
A request for food and water was rejected, said the captain via a satellite phone and who declined to use his name citing company policy. There should be measures to secure the safety of sailors, he said, adding they don’t know how long they should wait at sea.
While Hanjin’s lawyers try to arrange legal cover in 43 countries against ports taking over vessels, some captains are heading for Singapore, Hamburg or Busan in South Korea, where the company hopes the ships won’t be impounded and will be able to unload so that clients can arrange alternative transport.
Hanjin container vessels carry as many as 24 crew each and pack enough food, fresh water and other essentials for several weeks.
A journey across the Pacific from Busan to Los Angeles takes up to 10 days, while a trip via the Suez Canal to Rotterdam could
Kim Ho-kyung, a manager at Hanjin Shipping’s labour union
take a month.
Typically, a vessel that can carry 8,000, 20-foot containers costs about US$ 8,376 to operate per day, according to Drewry Maritime Services, an independent ship consultancy. That ship going at a speed of 17 knots would consume 80 tons to 85 tons of fuel oil a day.
Samsung Electronics said in court filings it had about US$ 38 million of goods on board two Hanjin vessels off the port of Long Beach, California, waiting to be unloaded.
Hanjin Shipping won temporary protection against US creditors from a US court last Tuesday.
Lenders to South Korea’s largest container- shipping company last week rejected a restructuring proposal saying it was insufficient to tide over a cash shortage.
The firm may still need as much as 1.3 trillion won in cash to roll over debt in the wake of losses in four of the last five years, according to its main creditor Korea Development Bank.
Hanjin’s woes show the container- shipping industry is in bad health, limping from one exigency to another since the 2008 global financial crisis brought trading to its knees.
Helped by cheap loans, container lines have hung on even as freight rates to move sneakers to Barbie dolls from Asia to Europe and the US plunged on sluggish demand. From A.P. Moeller-Maersk to Hapag-Lloyd and France’s CMA CGM, companies have tried everything – mergers, acquisitions and cost cuts – while a revival in demand remains elusive.
The global shipping industry has been operating at a loss since the end of 2015, and it’s set to lose about US$ 5 billion this year amid an oversupply of vessels, according Drewry Research.
The financial woes have made terminal operators and marine service suppliers wary of working with Hanjin’s vessels.
Typically, port fees for a ship that can carry 8,000 boxes would be about US$ 35,000 per call.
“Getting ships arrested or stranded would minimise debt exposure for vendors, but it will also get the court to quickly take steps to normalise the company and start making payments,” said Rahul Kapoor, a Singapore-based director at ship consultancy Drewry. — WPBloomberg Maritime