September 1, 2016

Hanjin Shipping's bankruptcy sends spot sea-container rates soaring

Increase of 42 percent on 40-foot boxes from Shanghai to Los Angeles, Drewry says.

By DC Velocity Staff

The sudden bankruptcy of Korean container line Hanjin Shipping Co. Ltd. has sent non-contract, or spot, rates soaring on major routes from Asia, with prices spiking 42 percent on the movements of 40-foot equivalent unit (FEU) boxes from Shanghai to Los Angeles, according to data published today by U.K.-based Drewry Shipping Consultants Ltd.

Spot rates jumped 19 percent on similar boxes moving from Shanghai to New York, Drewry said. On the Shanghai-Rotterdam route, perhaps the world's most important shipping lane, spot rates have jumped 39 percent, Drewry said.

The spikes come as the maritime supply chain grapples with the loss of the world's seventh largest container line, which filed for bankruptcy protection yesterday after U.S. and overseas ports refused to accept its vessels. Banks led by the state-run Korea Development Bank (KDB) rejected the parent company's restructuring plan on Tuesday, saying the proposal was inadequate to reduce billions of dollars in debt owed by the carrier.

Taiwanese carrier Evergreen Line, a member along with Hanjin of the five-carrier CKYHE Alliance, said it will not load Hanjin cargo aboard its vessels and will not tender its customers' cargoes to any Hanjin vessels.

The ripple effect of the Hanjin collapse has left shippers worldwide scrambling to find alternatives to get their goods to market. Such a "major upheaval of supply" will lead to "increasing freight costs and tight allocation for several weeks at least," said Richard Heath, general manager of Drewry's World Container Index, which tracks weekly changes in spot rates on 11 East-West routes.

In a statement, the trade group National Retail Federation (NRF) said its members' main concern is getting their goods to store shelves well before the holiday shopping season. "It is understandable that port terminal operators, railroads, trucking companies, and others don't want to do work for Hanjin if they are concerned they won't get paid," Jonathan Gold, NRF's vice president for supply chain and customs policy, said in a statement. "However, we need all parties to work together to find solutions to move this cargo so it does not have a broader impact on the economy," he added.

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