We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • ::COVID-19 COVERAGE::
  • INDUSTRY PRESS ROOM
  • ABOUT
  • CONTACT
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC.
    • Podcast
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Dispatches
      • Empowering Your Performance Edge
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC.
    • Podcast
    • Blogs
      • Analytics & Big Data
      • Best Practices
      • Dispatches
      • Empowering Your Performance Edge
      • Logistics Problem Solving
      • One-Off Sound Off
      • Public Sector Logistics
      • Two Sides of the Logistics Coin
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • MODEX 2020
    • Upload Your Video
Home » Fallout from Hanjin collapse to be amplified by complex web of ship alliances, experts say
newsworthy

Fallout from Hanjin collapse to be amplified by complex web of ship alliances, experts say

September 7, 2016
Mark B. Solomon
No Comments

On Sept. 2, the Port of Virginia, which runs terminals at Norfolk, Newport News and Portsmouth among other facilities, said it wouldn't transfer cargoes laden aboard ships of the bankrupt Korean liner Hanjin Shipping Co. to vessels in the "CKYHE" Alliance, a five-company global carrier compact that Hanjin belonged to. Nor would the port load cargoes from any of the four other members aboard Hanjin's ships, it said.

In a statement, the port said that it acted "after careful consideration" and at the behest of the four remaining carriers—Chinese carrier Cosco Group Container Lines, Japanese firm "K" Line, and Taiwanese firms Yang Ming Line and Evergreen Line. The port's actions underscore a key ripple effect of the largest bankruptcy in shipping industry: That the damage caused by Hanjin's collapse could stretch well beyond its customers and partners to affect users of other liner companies. These businesses may never have thought of booking their cargoes on Hanjin vessels, but due to the interlocking web of containership alliances, where carrier members swap vessel slots and move boxes around accordingly, that's where their goods ended up.

Such can be the blowback in the environment of ship alliances, which shippers, freight forwarders, and beneficial cargo owners (BCO) never much cared for, and will likely care for even less as the supply chain grapples with the collapse of the world's seventh largest liner company. Vessel-sharing agreements began in the mid to late 1980s as a way for carriers to improve capacity utilization and to defray the high cost of investing in large ships. They have become even larger in scope in recent years as the soaring costs of ever-larger ships needed to stay economically competitive made it difficult for an individual liner to invest outside of an alliance structure.

Liner interests maintain that their mode remains the most efficient mode for transporting global cargoes, and that the alliance structures continue to make this possible by using vessel assets as effectively as possible, and offering improved services to their customers.

However, shippers, BCOs and third parties have griped that the proliferation of alliances and the big ships that accompany them have strained port capacity, especially on the U.S. West Coast, causing shipment delays and backlogs.

The fallout from the Hanjin bankruptcy is likely to put unprecedented pressure on the alliance model. Hanjin contributed 21 vessels and nearly 177,000 twenty-foot equivalent unit (TEU) containers to the CKHYE alliance on the eastbound trades from Asia to the U.S. West Coast, according to data from U.K. maritime and logistics consultancy Drewry. On the eastbound Asia-East Coast trades, Hanjin contributed 13 vessels and about 84,000 TEUs, Drewry said. All told, Hanjin accounted for 8 percent of the container capacity of the eastbound trans-Pacific market, and 3 percent of global container capacity with about 600,000 TEUs.

Alan Murphy, CEO of shipping consultancy SeaIntel Maritime Analysis, told the U.K. publication The Loadstar that the impact of Hanjin's collapse would be felt by alliance partners and its customers, and by those involved in the many vessel-sharing agreements that operate in the non-alliance trades. "Shippers are likely to be surprised by the extent of such co-operation, and even though they are not customers of Hanjin they may still be heavily affected by the turmoil," Murphy was quoted as saying in the publication. The magnitude of the disruptions will largely depend on how quickly and effectively the CKYHE alliance carriers respond to the challenges, he added.

Simon Heaney, an analyst for Drewry, wrote late last week that while Hanjin's partners have begun to arrange for alternate means of transport, there will be "inevitable delays," especially for boxes that are stuck on the dozens of Hanjin ships that have been denied access to ports worldwide until it is determined who will pay ports and terminals to unload the cargoes. Shippers now moving their boxes from Hanjin to other carriers will face additional costs, while terminals will have problems moving containers to meet different vessels, as well as uncertainty over who will pay the handling fees, Heaney wrote. The remaining members of the CKYHE Alliance will have to fill the gaps left by Hanjin's exit, but such steps will disrupt its network scheduling for months, Heaney said.

Hanjin planned to leave the alliance early next year to join a new compact comprised of six carriers, including "K" Line and Yang Ming. Hanjin's demise is likely to diminish the competitiveness of the new alliance, said Heaney.

Transportation Maritime & Ocean
KEYWORDS "K" Line COSCO Container Lines Americas Inc. Drewry Shipping Consultants Evergreen Marine Corp. Hanjin Logistics SeaIntel Yang Ming Marine Transport
  • Related Articles

    Spot van truckload rates out of L.A. spike in wake of Hanjin collapse

    Inland port complex in northwest Georgia to be built under public-private partnership

    Korea Line, bulk shipping company, awarded Hanjin's Asia-U.S. assets

Marksolomon
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

Recent Articles by Mark Solomon

Coming together for road safety: interview with Joshua Girard

Off the rails

Freight rate spikes shaking up the C-suite

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • IBM survey says digitalization trends will sweep trucking industry by 2030

  • Gartner survey signals increased investment in resilience over the next two years

  • What Level of Automation is Right for Your Warehouse?

  • Growing up … and up and up: interview with Sam Bertram

  • Old Dominion adds nine freight service centers to handle business growth

Now Playing on DCV-TV

D92f0dd1 a98c 434a 9e17 30b63ee72c90

Automated Pack-out and Print-Apply System for thredUP

DCV-TV 4: Viewer Contributed
SilMan Industries designed and implemented a mixed polybag-carton system, including automated print and apply, in a new regional Fulfillment Center for thredUP, one of the world’s largest online resale platforms for women’s and kids’ apparel, shoes, and accessories. The Situation Secondhand clothing and online...

FEATURED WHITE PAPERS

  • Time to rethink your lift truck power

  • Warehouse Management System Project Toolkit

  • Solving Talent Management Challenges Now and In the Future

  • Shaping Up Last Mile Delivery to Surpass Customer Expectations

View More

Subscribe to DC Velocity Magazine

GET YOUR FREE SUBSCRIPTION
  • SUBSCRIBE
  • NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2021. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing