America’s Supply Chain ‘Is Unraveling’ – Ships Stuck at Sea as Major Carrier Files for Bankruptcy

The bankruptcy of just one company is disrupting world trade and the supply chain that serves US retailers.

The Hanjin Shipping Company of South Korea, a major carrier of cargo containers, filed for bankruptcy Wednesday. That left three giant container ships – containing millions of products — stuck 40 miles off of America’s largest port, Los Angeles, The Wall Street Journal reported. Hanjin is apparently fearful its ships will be seized by creditors.

Just as bad, Hanjin — the seventh largest shipper in the world — is not accepting new freight at its terminals. That means cargo containers, including some with food, are not moving. One expert estimated that Hanjin ships move 25,000 shipping containers each day across the Pacific. Those containers contain every type of product that Americans consume, including items found in Walmarts, in small-town groceries, and through online retailers.

‘Everything Is Unraveling’

Port terminals were turning away Hanjin containers, which means US companies were unable to export goods to other countries. That move alone could seriously hurt smaller companies who rely on their business with Hanjin.

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“Everything is unraveling,” Peter Schneider, a vice-president at TGS Transportation in California, told The Journal.

Ports around the world — including those in Georgia (US), China and Spain — are not letting Hanjin ships dock because officials are afraid the company cannot pay docking fees. Port authorities fear docks will become jammed if creditors seize a ship. At least one ship — the Hanjin Rome — has already been seized by creditors in Singapore.

Union longshoremen in South Korea refused to load a Hanjin vessel because of unpaid dues. The ship turned around and left the port.

Hanjin owns the majority stake in the largest terminal at the Port of Long Beach, The Los Angeles Times reported. It is also the one of the largest shippers using the port of Seattle.

Shipping Industry Could Collapse

Hanjin declared bankruptcy after operating at a loss all year. It is the largest shipping company in South Korea.

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Hanjin’s bankruptcy might be the beginning of chaos in the global supply chain because many other shippers are operating at a loss, Bloomberg reported. Shipping companies have lost around $5 billion since the beginning of 2016.

Higher Prices Coming?

In the short-term, Hanjin’s bankruptcy also could lead to higher prices on electronics, simply because it could increase shipping rates on the lanes normally occupied by Hanjin ships by as much as 55%, Reuters reported. Two major electronics companies, Samsung and LG, are based in Korea.

It looks as if the world’s supply chain is far more fragile than we thought.

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