Hanjin Shipping files for bankruptcy in South Korea

[BillBoard]

http://www.cnbc.com/2016/08/31/hanji...rt-yonhap.html

The Korea International Trade Association said on Thursday that about 10 Hanjin vessels in China have been either seized or were expected to seized by charterers, port authorities or other parties. That adds to one other ship seized in Singapore by a creditor earlier this week.
The collapse comes at a time of high seasonal demand for the shipping industry ahead of the year-end holidays.
Freight rates on some routes where Hanjin operates many ships have surged.
The cost of shipping a 40-foot container on the Busan-Los Angeles route has jumped about 55 percent, from $1,100 to around $1,700, according to South Korea-based freight forwarder Pantos Logistics. Rates between South Korea and the U.S. east coast via Panama have risen about 50 percent to $2,400, it added. South Korea's maritime ministry said on Wednesday that Hanjin's woes would affect cargo exports for two or three months, with about 540,000 TEU of cargo already loaded on Hanjin vessels and facing delays.

...
Get ready for tires and parts to go up in price.

[santafe2]

Re: Hanjin Shipping files for bankruptcy in South Korea

Get ready for tires and parts to go up in price.

It had to happen. The industry oversupply is massive. Shipping is still very cheap.

[GRG55]

Re: Hanjin Shipping files for bankruptcy in South Korea

It had to happen. The industry oversupply is massive. Shipping is still very cheap.

Yet another example of far too much capacity being created with the aid of abundant liquidity intersecting with cheap credit. Thank you Central Banks of the world.

This is NOT a problem of not enough demand. In due course, despite the unconstrained efforts of Central Banks, 'gravity' will prevail and some of that capacity in each over invested, oversupplied sector will be cleared by the market.

[santafe2]

Re: Hanjin Shipping files for bankruptcy in South Korea

Yet another example of far too much capacity being created with the aid of abundant liquidity intersecting with cheap credit. Thank you Central Banks of the world.

This is NOT a problem of not enough demand. In due course, despite the unconstrained efforts of Central Banks, 'gravity' will prevail and some of that capacity in each over invested, oversupplied sector will be cleared by the market.

This may not be the thread to dive deep into the gravity issue but an over supply of cash is driving many businesses into the ground. I know about this freighter issue because I was responsible for moving many hundreds of containers of solar panels from Asia to the US. During the height of the Hawaiian solar market we were the first distributor to understand that we could take the long route from any major port in Asia to the West Coast of the US and from the West Coast back to Oahu for about half the price one could ship from Asia directly to Hawaii. It was simply an issue of overcapacity in the major sea lanes. It cost less to move a solar panel from South Korea to Oakland than from Oakland to our other warehouse in Reno. And more amazing, it cost less to move a solar panel from Korea to Oakland and back to Oahu than it cost to move one from Oakland to Reno.

There's an additional issue today. Scrap metal is so cheap, nearly worthless freighters can't be scrapped but new product continues to be produced. In this business, I thought the bottom came in 2009 and then again this February but I wonder if we can understand where the bottom will be set in a world where cash is free and investment timelines are long.

[jk]

Re: Hanjin Shipping files for bankruptcy in South Korea

This may not be the thread to dive deep into the gravity issue but an over supply of cash is driving many businesses into the ground. I know about this freighter issue because I was responsible for moving many hundreds of containers of solar panels from Asia to the US. During the height of the Hawaiian solar market we were the first distributor to understand that we could take the long route from any major port in Asia to the West Coast of the US and from the West Coast back to Oahu for about half the price one could ship from Asia directly to Hawaii. It was simply an issue of overcapacity in the major sea lanes. It cost less to move a solar panel from South Korea to Oakland than from Oakland to our other warehouse in Reno. And more amazing, it cost less to move a solar panel from Korea to Oakland and back to Oahu than it cost to move one from Oakland to Reno.

There's an additional issue today. Scrap metal is so cheap, nearly worthless freighters can't be scrapped but new product continues to be produced. In this business, I thought the bottom came in 2009 and then again this February but I wonder if we can understand where the bottom will be set in a world where cash is free and investment timelines are long.

someone made money building those ships.

[GRG55]

Re: Hanjin Shipping files for bankruptcy in South Korea

someone made money building those ships.

Yes, and someone made money building all the oil drilling rigs now sitting idle. The same can be illustrated repeatedly in other sectors in economies all over the world. Unfortunately just because the first in the supply chain made a profit does not mean the capital was invested rationally by those writing the cheque. And an economy that persists in squandering capital (which used to be a scarce commodity) inefficiently is destined, eventually, to experience some painful outcomes. The only exception is the one nation that has the exorbitant privilege.

[jk]

Re: Hanjin Shipping files for bankruptcy in South Korea

... An economy that persists in squandering capital (which used to be a scarce commodity) inefficiently is destined, eventually, to experience some painful outcomes. The only exception is the one nation that has the exorbitant privilege.

u.s.a.! U.s.a.! U.s.a.!



i was about to add that we were the no. 1 country in squandering capital, but i think china may have exceeded us.

[GRG55]

Re: Hanjin Shipping files for bankruptcy in South Korea

u.s.a.! U.s.a.! U.s.a.!



i was about to add that we were the no. 1 country in squandering capital, but i think china may have exceeded us.

Agree completely.
Is it any wonder China is at the forefront of trying to lever the Yuan (perhaps via SDR) into some semblance of the privileged position the US$ currently enjoys?
If Shilling's deflationary scenario is even half correct the US$ is going to soar, the US economy will go ballistic and the rest of the world outside the Dollar bloc (NAFTA + UK) can say bye, bye to their economies.
Maybe we need a thread titled "The US$ Takes Down the ROW"

[santafe2]

Re: Hanjin Shipping files for bankruptcy in South Korea

u.s.a.! U.s.a.! U.s.a.!

You used two caps jk. I felt like I was reading Spanish with an introductory exclamation.

[santafe2]

Re: Hanjin Shipping files for bankruptcy in South Korea

If Shilling's deflationary scenario is even half correct the US$ is going to soar, the US economy will go ballistic and the rest of the world outside the Dollar bloc (NAFTA + UK) can say bye, bye to their economies.
Maybe we need a thread titled "The US$ Takes Down the ROW"

Yes, ROW outside our trading partnerships. TPP or a TPP like treaty will greatly expand the "Dollar bloc".

[Chris Coles]

Re: Hanjin Shipping files for bankruptcy in South Korea

Yes, and someone made money building all the oil drilling rigs now sitting idle. The same can be illustrated repeatedly in other sectors in economies all over the world. Unfortunately just because the first in the supply chain made a profit does not mean the capital was invested rationally by those writing the cheque. And an economy that persists in squandering capital (which used to be a scarce commodity) inefficiently is destined, eventually, to experience some painful outcomes. The only exception is the one nation that has the exorbitant privilege.

You have reminded me of something I read many decades ago about how a certain Greek shipping magnate who became so wealthy by buying up idle ships at the bottom of the great depression for less than scrap value. If these projections are correct, then there will be many very good condition ships lying idle at the bottom of what everyone believes is coming down the line. Even better if they are then owned by the receiver, rather than the original purchaser. - Food for thought?

[thriftyandboringinohio]

Re: Hanjin Shipping files for bankruptcy in South Korea

The Hanjin situation is interesting from the view of the cargo owner.
Their property has been seized because the ports and truck lines expect they will never be paid by Hanjin for offloading the containers.

Some arrangement similar to FDIC deposit insurance is required in the industry to protect the cargo owners.
Perhaps a surety bond that will pay to offload a ship in case like this.
Samsung has about $38 million of goods stuck on these vessels.

[BillBoard]

Re: Hanjin Shipping files for bankruptcy in South Korea

The Hanjin situation is interesting from the view of the cargo owner.
Their property has been seized because the ports and truck lines expect they will never be paid by Hanjin for offloading the containers.

Some arrangement similar to FDIC deposit insurance is required in the industry to protect the cargo owners.
Perhaps a surety bond that will pay to offload a ship in case like this.
Samsung has about $38 million of goods stuck on these vessels.

You know, that is a really great idea. I have a friend with 7 containers stuck on the water and one in Singapore.

[Chris Coles]

Re: Hanjin Shipping files for bankruptcy in South Korea

You know, that is a really great idea. I have a friend with 7 containers stuck on the water and one in Singapore.

They need to join their local section of the Master Mariners Association. This a bit obtuse as I was a member of a Master Mariners club, (that had membership right across the planet), in the South of England port of Southampton way back in the 1970's but cannot find an immediate reference for you. However, every major port has some form of club for Master Mariners and they in turn have direct contact with every senior port official. My past experience was crucial to some of my early successes. Master Mariners are a very interesting group. On board ship they are isolated by their command; yet I found they were very approachable when on shore. Well worth the effort to make some form of contact with local master mariners; they hold the key to many things in every major port.

[Chris Coles]

Re: Hanjin Shipping files for bankruptcy in South Korea

It has taken me all day to remember the official name; The International Cargo Handling Coordination Association ICHCA http://ichca.com/

Mine was http://www.ichca.org.uk/

Get your friends to join ICHCA, they will find themselves amongst a group, mainly Master Mariners, that know everyone. Every port manager; opens doors you never would believe ever existed. Sorry it took all day to remember.