Sadie Keljikian, Express Trade Capital
South Korean Hanjin Shipping has been the talk of the international shipping industry since the company filed for bankruptcy on August 31st.
Shippers all over the world have grappled with declining demand as trade flows have slowed, particularly from China. Hanjin has faced especially enormous financial difficulty in the last year, which came to a head near the end of August, when creditors stopped supporting the company. On August 31st, Hanjin filed for bankruptcy in South Korea and sought recognition in the US under Chapter 15 of the bankruptcy code. Since then, Hanjin has spent much of their time scrambling to reconcile shipments that were still in transit when the company officially filed.
The most notorious aspect of Hanjin’s bankruptcy has been the fate of their ships and cargo. Immediately following the bankruptcy filing, Hanjin’s shipments found themselves with nowhere to go. Ports refused to grant access to the ships, due to uncertainty about who would be responsible for docking fees, container-storage and unloading bills. As a result, nearly $14 billion in cargo was stranded at sea for several weeks. Stranded as well were the crew members of the container ships, as well as a young British filmmaker who gained international attention with her social media coverage of the situation while she was stranded on a Hanjin chartered ship.
Reconciling the massive debt of Hanjin, the ninth largest shipper in the world, has proven difficult. Creditors seized a number of ships when the extent of the company’s struggle came to public attention, but a judge has since decided that all ships chartered by Hanjin must be returned to their owners. The New York Times, among others, has blamed a lack of insolvency planning for the ships becoming stranded, often drawing a comparison with Lehman Brothers’ notorious failure in 2008.
Regardless of the company’s financial future, the lack of planning that led to cargo stranded at sea has undoubtedly harmed Hanjin’s reputation. They will need to demonstrate a remarkable ability to plan and recover in order to thrive after this debacle.
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