By Hyunjoo Jin and Se Young Lee
SEOUL (Reuters) – The collapse of South Korea’s Hanjin Shipping Co Ltd sent ripples though global trade on Thursday, as the country’s largest port turned away its ships and as some manufacturers scrambled for freight alternatives.
Hanjin on Wednesday filed for court receivership after its banks decided to end financial support, and ports from China to Spain, the United States and Canada have refused entry to Hanjin vessels in what is traditionally the industry’s busiest season ahead of the year-end holidays.
An official with Hanjin Shipping in Busan confirmed that its vessels were not entering the southern city’s port as container lashing providers deny service on concerns that they will not be paid. The company was also worried that the ships may be seized by creditors.
LG Electronics Inc, the world’s No.2 maker of TVs, told Reuters it was cancelling orders with Hanjin and was seeking alternatives to ship its freight.
An executive at the Korea International Freight Forwarders Association said on Wednesday he had been inundated with calls from cargo owners worried about the fate of their shipments in transit to the United States and Europe.
While mobile phones and semiconductors are carried by air, other electronics like home appliances are shipped by sea.
“This will have an impact on the entire industry,” the official said.
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. It would be difficult to find alternative ships given high seasonal demand from August to October.
The ministry said it would ask local rival Hyundai Merchant Marine to supply vessels to cover some of Hanjin’s routes to the United States and Europe, while also seeking help from overseas carriers.
LG Electronics told Reuters it was setting up contingency plans for cargo already on board Hanjin ships in the event the vessels are seized. She did not comment on exact volumes of cargo.
Hanjin is the world’s seventh-largest container shipper, and a bankruptcy would be the industry’s largest ever in terms of capacity, according to consultancy Alphaliner, exceeding the 1986 collapse of United States Lines.
Global shipping firms have been swamped by overcapacity and sluggish demand, with Hanjin booking a net loss of 473 billion won ($423 million) in the first half of the year.
South Korea’s ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring.
The Korea Economic Daily said container rates from Busan to Los Angeles jumped 55% while fees for Korea-Panama-U.S. East Coast rose 50%, citing shipping industry officials.
State-run think tank Korea Maritime Institute estimated that shipping rates on Busan to U.S. routes would rise 27% and Busan to Europe routes would rise 47% in the near term, causing Korean exporters additional shipping costs of about 440.7 billion won per year.
($1 = 1,119.0000 won)
(Reporting by Hyunjoo Jin and Se Young Lee; Writing by Tony Munroe; Editing by Edwina Gibbs)