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Hanjin Shipping bankruptcy causes surge in freight rates

by ChemOrbis Editorial Team - content@chemorbis.com
  • 12/09/2016 (17:23)
Following the bankruptcy filing by South Korea’s largest container company, Hanjin Shipping Co, freight rates have jumped higher. This was according to media reports quoting sources from Maersk Line. Maersk, the world’s largest container shipping company, described the rise in rates as a short-term reaction to the crisis at Hanjin and said that they have seen an inflow of new customers. South Korea’s second-largest container line, Hyundai Merchant Marine Co, told media sources that they will deploy 13 more vessels to ease the disruption. They also said prices for shipping containers have surged, saying the cost to transport a container from Hong Kong to Los Angeles has risen 40% to the highest level in more than a year.

Shipping analysts believe the rate increases will not last for long. They note that even if Hanjin goes into liquidation, the industry will still face the same oversupply of capacity that it has suffered from in the last few years. They note that the excess capacity has been driven by demand for bigger ships that can carry more containers at lower costs per box and this has resulted in bringing freight rates down to record lows.

This past weekend, Hanjin received a reprieve from a US Bankruptcy court to be able to offload its goods without fear of having its assets seized. The company’s biggest shareholder, Korean Air Lines Co., also agreed to give $54 million in funds to pay for the unloading. There are reported to be 89 ships belonging to the company stuck at sea, carrying an estimated $14 billion worth of goods. Ports in the US, Asia, and Europe have been turning the ships away as port authorities worry about being paid.
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