Hanjin bankruptcy creates 'serious predicament' for SoCal companies

The sudden bankruptcy of South Korean shipping company Hanjin, one of the world’s largest shipping lines, is being felt at Southern California ports and beyond, as retailers anxiously wait for millions of dollars worth of goods to arrive and exporters scramble to find ships for their products overseas.

“This is a serious predicament for a lot of companies,” said Jock O’Connell, international trade adviser at Beacon Economics. “There’s a lot of containers at sea that aren’t being delivered.”

As of Thursday afternoon, one Hanjin vessel was waiting 40 miles south of the ports, another was anchored in the port of Long Beach inside the breakwater, and a third anchored just outside the breakwater, according to Kip Louttit, executive director of the Marine Exchange of Southern California.

“Everybody on the land side is afraid Hanjin can’t pay its bills," said O’Connell. "So they’re not welcome.”

That means importers and retailers have to wait – no one knows for how long – for their goods to arrive, which could hardly be happening at a worse time because stores are starting to stock-up their shelves for the holiday season.

“Retailers’ main concern is that there is millions of dollars worth of merchandise that needs to be on store shelves that could be impacted by this," said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation in a prepared statement.

"It is understandable that port terminal operators, railroads, trucking companies and others don’t want to do work for Hanjin if they are concerned they won’t get paid. However, we need all parties to work together to find solutions to move this cargo so it does not have a broader impact on the economy,” the statement continued.

Hanjin had been in economic trouble for years due to competition from other shippers, and less demand from global traders. In May, when the company posted its first quarter earning results for 2016, it said in a statement that profit was down due to "record breaking low level of freight rate and increased gap between the supply and demand within the market."

But the bankruptcy caught many people off guard, according to Norman W. Harris III, president of the Los Angeles Customs Brokers and Freight Forwarders Association.

“I don’t think anyone ever imagined that the banks would force such a major steamship company into bankruptcy so suddenly,” said Harris. “The first effect is a lot of confusion."

Harris said even companies that don’t have goods aboard Hanjin vessels are being effected. Shipping rates for all companies quickly shot up. That's because Hanjin had been a big player in the shipping world. With it out, there are fewer options for companies that need their products transported across the sea. The remaining shippers can raise their prices without losing business.

"It ends up costing more money for everyone," said Harris.

Companies here in the U.S., which were scheduled to export their goods on Hanjin ships are being told not to bring their shipments to the ports, according to O’Connell.

"There's a lot of export containers that are sitting around California that ideally would go onto a Hanjin vessel to world markets, and they're not moving," he said.