Published: Sun, September 11, 2016
Economy | By Melissa Porter

Container Ships Stranded At Sea After South Korean Company Goes Bankrupt

The collapse of Hanjin Shipping, South Korea's biggest container shipping line, has sparked concerns the vessels will not be able to pay docking fees and handling charges, or their cargo might be seized by creditors, prompting many ports in the US, Asia and Europe to turn them away.

Since Hanjin, which is South Korea's largest shipping line, filed for bankruptcy protection, dozens of ships carrying more than half a million containers have been denied access to ports around the world. A US federal judge on Tuesday temporarily granted Hanjin's request for protection from its creditors and scheduled a hearing for Friday. The company was the seventh-largest shipping line in the world until it declared bankruptcy August 31, leaving an enormous amount of cargo stranded at sea.

Hanjin now has 43 ships en route to deliver goods and has "no idea when their cargo will be unloaded", CEO of the maritime analysis outfit SeaIntel Lars Jensen said to the Journal.

Shippers with cargo on Hanjin ships right now are in a tough spot.

The company's efforts to extend its debts and sell off assets came to a head last month, when creditors led by Korea Development Bank refused to approve Hanjin's restructuring plan.

Hanjin Shipping was handling almost 8 percent of the trans-Pacific trade volume for the US market, and with its container ships marooned offshore, major retailers have been scrambling to devise contingency plans to get their merchandise into stores.

Hyundai shipping containers are seen on a Hanjin Shipping Co ship which stranded outside the Port of Long Beach, California, September 8, 2016.

Last week, the Montevideo was arrested by U.S. Marshalls after fuel suppliers laid claim on the massive ship.

"We are at a very precarious economic situation", said John Martin, a maritime economist and consultant to ports around the country.

Hanjin Shipping entered court receivership on September 1, after its creditors halted financial support to the debt-ridden shipper. The value of the South Korean exports loaded on these ships is estimated to be 1.27 trillion won (US$1.16 billion). Bookings for the ship have reached more than 90 percent, of which the two electronics makers accounted for about 60 percent, according to Hyundai Merchant.

Samsung worries the shipping hold-up could affect holiday shoppers.

However, the shipping company's parent, Hanjin Group, has pledged to raise 100bn won ($90m) - although there are doubts as to whether that would be enough to cover the cost of unloading cargo.

The South Korean government said Saturday it will work with the court, Hanjin Shipping, Hanjin Group and creditors to solve financial issues faced by the company in unloading cargo.

Reuters said that Hanjin filed for what is known as Chapter 15 bankruptcy protection in the United States and sought an order recognizing proceedings in South Korea and protecting its USA assets. The court ruling will preclude creditors from seizing the shipping company's assets in the United States and proceeding with other legal steps.

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