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Why billions of dollars of goods are stuck at sea

226 pointsby situationistaover 8 years ago

24 comments

Animatsover 8 years ago
This is a mess because Hanjin&#x27;s top management was in denial about the possibility of bankruptcy. Just like the typical startup. They&#x27;ve been trying for months to get a bailout deal from somebody, anybody - a merger, loans, their parent chaebol, their stockholders (Korean Air is the largest), or the S. Korean government. Everybody turned them down. There&#x27;s too much container ship capacity right now; nobody needed Hanjin&#x27;s fleet.<p>Management didn&#x27;t have a plan for an orderly shutdown, so when the company went into receivership, everything just stopped. Just like many failing startups, the web site continued to indicate nothing was wrong. They&#x27;ve now put up a spreadsheet with current vessel status, but that took weeks. The status has entries such as &quot;Arrested&quot;, &quot;Unpaid Canal Fee (Suez)&quot;, &quot;Arrested by Bunker Supply Co. (Panama Canal)&quot;, and &quot;Port labor rejected&quot; (they&#x27;re way behind on their payments)&quot;. There are about 500,000 containers stuck with Hanjin.<p>Admiralty law is especially harsh on bankrupt shipowners. In many jurisdictions, ships can be seized regardless of bankruptcy status. Some Hanjin ships have been seized. Some are waiting offshore until somebody puts up the money for unloading and refueling. There were four stuck off the coast of California. Hanjin has come up with enough money to get two of them into the port of Los Angeles and unloaded. Those appear to be ships Hanjin leased, rather than owned, and a court in Korea has told them to unload and return all their leased ships ASAP. Courts in about 15 countries are involved, trying to untangle this mess. The US Maritime Commission is trying to get cargoes unloaded, but they don&#x27;t have much authority. Ports are unwilling to let Hanjin ships in unless they have enough money to fuel up, pay a crew, and leave - they don&#x27;t want them stuck at their docks. Meanwhile, some of the ships are running low on food and water.<p>Then there&#x27;s the empty container mess. In the container business, you pay a per-day fee when you hold someone else&#x27;s container, so everyone tries to return their borrowed empties quickly. But most of Hanjin&#x27;s empty container return points are shut down, and are not taking empties back. Many of those empties are on trailer bodies, and are tying up trailers needed to move freight. Truckers are angry about this. Shippers are having trouble getting enough empty trailers.<p>This will all get unwound, but it&#x27;s going to take weeks or months. There are going to be really big post-Xmas sales as the delayed cargo is unloaded.
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keebEzover 8 years ago
Flexport did a great blog post on the situation: <a href="https:&#x2F;&#x2F;www.flexport.com&#x2F;blog&#x2F;on-hanjin&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.flexport.com&#x2F;blog&#x2F;on-hanjin&#x2F;</a><p>Also of interest, they also did a game theory analysis of ocean liners: <a href="https:&#x2F;&#x2F;www.flexport.com&#x2F;blog&#x2F;game-theory-ocean-carrier-competition&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.flexport.com&#x2F;blog&#x2F;game-theory-ocean-carrier-comp...</a>
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josscrowcroftover 8 years ago
I&#x27;m curious - and surprised nobody seems to have mentioned or asked - what happens to all the sailors working aboard the ships, which are now stranded offshore?<p>Do they continue working aboard, knowing that they probably won&#x27;t be paid (because the company is bankrupt)?<p>What&#x27;s morale like? Can they leave, and how would they logistically?<p>What kind of laws and rights (if any) apply to them in these circumstances?<p>It&#x27;s funny to me to be thinking about how our Christmas may be &quot;ruined&quot;, meanwhile hundreds or thousands of workers may be out of jobs and effectively indefinitely stranded at sea.
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slv77over 8 years ago
This bankruptcy means that companies shipping goods are no longer going to be able to treat shipping as a fungible commodity and instead are going to have to price in a risk component as well. That suggests that the largest and best financed players are likely to be able to command a premium which will accelerate losses at smaller players. This would increase the spreads further and create a viscous loop.<p>Does anybody have visibility into shipping rates to see if larger players are getting a bigger premium?
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x1798DEover 8 years ago
You occasionally hear about immigrants being smuggled into (a) country in shipping containers. Is that common enough that it&#x27;s likely that one or more of the stalled containers has a bunch of people stuck in it? That seems like a really unfortunate scenario...
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AstroJetsonover 8 years ago
It&#x27;s not just retail goods on those ships. There is also a great deal of parts that are needed by US manufacturing lines. That creates a ripple effect down the line as missed parts causes snags in the lines. Businesses have gotten pretty good with Just In Time building, so the loss of a few containers will put a snag into it. Some places may have predicted this and gotten alternative parts flows, but that puts a strain on the people making the goods to go into the containers to come here.<p>Third quarter reporting should be very interesting for the markets.
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_rpdover 8 years ago
&gt; In late August, Hanjin Shipping, South Korea’s biggest container line and the world’s seventh-largest, filed for receivership. Some 66 of its ships, loaded with $14.5 billion of goods, including quantities of electronics heading for America, were left stranded at sea. Ports around the world did not want to let Hanjin’s vessels dock because the bankrupt line had no money to pay unloading fees.
mathgeniusover 8 years ago
Amazing that this happens on top of such low prices for crude oil. What&#x27;s going on?<p>EDIT: Yes I read the article. Seriously, oil is so cheap and this still happened? It&#x27;s just mind boggling to me.
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yes_or_gnomeover 8 years ago
It&#x27;ll be interesting to see this play out. If the bankrupt company is unwilling or unable to unload their cargo, could another company start repossessing the ships? I&#x27;d imagine it would have to on the behalf of several companies; likely, the most heavily invested insurance companies act as a group.
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Animatsover 8 years ago
Today&#x27;s news: Hanjin has now raised enough money to unload their ships and shut down properly.[1] But it may take until the end of October to unload 90% of the ships.<p>[1] <a href="http:&#x2F;&#x2F;fortune.com&#x2F;2016&#x2F;09&#x2F;23&#x2F;hanjin-shipping-cash-unload-cargo&#x2F;" rel="nofollow">http:&#x2F;&#x2F;fortune.com&#x2F;2016&#x2F;09&#x2F;23&#x2F;hanjin-shipping-cash-unload-ca...</a>
ThrustVectoringover 8 years ago
Low interest rates definitely explains part of it. The one-year treasury bond rate is at 0.6%, which means that unloading the goods now instead of next year is worth only $87M if you assume no losses from business disruption.
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vit05over 8 years ago
We have overcapacity that could lead to the formation of cartels if profit margins remain small. We need more companies in this game, not less, but with overcapacity, who would like to join?
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L_226over 8 years ago
The Hanjin California was seized and moored down the road from my house in Sydney. I was actually down at the water to see it before I knew about the parent firm&#x27;s collapse. It&#x27;s pretty interesting seeing such a big ship in what&#x27;s otherwise (contemporarily) a small recreational&#x2F;transport channel (Glebe Island, Sydney).
honkhonkpantsover 8 years ago
What&#x27;s the typical value of goods afloat?
rhaps0dyover 8 years ago
They raced to the bottom for prices and number of ships, and now neither of them is profitable.<p>Moloch who kills shipping companies!
ninja-wannabe-7over 8 years ago
Paging Mark Cuban or Mr. Jack Ma ... complete some deliveries and liquidate assets at the right time for a good price, either when the economy picks up or steel prices climb.
seanmcdirmidover 8 years ago
I shipped my stuff from Beijing to LA a month and a half ago, without seeing it on this side yet (takes 1-2 months). Hoping it is not stuck on one of these boats!
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yrroover 8 years ago
Even the Economist are not immune to the temptation of clickbait headlines...
themoogleover 8 years ago
So these ships are just sitting there off shore?<p>What stops pirates from taking over the ships? What about the crews just taking what they want and leaving?
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grapehutover 8 years ago
FWIW the person you&#x27;re replying to represents everything that is bad about HN. If you read his post history you&#x27;d be lead to believe he&#x27;s an industry insider in: Shipping, Irrigation, Crypto Currencies, Genetics, Nano Technology, Manufacturing, Microkernels and a lot more if you keep going back.<p>There was a time I believed his posts, until I read one of his mini-essays on a topic I happened to know about (cryptography) and it was painful obvious that it was someone who spent 10 minutes googling the topic and took it upon themselves to give a dangerously incorrect &quot;authoritative&quot; lay of the land. Since then I&#x27;ve tagged those people as &quot;faux experts&quot;. I don&#x27;t blame him, I did the same thing for high-school essays, albeit with a more jilted writing style. Just be careful who and what you believe
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squozzerover 8 years ago
Huh. For some reason I thought cargoes had bonds that would allow them to make port and unload.<p>OTOH, some enterprising sailors could make some money relieving stranded ships of their contents.
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wehadfunover 8 years ago
Could they just have an &quot;accident&quot; and get insurance money?
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erikpukinskisover 8 years ago
This seems like a really good sign. We can only hope global shipping continues to shrink until we can get down to a level of consumer purchasing that is sustainable for the ecology of the planet.
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gbinover 8 years ago
What about this idea of a business plan ? buy 5 of those ships very cheap, get rid of&#x2F;deliver the goods, merge them in international waters nearby San Francisco, make a top notch&#x2F;self sustaining mix of offices and Corp housing on top of them. Anybody could work there waiting for their H1B or just simply contracting or bootstrapping their companies.
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