Bankruptcy of Hanjin Shipping, world’s 7th largest container carrier, will impact U.S.-global economy

The Baltic Dry Index is a shipping and trade index, created by the London-based Baltic Exchange, which measures the sizes of dry bulk carriers or merchant ships. Changes in the Baltic Dry Index give investors insight into global supply and demand trends, and are a leading indicator of future economic growth (if the index is rising) or contraction (index is falling).

Just as the Baltic Dry Index began emerging from its lowest depth since 1980 (see dark red arrow in chart below), the bankruptcy of Hanjin Shipping, the world’s 7th largest container carrier, threatens to, once again, plunge the index down.

Baltic Dry Index

As reported by Reuters, yesterday, August 31, 2016, Hanjin Shipping, South Korea’s largest shipping firm and the world’s 7th-biggest container carrier, filed for bankruptcy after losing the support of its banks, leaving its assets frozen as ports from China to Spain denied access to its vessels.

Led by state-run Korea Development Bank, the banks withdrew their backing for Hanjin on the grounds that Hanjin’s funding plan was inadequate to tackle its massive debt that stood at $5 billion at the end of 2015.

HanjinHanjin Shipping has a fleet of some 150 containerships and bulk carriers transporting over 100 million tons of cargo annually over 60 routes in 35 countries. With 4 regional headquarters in the U.S., Europe, S.E. Asia, and W. Asia, Hanjin has a global staff of approximately 5,000, as well as container terminals in the world’s major ports. Hanjin accounts for 7% of Far East-North America container trade, or, in dollar terms, hundreds of billions of dollars.

A day after Hanjin’s bankruptcy, the global effects are already felt. As reported by ZeroHedge, September 1, 2016:

  • 10 Hanjin vessels have been seized at Chinese ports, adding to the ship that had been seized in Singapore by a creditor earlier this week.
  • Many Hanjin ships have either been denied entry to ports — including Busan, South Korea’s largest port — or are unable to dock as container lashing providers worry that they will not be paid. Three Hanjin ships are stranded off the California coast, with the ships and their hundreds of tons of cargo in legal and financial limbo.
  • Sharp increases in freight rates for routes where Hanjin had operated. As an example, the cost of shipping a 40-foot container on the Busan-Los Angeles route has jumped about 55%, from $1,100 to around $1,700; rates between South Korea and the U.S. east coast via Panama have risen about 50% to $2,400; Busan to Europe routes would rise 47% in the near term. The most direct impact of this price surge will be borne by South Korean exporters, them additional shipping costs of about $394,805,502 (440.7 billion won) per year. For South Korea, where approximately 50% of GDP is in the form of net exports, the hit would be substantial.
  • Manufacturers are scrambling for alternatives. South Korean conglomerates are scrambling to find alternatives. LG Electronics, the world’s No.2 maker of TVs, told Reuters it was cancelling orders with Hanjin and seeking alternatives to ship its freight. It is also making contingency plans for cargo already on board Hanjin ships in the event the vessels are seized. Hanjin’s rival, Hyundai Merchant Marine, announced they would deploy at least 13 of its ships to two routes exclusively serviced by Hanjin, while the South Korean government also plans to reach out to overseas carriers for help. However, a lengthy period of time will pass before the Hanjin void is filled.
  • The most troubling outcome is the impact on global supply chains, potentially resulting in a cascading waterfall effect. This is already manifesting itself in the quietly creeping chaos that has gripped the global logistics industry, as operators realize what has happened. South Korea’s maritime ministry said Hanjin’s bankruptcy would affect cargo exports for 2 to 3 months. That means intermediary operations now find themselves without critical components to engage in production, which in turn creates more bottlenecks in overall production.

Seeking to contain the fallout, a South Korean court said it would soon begin proceedings to rehabilitate the carrier – which would allow Hanjin to take legal action in other countries to keep its ships and other assets from being seized. So far it appears to have failed, as reports of “frozen” and stranded container carriers emerge by the hour. Furthermore the task is moot: the court’s move to rehabilitate Hanjin is seen as mainly procedural, and an eventual liquidation of assets is most likely.

Rahul Kapoor, a director at maritime consultancy Drewry Financial Research Services, said, “Unlike dry cargo, liner shipping is all about marketing and service reliability — we haven’t seen any large carriers come back from collapse. There is a loss of faith among customers. It’s very unlikely Hanjin can come back from the ashes.”

Even before the bankruptcy of the world’s 7th largest container carrier, the global economy was already anemic:

  • The Organization for Economic Co-operation and Development (OECD) said global trade would only grow by 2% this year, “a level it has fallen to only five times in the past five decades and that coincided with downturns: 1975, 1982-83, 2001 and 2009.”
  • According to the Wall Street Journal, U.S. industrial production is faltering: “Overall industrial production peaked in November 2014 but has failed to regain that level amid a mining sector collapse and leveling off at factories.” Overall industrial production was down 1.4% in the 12 months through May 2016; utility output is down 0.8%; and mining output has plunged 11.5%.
  • All of which led Michael Pento, president and founder of Pento Portfolio Strategies and author of The Coming Bond Market Collapse, to conclude in a commentary for MSNBC on June 21, 2016, that “the next recession is already here and there isn’t much the Fed can do.”

Tighten your seat belts, folks. We are in for a rough ride . . . .

Update (Sept. 2, 2016)

Here’s how Hanjin’s bankruptcy will affect the U.S. economy:

  1. Manufacturing: Whatever U.S. manufacturing is left will experience delays in getting raw materials and parts.
  2. Trucking: “The confusion might sink some trucking firms that contract with Hanjin to deliver cargo containers carrying everything from electronics to car parts from ports to company loading bays.” (Source: manufacturing.net)
  3. Retail sales:Hanjin’s bankruptcy “left cargo headed to and from Asia in limbo, much to the distress of merchants looking to stock shelves with fall fashions or Christmas toys.” J. Kip Louttit, executive director of the Marine Exchange of Southern California, which provides traffic control for the ports of Los Angeles and Long Beach, the nation’s busiest port complex, said: “Someone from the garment industry called earlier today asking: ‘How long is this going to go on, because I’ve got clothing out there.'” The National Retail Federation, the world’s largest retail trade association, wrote to U.S. Secretary of Commerce Penny Pritzker and Federal Maritime Commission Chairman Mario Cordero on Thursday, urging them to work with the South Korean government, ports and others to prevent disruptions. The bankruptcy is having “a ripple effect throughout the global supply chain” that could cause significant harm to both consumers and the U.S. economy, the association wrote. (Source: manufacturing.net)

H/t FOTM‘s Ken R.

~Eowyn

12 responses to “Bankruptcy of Hanjin Shipping, world’s 7th largest container carrier, will impact U.S.-global economy

  1. Oh goody. Not good news.

    This is where a president Trump would have an edge over Clinton – he knows business operations in and out. Clinton only knows about wiping email servers and securing money for her own private foundation.

    Liked by 3 people

  2. Things get much tighter, the wife and I are going to be boiling our shoes, to make broth. The price of everything has gone up so much, I just can’t even fathom how people are buying new cars, trucks,etc., much less groceries and making all the other payments we have to make, each month.

    Yes sir, life just keeps getting more and more interesting, every day.

    Liked by 4 people

  3. With all THAT business,how can they go broke? They must have learned business management from the American railroad industry. Hey-MAYBE Obama will send ’em a Trillion $$ Bail-out check…..

    Liked by 2 people

  4. Kevin J Lankford

    How in the WORLD?? One can only think, too many hands in the till, too many kick-backs, too much greasing the skids, just too many demanding their cut for protection.

    Liked by 3 people

  5. Oops. The BDI is a survey of shipbrokers that averages timecharter rates over 20 major routes for several sizes of “bulk carriers,” that is, ships carrying raw materials, such as ores, grains, and coal. These vessels with wide open cargo holds only incidentally carry on-deck containers. Small point in otherwise fine article, and the interrelatedness is that bulkers carry industrial input while containerships carry the output.

    Liked by 3 people

    • I’m not sure what your point is, Dan.

      Yes, the BDI is all that, but the SIGNIFICANCE of the BDI for regular people is that, as I stated in my post, “Changes in the Baltic Dry Index give investors insight into global supply and demand trends, and are a leading indicator of future economic growth (if the index is rising) or contraction (index is falling).” Are you disputing that?

      Liked by 1 person

  6. An impetus to return manufacturing to our shores. Easier said than done, and I sure hope Trump gets in b/c the globalists don’t want that. Rocky road indeed!

    Liked by 2 people

  7. People aren’t going to realize how much they depend on imported goods until the Wal Mart shelves are empty. 🙁

    Liked by 3 people

  8. Wow, that’s terrible. I feel bad for that company. I doubt it’s ALL their fault. The crooks who decide the COST of EVERYTHING, fuel to run those ships, maintenance, upkeep, steel, wages, dock fees, licenses, etc. etc. (probably sitting in London somewhere on Bankster-Gangster Alley) are probably the guilty ones.

    As already stated, we all gripe about “junk from China, et al” but since we aren’t producing our own needs as a country, we need that “junk” because “THEY” (globalists) created this nightmare, PURPOSELY forcing nations to be DEPENDENT on each other rather than each nation depending on/producing all they need themselves.

    That very fact was brought out in 1969 in the Drs. Richard Day & Lawrence Dunegan info that you guys posted back in 2012 but which I was recently saving links about it again to share (Makow had a repeat article about it recently), so I have the links handy (see further below).

    There’s a section in the Dunegan transcripts about Manufacturing specifically, & how the “movers/shakers” wanted all nations to become INTERDEPENDENT so no ONE nation, especially the USA, could ever be TOO STRONG on its own ever again, having all it needed. It also says that each nation would be “allowed” its own “specialty/strength” so all the other nations would go to/buy from THAT nation for whatever that service/product is. And the USA’s main focus would be as the TECHNO+COMMUNICATIONS source for the world.

    So, your excellently detailed (as always!) article is a CLEAR example of how the above-described globalist plan is turning into a DISASTER. Each country NEEDS to be SELF-SUFFICIENT for its own survivability (is that even a word? lol). USA can make its own TV’s I’m sure! And I don’t want PRODUCE shipped in from across a half-dozen countries!

    Here’s the links/description:

    On 3/20/1969 there was a conference of the Pittsburgh Pediatric Society located on Ridge Avenue in Pittsburgh, PA. Approximately 80 pediatricians attended. One of the speakers, Dr. Richard Day (1905-1989: obit NYT: http://www.nytimes.com/1989/06/16/obituaries/dr-richard-day-84-ex-pediatrics-professor.html), was the former National Medical Director of Planned Parenthood (1965-1968). He outlined for his fellow pediatricians at that conference the specific agendas that would be implemented in order to bring forth the “New World Order” aka Globalism. He asked them not to tell anyone as it could possibly cause negative repercussions for him. He also told them that it “would make it easier for them to adapt if they knew what to expect beforehand.” One attendee, Dr. Lawrence A. Dunegan (1933-2004), kept his mouth shut for another 20 years or so, but between 1988-1991, he agreed to give four hours of audio interviews with Randy Engel, Director of the U.S. Coalition for Life. Tapes I and II interviews took place in 1988. Tape III interview took place on Oct. 10, 1991, in Pittsburgh.

    FOTM’s prior 2012 article:
    https://fellowshipoftheminds.com/2012/11/23/planned-parenthood-doctor-spilled-the-beans-in-1969/

    36-page .PDF document of Dr. Lawrence A. Dunegan’s interviews/transcripts by Randy Engel, Director of the U.S. Coalition for Life, at the US COALITION FOR LIFE website: http://uscl.info/edoc/doc.php?doc_id=89&action=inline (document dated 2001):
    1. Pages 1-13: Tape I: “IS THERE A POWER; A FORCE, OR A GROUP OF MEN ORGANIZING AND REDIRECTING CHANGE?” – “Note: This is a transcript of three tapes on the ‘The New Order of Barbarians’, referred to on the tapes simply as the ‘new world system.’ Tapes one and two were recorded in 1988 and are the recollections of Dr. Lawrence Dunegan regarding a lecture he attended on March 20, 1969 at a meeting of the Pittsburgh Pediatric Society. The lecturer at that gathering of pediatricians (identified in tape three recorded in 1991) was a Dr. Richard Day (who died in 1989). At the time Dr. Day was Professor of Pediatrics at Mount Sinai Medical School in New York. Previously he had served as Medical Director of Planned Parenthood Federation of America. Dr. Dunegan was formerly a student of Dr. Day at the University of Pittsburgh and was well acquainted with him, though not intimately. He describes Dr. Day as an insider of the “Order” and although Dr. Dunegan’s memory was somewhat dimmed by the intervening years, he is able to provide enough details of the lecture to enable any enlightened person to discern the real purposes behind the trends of our time. This is a transcript of a loose, conversational monologue that makes for better listening than reading.”
    2. Pages 13-24: Tape II: “NO MORE SECURITY.”
    3. Page 25-36: Tape III: “This is the third and final tape of the “New Order of Barbarians”. This interview by Randy Engel, Director of the U.S. Coalition for Life, with Dr. Larry Dunegan was taped on Oct. 10, 1991, in Pittsburgh, Penn. On tapes I and II (made in 1988) Dr. Dunegan spoke about his recollections of the lecture he attended in 1969 where Dr. Richard Day, an insider, revealed the plans for their World System, AKA the totalitarian, socialist World Government. Once again, this final tape/interview speaks for itself.”
    ▪ “The complete Lawrence Dunegan boxed tape set is available from the U.S. Coalition for Life, Box 315, Export, PA 15632. The cost is $29.50 which includes postage and a complete printed transcript.”

    –Another website called “The Revelations of Dr. Richard Day,” has the transcript broken up by Subject into individual posts:
    • Home: https://drrichardday.wordpress.com/
    • Introduction: https://drrichardday.wordpress.com/introduction/
    • About Dr. Lawrence Dunegan: https://drrichardday.wordpress.com/about-dr-lawrence-dunegan/ includes a note from Dr. Lawrence Dunegan’s son.
    • About Dr. Richard Day: https://drrichardday.wordpress.com/about-dr-richard-day/
    • About the [1969 Pediatric] Meeting: https://drrichardday.wordpress.com/about-the-meeting/
    • Audio: https://drrichardday.wordpress.com/audio/ (Four audio/interview files approx. 1-hour each with direct links to YouTube; site says “The audio quality (especially on tapes 3 and 4) is low quality.”

    Full .MP3 “remastered” audio file of Dr. Lawrence Dunegan all-in-one interviews at Archive.org:
    • Archive.org has the entire set all-in-one, approx. 4-hours & 15-mins. as an .MP3 file which can be downloaded: https://ia801000.us.archive.org/28/items/New_Order_of_Barbarians_remaster_tapes_1to3/New%20Order%20of%20Barbarians%20%5Bremaster%5D%20tapes%201%20to%203.mp3

    Dr. Lawrence A. Dunegan‘s entry at “Find-A-Grave”: http://findagrave.org/cgi-bin/fg.cgi?page=gr&GRid=145421513 . Also his death record from the Social Security Death Index (I could not find a photo nor an obit for Dr. Dunegan; would need to check all Pennsylvania newspapers): familysearch.org/search/collection/results?count=20&query=+givenname:Lawrence~%20+surname:Dunegan~%20+death_place:Pennsylvania~%20+death_year:2004-2004~&collection_id=1202535 , then click on the “Details” symbol on the right: https://familysearch.org/ark:/61903/1:1:JP6Q-4WL

    –5/10/16 (updated from 2008): “The Illuminati Plan to Enslave Americans (1969)” by Henry Makow, PhD, is re the Dr. Richard Day & Dr. Lawrence Dunegan story: http://henrymakow.com/confirmedrockefeller_plan_to_g.html

    –12/19/15: “Power and Dr. Day’s Predictions – Part 3 of Gumshoe’s Royal Commission Series” by Mary W. Maxwell, PhD, LLB: https://gumshoenews.com/2015/12/19/power-and-dr-days-predictions-part-3-of-gumshoes-royal-commission-series/#more-6642 She said the 1969 Pediatric Society meeting was a sit-down medical dinner, and that Dr. Dunegan decades later “spilled all the beans on a Christian radio show, the Randy Engels program.” She also wrote: “Dunegan tells us that when he ran into colleagues years later and asked if they recalled Dr. Day’s speech, they showed no appreciation of its significance.”

    THE END!

    Like

  9. Contractions in US economy, and the Chinese run the Panama Canal?

    Like

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