Get ready for a rocky holiday season. One of the worlds major shipping companies just went belly up.
In a story covered by the Associated Press South Korea’s Hanjin Shipping Co. has gone bankrupt. “Okay, so why is this being covered on BoLS?” Great question! The reason is because Hanjin is listed as the world’s seventh-largest container shipper and that translates to roughly “8 percent of the trans-Pacific trade volume for the US market.”
“Oh, well that still leaves 92 percent,” you say. Well, it’s not that simple. As with economics on the MACRO level, this type of thing has a lot of factors at play. To put it frankly there are millions of dollars of retail goods and merchandise stuck in ports in China, at sea, or in the LA ports. Yeah – those same ports. And you do remember the last time the ports were hit with delays, right?
“But this is just one shipping company, surely they will just move their product from those ships to another company.” That’s entirely true! Manufacturers will have to find alternate shipping methods. Except it’s not going to be at the same price they had just negotiated.
“Other shipping lines may take on some of Hanjin’s traffic but at a price. Since vessels already are operating at high capacity, shippers may wind up paying a premium to squeeze their cargo containers on board, said Jock O’Connell, international trade adviser to Los Angeles-based Beacon Economics.
The price of shipping a 40-foot container from China to the U.S. jumped up to 50 percent in a single day, said Nerijus Poskus, director of pricing and procurement for Flexport, a licensed freight forwarder and customs broker based in San Francisco.”(AP)
Yeah, that’s not good. There are lots of other factors aside from the millions of dollars in retail goods stuck in transit at sea. The ripple effect is already impacting the entire global supply chain from the manufacturers, to the docks & ports, to the truckers & shipping companies, all the way down to your local retailer.
And don’t think this is just a US shipping problem. “Around $14 billion of cargo has been tied up globally,” according to Reuters. That’s a lot of goods and a really big mess to sort out.
If you were expecting to receive goods manufactured in China, considering they are the United States’ 2nd largest trading partner, you might want to prepare yourself for delays.
A bunch of Kickstarter campaigns for board & tabletop games sent out delay notices. This is expected because many of those Kickstarters had their goods produced in China due to limitations on in-house manufacturing. But don’t think this is just impacting all those smaller companies; The big guys are starting to feel the heat, too. ICv2 is already reporting that WizKids has announced a delay of their new “Teenage Mutant Ninja Turtles HeroClix: Heroes in a Half Shell Gravity Feed.”
Now, before everyone panics, authorities are working on solutions to this shipping crisis:
“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.”(AP)
And, according to Reuters, millions of dollars have already been raised to get the shipping containers unloaded, but Hanjin still has a long way to go. I’m just hoping they get all this sorted out soon. Q4 is the biggest season for retail stores in the US – these type of delays could cause billions of dollars worth of economic damage globally. So here’s hoping that Hanjin, the South Korean government, and all the countries involved can sort this mess out before more damage is done.
It can take companies in the US up to 6 weeks to get their goods from Chinese Manufacturers if you count prep & transit time plus customs & transportation from the dock.