South Korea's Hanjin Shipping, the world’s seventh largest shipping company as measured by capacity, filed for bankruptcy protection Wednesday according to news outlets, disrupting supply chains just as retailers are preparing for the holiday shopping season.
While the South Korean government said it would take steps to help prop up Hanjin, U.S. and Chinese ports are turning away the company's ships, and Hanjin has stopped accepting cargo, including clothing, electronics, toys and furniture meant for delivery to U.S. retailers, the Wall Street Journal reports.
Some 25,000 containers move across the Pacific on Hanjin ships each day. The situation is already prompting freighting shipping rate spikes, leaving retailers and truckers fretting about costs and retailers scrambling for capacity to move their inventories to warehouses.
U.S. retailers have not forgotten feeling the pinch of delays resulting from recent labor disputes at West Coast ports. The 29 ports stretching from Washington to southern California handle almost half the nation's sea trade, including more than 70% of Asian imports, putting severe kinks in retailers’ supply chains. The situation prompted by Hanjin’s bankruptcy promises to add further delays and potentially huge cost increases just as retailers are readying their warehouses and store shelves for the all-important holiday season.
As with the West Coast port delays, inventory pile-ups that may occur as the drama unfolds could make for winners and losers. Fast-fashion retailers may be especially vulnerable because of their dependence on frequent shipments, while discount consolidators like TJ Maxx or Burlington may benefit from the resulting excess inventory.
But the Hanjin delays bring with them other issues, like trucking companies that could go out of business, at least those heavily dependent on Hanjin deliveries.
“There’s going to be exorbitant costs,” Peter Schneider, vice president of California-based T.G.S. Transportation, told the Wall Street Journal. “Everything is unraveling.” T.G.S. has some $7,000 in outstanding bills to Hanjin, which Schneider said he will likely write off, but added that smaller trucking companies that “had all their eggs in one basket with Hanjin... may go under."
That all is adding costs and delays at a time when retailers are already pressed with thin margins in a competitive environment. It’s even possible that U.S.-made goods may have an unusual advantage in price and accessibility for a change.