The bankruptcy of South Korea’s Hanjin Shipping Co., the world’s seventh-largest shipper, could impact fastener shipping as well as the Christmas holidays.

The Wall Street Journal reported “as much as $14 billion worth of cargo stranded at sea, sending its owners scurrying to try to recover their goods and get them to customers, according to industry executives, brokers and cargo owners.”  

The bankruptcy was causing customers to pay more for freight, Simmi Sakhuja of Stelfast Inc. observed. After an overbuilding of cargo ships, due to the Hanjin bankruptcy there is now a reduced supply causing importers to “shop for freight rates.”

In addition to the Hanjin bankruptcy, the consolidation of the ANL and US Lines under the APL brand has reduced the number of freight carriers, she pointed out. 

Easing the situation was Hanjin receiving bankruptcy protection so ships, cargo and other assets wouldn’t be seized by creditors – allowing ships to enter port and offload, Sakhuja explained. However, she predicted there would be cargo bottlenecks for “months not weeks.”

 • Bob Sachs of XL Screw noted that “some of the Hanjin vessels are starting to unload the containers in the U.S. ports.”   Sachs observed that situations such as the Hanjin bankruptcy “can get very complicated and it is really too early to tell what will happen going forward. I am sure it will have some effect on the supply chain. To what extreme this disruption will have on the industry is uncertain at this time.”

• Bruce Wheeler of Star Stainless began counting containers on Hanjin ships when the bankruptcy hit the news.  “It turned out we only had 30-some containers on their ships,” Wheeler found. 

“Some of the containers arrived at the port a day prior to the filing,” Wheeler explained. “Once we agreed to pay all outstanding charges these were immediately released.”

“As far as the remaining 10-or-so containers, they are floating around out there somewhere and we are just not sure when we will get them,” Wheeler added.

Star Stainless also is relying on its “deep inventory” to “weather this out with little to no impact,” Wheeler said.

“Luckily for our customers we don’t strive for high inventory turns. People who micro manage their inventory turns could run into some problems and get caught short until this issue is resolved.”

Even though several fastener importers said they do not have cargo sitting on Hanjin ships, the bankruptcy could affect prices.

• Peggy Hsieh of Brighton-Best International – which does not deal directly with Hanjin and thus does not have fasteners stuck on its ships – said ocean freight carriers have already pushed prices up 100% to 200% for the pre-Christmas shipping. “In the short term, all industries – including the fastener industry – will feel the impact of these higher prices an squeezed supply, which will inevitably delay future shipments.”

“Since BBI has always had a strategy of keeping ample local inventories in the U.S., we believe there will be minimal disruptions to our customers and supply chain,” Hsieh told FIN.

Brighton-Best is hoping that shipping capacity will “normalize within three to four months and ocean freight rates will come down,” Hsieh said. But she expects ocean freight rates “will remain higher than in the last few years.”

“The whole issue that drove Hanjin to bankruptcy was that there was too much oversupply,” Hsieh said.

 • Mike Wrenn of Lindstrom told FIN that they did not ship with Hanjin “so there will be no immediate impact on our business.” But the “longer term impact is harder to gage,” he added. “Reduced capacity will bring higher costs.”  

Importers typically have one-year contracts, Wrenn noted.

 • U.S. cable tie manufacturer American Elite Molding of Florida CEO Robert Sires was quick to suggest distributors turn to domestic producers. “This is an unfortunate situation, and it highlights the difficulties of ordering products from overseas,” Sires said. 

According to Salon.com, the problem “that  imperils the rest of the industry is that it was too bullish and built too fast. Now it’s at the mercy of a supply and demand imbalance — too many ships, not enough cargo.”

But when a major carrier ceases operations and takes 20,000 to 25,000 containers per week of capacity from global supply, it is a sudden reduction of supply.

Salon.com reports there were more than 80 Hanjin container ships are “in limbo — either en route or anchored near their destinations, unable to offload their cargo because terminal operators fear Hanjin won’t be able to pay them.” More than $14 billion worth of goods are in “maritime limbo” as seized or prevented from entering or leaving port. 

Hanjin is negotiating with creditors.

 “The Hanjin bankruptcy is a mega-event for the maritime industry, for all interests, not just for the cargo its ships are carrying, but also for terminal operators and longshoremen,” James Mercante, head of admiralty, transportation and maritime insurance practice at Rubin, Fiorella and Freidman, a New York-based insurance law firm, told Salon.com. “You’re going to see hundreds and hundreds of insurance claims and litigation surrounding this going on for well more than a year.”

“With its assets frozen, Hanjin, which handles about 8% of all U.S. cargo, is faced with its ships not being allowed to unload or take on cargo as dock workers and tugboat pilots are concerned about not being paid,” USA Today explained.

Hanjin filed for bankruptcy in South Korea in late August and is seeking similar protection in multiple countries to prevent seizures of ships and cargo. Hanjin has been granted temporary bankruptcy protection in the U.S.  

Members of Congress and U.S. retailers have also sought support for Hanjin to temper the repercussions of the shipper’s dilemma, USA Today reported.