Hanjin Shipping Remains Tight-Lipped Amidst Bankruptcy Talks in Media (and Updates)

Hanjin_container_ship

Source: http://www.wikipedia.org/

UPDATE (8/31/2016): Hanjin Shipping has officially filed for receivership and industry pundits are now speculating a Hanjin Shipping, Hyundai Merchant Marine (HMM) merger might be considered. The Korea Shipowners Association suggested that their has been national interest in this route.

As of now, the Korea Exchange has suspended the trading of Hanjin Shipping shares indefinitely after its stock price fell 24.16 percent and reached a 1,240 won ($1.11) low. This nadir resulted from the media reports of creditors pulling out of the company and that the company will be applying for receivership and court protection. Most experts in the industry are shocked by the revelation, as Hanjin Shipping themselves pointed out the progress they have made with partners in lowering charter rates and deferring loan payments to foreign banks, which eased many uneasy investors. Both the Korea Exchange and the government are now awaiting an official decision from the company on whether they will file for court protection or not.

It was just last week when Hanjin Shipping proposed a liquidation plan to their main creditor, the Korea Development Bank, which is also supporting Hyundai Merchant Marine. The plan included a capital increase from Korean Air Lines and other affiliated companies of 500 billion won, but it seems to have been rejected by the bank. The Hanjin Group continues to fully support its subsidiary, with all efforts now put into normalizing Hanjin Shipping. Despite their intention, it might be too late to revive the shipping company’s good standing. As of June 30, Hanjin Shipping had a working capital deficit of 3.38 trillion won and was looking a liquidity shortage of 1.2 trillion won over the next two years. No doubt the industry’s flopped quarter hastened this outcome, in which Hanjin Shipping suffered a 212 billion won loss.

Once news broke out of Hanjin Shipping’s possible bankruptcy, civic organizations quickly gathered in Busan to rally for the shipping company. Supporters claim that Hanjin Shipping’s condition necessitates government intervention, and that letting the company go bankrupt would be a devastating blow to the South Korean economy. The organizations credit the company for developing the logistics and shipping sectors of South Korea and hopes that the government will take action to prevent the looming bankruptcy.

 

Additional Information:

Hanjin Group Promises to Back Liner as Creditors Seen Exiting (JOC)

Hanjin Shipping Nears Bankruptcy After Creditors End Support (WSJ)

Hanjin Shipping Gets Breathing Room (American Shipper)

Korea’s Hanjin Shipping Becomes Symbol of Industry in Trouble (Bloomberg)

US Mandate Proposed to Limit Truck Speed

truck 66

Source: www.joc.com

 

Over the weekend, the Federal Motor Carrier Safety Administration (FMCSA) and National Highway Traffic Safety Administration (NHTSA) jointly proposed a regulation that would require speed limiters in newly manufactured trucks. The proposal will soon be released on the Federal Register, where a 60-day comment period welcomes feedback from all relevant sources. Although the proposal doesn’t have a set speed limit in mind yet, the goal of the regulation is to reduce truck-related crashes and accidents. This regulation would also result in $1.1 billion saved in fuel costs annually.

The proposed mandate would only apply to newly manufactured trucks and buses, and manufacturers are given three years to implement the regulators into their produced vehicles. So far, there hasn’t been any call for retrofitting current vehicles, but the idea has been kept open for the time being. Organizations such as the American Trucking Association (ATA) are enthused about the proposal, as they have been pushing for it since 2006. On the other hand, the Owner-Operator Independent Drivers Association (OOIDA) strongly opposes the proposal, claiming that the speed limiters will interfere with the operators and that safety is ultimately controlled by the operator, not the truck itself.

The consequences of the mandate will be felt not only across the operators and trucking companies, but also everyone in the logistics supply chain as well. The proposal aims to limit drivers’ maximum daily travel distance, which will in effect affect trucking capacity as well. Companies will be expected to hire more operators and implement additional team-driving strategies – the expected loss for trucking companies in labor income is currently marked at $54 million. Smaller companies and owner-operators that cannot afford the flexibility will be hit the hardest by the proposed regulation. With the proposal still in its infancy, the freight forwarding industry will keep a close watch as the proposal continues to develop.

 

Additional Information:

US Proposal to Limit Truck Speeds Would Cut Capacity (JOC)

The Government Has An Unexpected Ally in 68 MPH Truck Speed Limit Push (Autoblog)

US Transportation Agencies Submit Proposal to Limit Heavy Duty Truck Speeds (The News Wheel)

U.S. Proposes Requiring Speed Limit Devices on Trucks, Buses (Insurance Journal)

A Look into China’s Zika Rules for US Exports

container fumigation 3

Source: www.joc.com

 

Last week, clarifications for China’s Zika rules were issued by the U.S. government. The freight forwarding industry originally believed that the rules were going to bog down the importing process in China and cause delays in many shippers’ processes. The details outlined by the U.S. government last Thursday alleviated most of those concerns as outlook for changes have turned far more optimistic.

One of the major concerns after the immediate news of China’s Zika rules was the necessity of fumigation. A cargo fumigation process would require enveloping all the cargo in an air-tight container or vessel where insecticides would be pumped into. According to the Foreign Commercial Service of the International Trade Administration, imported cargo can forego all this and simply use disinfection methods to clear the cargo. Another sigh of relief was the announcement that the disinfection process does not have to be government certified. These two factors will not only simplify the process to meet requirements, but will also lower costs. The original expected process of fumigation would cause a one-to-three day delay for cargo, with 20-foot containers costing about $30 each for fumigation.

There are certain exceptions and rules that come into play in regards to China’s Zika rules. One exception listed Thursday is that, if an entire vessel was fumigated before or after loading, the individual containers are not required to be fumigated. Also, commodities that are kept or 15 degrees Celsius are exempt from fumigations as well. Along with the details regarding the disinfection and lack of necessity of government certification, shippers are feeling much better about their export operations to China.

 

Additional Information:

China Details Anti-Zika Prep for US Exporters, but Questions Remain (JOC)

China’s Zika Rules for US Exports Easier than First Disclosed (JOC)

UPDATE: Zika Fumigation Requirements for U.S. Cargo to China (American Journal of Transportation)

USA Added to China Import Regulations for Zika/Mosquito Control (Transgroup)

Southern California Wildfire Stalls Rail Traffic, Expect 1-2 Day Delay

blue cut fire big rigs credit-@KTLA

Source: www.joc.com

 

Yesterday morning, a California wildfire developed in the Cajon Pass and has now spread to over 33,000 acres. Resting on the edge of Inland Empire in the San Bernardino County, the “Blue Cut” fire has sparked a “state of emergency” declaration from Gov. Jerry Brown. At the moment, there has been over 80,000 people ordered to evacuate and 34,000 homes endangered by the fire.

The fire has forced a shutdown of Interstate 15, the main highway connecting Los Angeles and Las Vegas, as well as many other roads. The Cajon Pass area is suffering from track shutdowns, leading to disruptions and delays for shippers passing by the region – the traffic caused by the evacuations is expected to exacerbate the situation. It is difficult to predict the full effects of Blue Cut on trans-Pacific freight, but it is certain that all traffic between the port terminals and intermodal facilities will be negatively impacted in one way or another.

According to BNSF Railway, shipments through this route can be met with an expected 36 to 48-hour delay. As of this morning, the I-15 highway remains closed between San Bernardino and Hesperia. Caltrans, the California Department of Transportation, has warned truckers to avoid State Routes 138 and 18 as a detour. Please refer to the alternative routes below, as recommended by the California Highway Patrol. For updates on the fire or details about the evacuation areas or road closures, please refer to the InciWeb link listed below.

Recommended Alternate Routes Per California Highway Patrol (InciWeb):

  • From the Valley to the High Desert: Interstate 10E to Highway 62N to Highway 247N to Highway 18W
  • From High Desert to the Valley: Highway 18E to highway 247S to Highway 62S to Interstate 10W

 

Additional Information:

Blue Cut Fire Report (InciWeb)

California Wildfire Cuts Off Highway, Intermodal Rail Route (JOC)

Blue Cut Fire Burns 30,000 Acres, Forces 82,000 to Evacuate in California (NBC News)

How Commuters Can Get Around the Blue Cut Fire (The Press Enterprise)

HMM Has Second-Quarter Profits through Asset Sales

1

Source: www.joc.com

 

Despite a tumultuous and difficult second-quarter in the freight forwarding and logistics service industry, Hyundai Merchant Marine (HMM) posted profitable quarter results when even the bigger players in the market suffered losses. Earlier in the year, HMM was headed towards bankruptcy when their low volume on the trans-Pacific trade and Asia-Europe trade failed to sustain the company.

Since then, HMM has done a great deal to right the ship and the company seems to be heading in the right direction. Alongside major renegotiations of charter rates and the search of a new CEO, HMM has also managed to find itself within the 2M Alliance led by Maersk Line and Mediterranean Shipping Co. The true reason behind their second-quarter profit, however, was the sale of their assets, namely Hyundai Securities and the Hyundai Busan New-Port Terminal.

This major company restructuring was a necessity in their company turnaround, and HMM plans to continue their return to profitability by focusing on mega-ships on the east-west trade. An example of this would be their deployed ships on the newly reopened Panama Canal. Although it’s clear that HMM seems to be faring much better than they were before, it is important to note that their success in this second-quarter can be largely contributed to their stake sales. HMM will still require a commitment towards long-term efforts if they plan to stay afloat.

Additional Information:

Danaos Reveals HMM Deal Details in Reporting Double-Digit Profit Gain (JOC)

Short Selling on Hyundai Merchant Marine Causes Big Loss to Retail Investors (Pulse)

HMM Posts Profit as Asset Sales Overcome Operational Losses (JOC)

Short Selling on Hyundai Merchant Marine Surgest before New Share Issuance (Hellenic Shipping News)