Shops set for Christmas price hikes as millions of shipments stranded at sea

Each stranded ship also has 15 to 25 crew on board who could find themselves stranded for weeks or even months

Ben Chapman
Friday 02 September 2016 14:02 BST
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Half a million 40 foot shipping containers are affected – with no sign of a quick resolution
Half a million 40 foot shipping containers are affected – with no sign of a quick resolution

Summer is not yet over but Christmas could be about to get more expensive as millions of gifts including TVs and electrical gadgets could be stranded at sea for months.

Retailers have been thrown into turmoil after one of the world’s largest shipping companies collapsed into bankruptcy.

South Korean company Hanjin’s vessels have been seized at Chinese ports, while others have been banned from docking until unpaid fees are received.

As a result, the cost of transporting goods from Asia to the US and Europe has jumped by more than half, threatening margins as retailers begin stocking up for Christmas. September marks the start of the busiest period of the year for transporting goods.

The US National Retail Federation, the world’s largest retail trade association, wrote to Penny Pritzker, secretary of commerce, 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 economy, the association wrote.

“Retailers’ main concern is that there (are) millions of dollars’ worth of merchandise that needs to be on store shelves that could be impacted by this,” said Jonathan Gold, the group’s vice president for supply chain and customs policy.

“Some of it is sitting in Asia waiting to be loaded on ships, some is already aboard ships out on the ocean and some is sitting on US docks waiting to be picked up. It is understandable that port terminal operators, railroads, trucking companies and others don’t want to do work for Hanjin if they are concerned they won’t get paid.”

With an estimated half a million 40-foot containers full of goods stuck at sea or in ports there appears to be little hope of a quick resolution to the issue. September marks the start of the busiest time of the year for transporting goods, but a Korean court on Thursday set a deadline of 25 November to submit a plan to resolve the dispute.

LG Electronics, the world’s second largest maker of TVs, told Reuters it was cancelling orders with Hanjin and was seeking alternatives to ship its goods. It is also making contingency plans for cargo already on board Hanjin ships in the event the vessels are seized.

Korean authorities have been inundated with calls from cargo owners worried about the fate of their shipments to the US and Europe. Many companies are now worried that a protracted dispute will put their goods at risk.

While mobile phones and semiconductors are carried by air, other electronics like home appliances are shipped by sea.

Each stranded ship also has 15 to 25 crew on board who could find themselves stranded for weeks or even months and will have to survive on the supplies they have until a solution in found. Most face uncertainty over wages as Hanjin is unlikely to pay the crewing agencies who employ them.

“Unless someone steps in very quickly – and there is no sign of that – this will last a very long time,” Lars Jensen, chief executive of Sea Intelligence Consulting in Copenhagen told the BBC.

Hanjin, the world’s seventh-largest container shipper, supplies nearly 8 per cent of the trans-Pacific trade volume for the US market.

Banks stopped lending to the firm this week after years of losses. Since then, 27 of its vessels have been seized and many denied entry to ports as container lashing providers fret that they will not be paid.

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