US retailers take a hit from Hanjin

US businesses across the spectrum from food to home furniture are likely to be hit financially by the collapse of Hanjin Shipping Line.

Industry insiders believe that other container shipping carriers are likely to boost their container freight rates by as much as 50% beginning in October as retailers scramble to find secure shipping ahead of the peak season in November and December.

International logistics company UPS has said that it is seeing a spike in demand for its freight services and is working with customers in Asia to move goods from Hanjin containers to other ocean and freight carriers. As Apex Insight reported yesterday, around £10.5bn worth of goods is reported to be stranded on Hanjin ships.

“Right now, there is much more (freight) demand than there is supply. People are scrambling to find a carrier with space,” said Peter Friedmann, executive director of the US Agriculture Transportation Coalition shipping industry group.

“But the biggest challenge right now is for people with cargo on Hanjin ships,” he said.

In order to get their goods ashore, cargo shippers have been forced to pay thousands of pounds in fees to reclaim their goods from ships in order to stop perishable goods from spoiling and to avoid losing sales because goods aren’t otherwise aavailable when customers want them.

Ordinarily, Hanjin would pay those fees as part of their own fees. Given that the shipping line is in receivership, it is not clear whether any of those monies spent will be returned.

Singapore-based crop shipper Agrocorp International said that DP World, terminal operator at Port Metro Vancouver, last week held 24 containers, or 600 tonnes, of its Canadian lentils that were bound for India and Bangladesh, demanding a release fee of $450 per container.

Industry insiders believe however that this is likely to only be a spike in costs and won’t have long term effects.

“The Hanjin ships are going to be off the market for the holiday seasons. It will take several months to sort through the legalities, but any rate increase will be temporary,” said David St. Amand, president of Navigistics Consulting.

It is unlikely that retailers will pass on the costs incurred given how competitive their markets are – if they did people would go elsewhere to a company that has not used Hanjin.

“We believe that (the Hanjin collapse) will likely increase our short to medium term ocean freight costs which will minimally impact product cost in all of our operating segments to varying degrees. However, inventory availability is good,” Paul Toms, CEO of Hooker Furniture, one of the thousands of affected companies.