'A big nightmare': Businesses in Singapore hit as Hanjin Shipping sinks

'A big nightmare': Businesses in Singapore hit as Hanjin Shipping sinks

The collapse of South Korea’s biggest container-shipping line has rocked the boats of some businesses in Singapore.

SINGAPORE: With nine containers of goods stranded at sea following the sudden collapse of South Korean behemoth Hanjin Shipping, the past three weeks have been both chaotic and frustrating for employees at the logistics department of Yong Wen Food Industries.

While most of the company's stranded goods are non-perishable items such as canned food, the firm does have two containers carrying 3,600 cartons of fresh milk from Italy. Employees at the Singapore-based food group have thus far received little detail regarding the whereabouts of most of its containers. Daily queries made to Hanjin's Singapore office have also gone unanswered since the shipping giant filed for court receivership last month.

"It's like they purposely ignore your calls and emails," said a female employee at Yong Wen Food Industries who declined to be named. "It is very frustrating because I just want to know how I can get to my cargo, especially the two 40-foot containers with milk that cannot be (left) under the sun. It is a huge amount and it will affect our sales."

For the time being, the local food importer and distributor is relying on other shipments to make up for the stranded goods meant to be distributed to local supermarkets, bakeries and retailers. With updates from Hanjin Shipping being slow and scarce, the company has decided to engage freight forwarders to try to locate and retrieve its goods.

While that will incur additional costs, the employee told Channel NewsAsia that her team does not have much of a choice. "(There's) no point sitting around and wait for information... might as well look for external help and these forwarders may have more information than we do."

CONFUSION AND UNCERTAINTY

Yong Wen Food Industries is not the only one in Singapore caught up in the global supply-chain mess triggered by the demise of the world's seventh-largest container line, which has left more than 100 ships and their cargo in limbo at sea.

When Channel NewsAsia visited Hanjin's Singapore office at the PSA Building on Wednesday (Sep 28) morning, at least 10 representatives from various segments of the supply chain were seen in a queue at the reception area.

This has become a common sight for the past month, according to these representatives whose businesses have been impacted by the shipping giant's sudden bankruptcy. Since news of the collapse emerged, frustrated shippers and cargo owners have been turning up at Hanjin's office demanding updates and more recently, making relevant payments for the retrieval of their goods.

Hanjin Shipping's Singapore office (Photo: Tang See Kit)

Jasico Express Services' manager Neo Kang Wei, for one, has made several trips to Hanjin's office over the past few weeks. "They wouldn't answer the phone so I have to come down personally," he said.

The Singapore-based freight forwarder has "hundreds of containers" stranded on Hanjin's vessels, with most of them bound for delivery to various countries in the world, said Mr Neo. With the Singapore port being declared as one of the "safe havens" for Hanjin Shipping, following a High Court ruling to suspend "any enforcement or execution against any asset" of the South Korean firm and its local subsidiaries, the freight forwarder is hoping to unload all of its containers on board Hanjin's ships in Singapore before transferring them to alternative container lines.

But the process has been far from smooth-sailing. "It's been very bad and messy," said Mr Neo. "The sudden collapse created a lot of confusion .... no one knows what was happening and it was mainly because of a communication problem (on) Hanjin's (part)."

A local importer of construction materials, who spoke to Channel NewsAsia on the condition of anonymity, described his experience of trying to retrieve his five containers of customised construction equipment, worth nearly S$600,000, on board Hanjin Los Angeles as a "big nightmare".

The vessel carrying the equipment set sail from China's Tianjin port on Aug 12 and was supposed to arrive in Singapore on Aug 26. But just days before the shipping giant went into court receivership, the contractor said he started receiving notifications that his shipment would be delayed. After the announcement of bankruptcy, the updates stopped.

"I went to their office almost every day but all they say is: 'We don’t know when your vessel can come in'," the contractor recounted. "It was a disaster."

With a lack of concrete detail, the contractor said he was unable to make back-up plans as to whether to place a new order for his customised equipment, which were needed at a construction site in central Singapore by early October.

"Without this equipment, the whole construction cannot start. My client understands that it's not my fault, but contractually it's my responsibility to deliver ... If they decide to make claims, we are just an SME (small and medium-sized enterprise) and I cannot afford that.

"I told Hanjin's staff: 'If I have to give compensation, I will be like you and have to declare bankruptcy you know. This is no joke!'," he added.

Fortunately for him, Hanjin Los Angeles eventually called at Singapore's port on Tuesday and the contractor could finally heave a sigh of relief. "At least our case is settled, but what about the other SMEs like ours? I cannot imagine."

According to a notice dated Sep 29 on PSA's website, at least five vessels operated by the beleaguered shipping giant have called at local ports. No further details were given in the release, which only said: "This notice will be updated as and when other vessels operated by HJ are ready to come alongside."

ADDITIONAL COSTS FOR AFFECTED BUSINESSES

But even for those who can rescue their stranded goods, there are additional costs to bear.

PSA said on Sep 6 that companies with cargo shipped by Hanjin will have to fork out a refundable deposit of S$5,000 per container before taking delivery. The deposit will be refunded when firms return the same and empty container to PSA's yard.

Hanjin containers are stacked at PSA's Tanjong Pagar terminal in Singapore. (REUTERS/Edgar Su)

Mr Andy Lane, a partner at CTI Consultancy, said the introduction of the refundable deposit is "practiced by just about all terminals globally" as some form of guarantee.

"Hanjin will be in arrears with PSA both locally in Singapore and also across their global portfolio," Mr Lane wrote in a emailed response. "Hanjin’s operated ships cannot be arrested in Singapore as collateral, so the best Hanjin assets to hold are the containers and therefore PSA wants to be sure that the empties will be returned for that purpose – hence the deposit."

In addition to that, cargo owners will also have to pay stevedorage fees - container charges incurred for unloading the goods - in cash.

For freight forwarders such as Jasico Express Services which are transloading containers, additional fees such as a change of status charge, shut out charge and stevedorage will be imposed, according to the PSA notice released on Sep 6.

Mr Neo said his company has been making these payments on behalf of its clients in order to secure the release of its goods. "For now, our clients just want their cargo so they are okay with it."

Should affected businesses decide to seek compensation for these additional costs, they may be able to do so depending on their contracts but the process could be tricky, said Clyde & Co's maritime legal team.

"Subject to the terms of each individual contract, the cargo owner may be able to bring a claim against Hanjin or their shipping company under the bill of lading for breaching the contract of carriage," the team wrote in an email reply to Channel NewsAsia. The bill of lading refers to the official document issued by a carrier as acknowledgement of a shipment.

"However, whilst a party may have a claim against Hanjin, the difficulty is measuring the value of that claim as it is likely that any such claim would have to be brought in Hanjin's rehabilitation proceedings in South Korea. Whilst it is too early to forecast what Hanjin's creditors will receive in the rehabilitation, it is unlikely that creditors will obtain a full cash recovery of their claims including any amounts paid to facilitate the release of cargo," Clyde & Co's maritime legal team added.

Online furniture store HipVan similarly went through a frustrating experience, when its container with goods worth US$20,000 (S$27,300) was stalled on a Hanjin ship at a port in China on Aug 30.

An earlier report by Reuters said about 10 vessels operated by the cash-strapped South Korean line have been seized at China ports by charterers, port authorities and others.

"It was a big cargo with many orders, so we were frustrated," CEO Danny Tan told Channel NewsAsia. "Our first reaction was to immediately place a replacement order with the factory because we did not know when the shipment will be released."

The online store specialising in designer furniture also offered affected customers a gift voucher, as well as the option of a full refund. Fewer than five customers opted for a refund, Mr Tan noted.

HipVan's shipping agent was eventually able to retrieve its container a week later and have it transferred onto another shipping vessel, which is expected to arrive in Singapore this week. Despite the more than two-week delay, Mr Tan said the company had been "lucky".

"We were lucky because the first vessel wasn't asked to leave the port. If it did, there'll be a headache because the port may not let them dock again since there's no guarantee they can pay the docking fees," he explained.

As for the additional costs related to the replacement order and alternative shipping arrangements, Mr Tan is not too worried either. "These are products that we constantly restock so we just had to push back the delivery date for the replacement order. It's a factory that we work with a lot so there's room for negotiations there."

ROUGHER SEAS AHEAD

The latest troubles surrounding South Korea's biggest container-shipping line come as a double whammy of slowing world trade and an excess of ships weigh down the global shipping industry.

Amid a bleak environment, some carriers have been forced to sell vessels at a discount while a handful of smaller operators have gone bust. Consolidation has also been taking place among carriers looking to compete on scale. Last December, the world's third-largest container shipping company CMA CGM bought over Singapore's Neptune Orient Lines, a move that analysts said had been "long overdue".

However, even with Hanjin's demise, the primary issue of overcapacity in the sector is unlikely to go away, analysts said.

"We do not believe Hanjin’s bankruptcy would have a large impact in the longer-term, given that the physical ships may be redeployed after Hanjin’s legal future is sorted out. At this point in time, we believe the impact of Hanjin Shipping is likely to be minimal," a Sep 14 report from OCBC Investment Research said.

Mr Lane from CTI Consultancy expects even rougher seas ahead for the shipping industry. In particular, carriers with "high gearing, a lot of short-term debt, impatient creditors, and shareholders unwilling to contribute further shareholders or governments not willing to bail them out" will likely be at risk of becoming the next Hanjin, he added.

For businesses that will have to continue relying on container-shipping lines, many said exercising caution is the way to go forward, but most agree that events like Hanjin's downfall are hard to pre-empt.

"We've used Hanjin so many times for our cargo from China. They are fast and prices are reasonable so it was a big surprise," said the local contractor who declined to be named. "Our shipping agents have suggested other container lines for us to consider ... I'll probably take the bigger names for now but the shipping industry is so scary, there's no certainty who's safe and who's not."

Follow See Kit on Twitter @SeeKitCNA

Source: CNA/sk