On September 4th, the South Korean freight shipping company, Hanjin, filed for bankruptcy, leaving 93 ocean freighters stuck in limbo outside of 51 ports spanning over 23 countries. The estimated $14+ billion worth of cargo, which includes goods from blue chip companies like Samsung, HP and LG among others, was in route to some of the most notable US retailers. Due to the unexpected nature of the bankruptcy and creditors refusing to jump in and save the subsidiary, the situation is becoming increasingly dire and a major threat to global trade which could have major long term impacts on the supply chain.
So how does this directly affect the global markets? While consumers may not feel the impact of this today, they will in the coming months. Vander Group is already experiencing spikes as high as 60%+ in sea freight quotes from our global partners which directly affects the landed cost of goods. During the months of August, September and October, companies ship their merchandise to stock up for the upcoming holiday season’s high demand. If the situation is cleared up by then, which seems fairly far-fetched at this point, consumers can expect to see a noticeable spike in consumer goods, which could be the best outcome. On the other hand, if this crisis is not handled in a timely fashion, companies will be forced to find nearshore suppliers to meet consumer demands and impeding landed cost of offshore manufacturing and sourcing.
Right now, creditors have already set in motion their plans to seize assets, which would require rebooking, retrucking, reloading and repacking onto other carrier vessels that will raise their costs to shippers looking for alternative methods to transport and deliver the goods. With the high demand for these alternative carriers, we’re expected to see price gouging as the companies are desperate to get their merchandise to retailers. To muddle the situation even more, some local authorities are seizing cargo to pay off outstanding debts and other obligations, cutting supply and heightening demand. Our group has also received intel of sabotage from longshoreman in retaliation due to unpaid Hanjin import fees and duties. What all of these factors will amass to is an exponential price hike for consumer goods this coming holiday season and at worse case scenario global refactoring of the supply chain.
Vander Group is already looking for backup nearshore suppliers as the cost of manufacturing with landed costs from the Asian markets is quickly becoming cost prohibitive. Is this the tip of the iceberg of a global supply chain crisis and is your organization currently refactoring its supply chain?