For your guidance you can use the following questions to successfully complete your project:
1. How will the strategioc, alliares react to the collapse of Hanjin Shipping?
2. What courses of action do you recommend for the bigger shipping companies in terms of further investments bigger ships (economies of scale)?
3. How do you think Hanjins' existing shippers will be effected with this new development? What would be their course of action?
4. What judgement can you make about the freight costs and service levels of Hanjin's shippers?
5. What are the economic effects on the industry and specifically how will the collapse influence freight costs?
6. What are the causes of the collapse of Hanjin Shipping? What is the impact on Asia-Pacific ports?
7. Obtain statistical data on the movement of containers on the east west trades and vice versa.
8. Compare the profitabilit/ per TEU on both trades.
9. Graphically picture the data in an appropriate graph.
Following are the information of the company which can help the tutor to do task 1.
1.Background of Research Topic
Shipping is an international business. Hanjin is a 7th international container shipping line with 80 ships and global network. It came in financial trouble of bankruptcy in August 16 and unable to pay port charges and other financial dues. (financial sick company) There was bad impact on its global operations.
This company was member of CKYHE Alliance. When any alliance come in operational problem, it become problem of international shipping and port industry. It also hurdle to international trade logistics. The supply chain of many customers has been broken due to Hanjin financial problems. Hanjin, have 500,000 containers and around 3 percent of market share in shipping. Therefore it become global shipping problem
2.Introduction of research topic
Shipping alliance is basic structure of international container shipping line. Hanjin was member of CKYHE Alliance. The CKYHE Alliance consists of Cosco Container Lines, "K" Line, Yang Ming Line, Hanjin Shipping, and Evergreen Line. Out of above shipping line, Hanjin ships have been denied access to ports and, in some cases, have been seized. The carriers facing the biggest disruption are Hanjin's partners in the CKYHE Alliance - Cosco, K Line, Yang Ming and Evergreen - who operate a number of services in the East-West container trades
3.Research problems
It creates problems to other member shipping line to supply more ship on route. Take container from Hanjin ship and deliver to the final destination ,rework on demand supply of shipping service. Importer and exporter have faced problem due container are stuck on Hanjin ship and they have to pay more fright to another shipping line and extra charges to the ports. Ports also started to demand advance charges from customer's of Hanjin The carriers facing the biggest disruption are Hanjin's partners in the CKYHE Alliance - Cosco, K Line, Yang Ming and Evergreen - who operate a number of services in the East-West container trades
4.Actual problems of Hanjin
The problem stems from Hanjin's shortage of cash, which has stranded $14 billion of cargo owned by companies such as HP Inc HPQ 0.72% , Home Shopping Network and Samsung Electronics SSNLF -12.28% . Much of the cargo is on more than 100 ships at sea because cargo handlers, tug operators and ports are refusing to work with Hanjin unless they get paid up front.
5.Problems statement
International sea transport has been disturbed due to Hanjin shipping bankruptcy problems. What is effect of Hanjin problems on strategic alliance, port and shipping industry. What logistics and supply chain of customers (shipper or exporter or importer)
7.Collection of data
There are two types of data
1-Primary data -which is collected directly from customers or those are suffering from Hanjin problems
Example -another partner of alliance -ports and importer and exporter
2-Secondary data
This is called table/desk research -The data which is already available in books, magazine and website
8.Data Analysis
From our data we can see how much long-term rates have risen through Q2 and Q3. For example, the cost of shipping a 40' container for the Far East to North Europe route has escalated from a low of US$361 in April to US$965 on 30 September, a 168% increase. "With this in mind shippers probably shouldn't expect the same low price contracts in 2017 as they secured in 2016."
The report shows the trades in which Hanjin had the largest presence, including a 10% share of Asia-Middle East nominal capacity, 9% share of Asia-Mediterranean, 9% share of Asia-WCNA, and 6% share of Asia-ECNA.
Analysts believe the move will benefit the larger European container lines like Maersk and CMA CGM who will be able to move in and increase their market share on the Far East-to-Europe trade lane, the world's largest, and are already doing so
9.Finding
9.1Freight rates
There was over capacity in shipping industry and freights were low. But suddenly, 80 vessels of Hanjin stuck in the sea and out of operations. Consequently, there was shortage of supply of shipping space.
Short-term rates on the world's number one trade route - Far East Asia to North American main ports - sky-rocketed, largely due to Hanjin transforming oversupply to undersupply almost overnight.
"This enabled significant rate hikes, with the market average price for 40' containers climbing by 47% across Q3, starting at US$1,240 and ending on US$1,826.
"However, looking at today's data we can already see that prices are trending down somewhat, meaning the Hanjin Effect is history.
Withdrawal of Korean line has contributed to container freight price rises of around 40% on Asia-Europe and Asia-US services, Drewry reports
Shippers are facing container freight rate rises on key east-west trades following the decision by Hanjin Shipping to file for court receivership last week, with the Korean line's collapse contributing to container freight price rises of around 40% on Asia-Europe and
Asia US services
The World Container Index, a joint venture between Drewry and Cleartrade Exchange, reported that spot rates from Shanghai to Los Angeles in the US and Rotterdam in Europe, increased by 42% and 39% respectively on 1 September against the previous week."
Troubles is that shipping rates have spiked. Prices for shipments between Asia and the U.S. have risen 50 percent through September,
9.2 Impact on sea transport and alliance
Sea transport disruption throughout the container supply chain as the complicated web of alliances, vessel sharing agreements and slot swaps unravels. Impact will also ripple through the many vessel sharing agreements in non-alliance trades, as well as through carriers trading slots with Hanjin.
Problems within alliance
On a worldwide basis Hanjin is a member of the CKYHE alliance and both Evergreen and K Line said they were not loading containers on Hanjin ships or accepting boxes from the Korean line
9.3 Shipping line
Samudera shipping
Samudera and Hanjin had operated joint services into Yangon, Chittagong, Surabaya and Bangkok,. Samudera shipping line was transporting 273,000 TEU every year in alliance but Hanjin Shipping ceased it operation. Therefore, this company handled 2.1% less containers It container shipping business declined 17.2% to US$52.1m in the third quarter 2016, compared with US$63m in the third quarter 2015,"
CMA CGM has ditched its partnership with bankrupt Hanjin Shipping on five services. Given many Hanjin vessels are currently stranded outside ports it was not made clear how the CMA CGM boxes would be unloaded. For CMA CGM containers already on Hanjin vessels they would unloaded and transferred to other vessels operated by the French line or its partners.
It said that Hanjin containers already on its vessels would be delivered to their final destinations and it was no longer loading any CMA CGM boxes on vessels from the Korean line.
Hong Kong's Orient Overseas Container Line (OOCL) said it has stopped loading cargoes and containers from South Korea's Hanjin Shipping Co Ltd
OOCL's cargo units will also no longer be loaded on vessels operated by Hanjin Shipping
For OOCL cargo on Hanjin Shipping operated vessels that are under arrest and/or idled outside the port
OOCL has liaised with Hanjin Shipping and the marine terminal operators to release the cargo as soon as possible
COSCO-emergency continency planning have been done by Ever green and COSCO (China)
9.4 Impact on Ports
Chinese port denied entry to Hanjin ship. Out of 80 ships 44 ships were dined access to Hanjin ship
Congestion in Port
Flexistove container port has seen a recent return of landside congestion, leading to a temporary ban on empty container restitution, hampered intermodal operations of port including rail movement and its biggest customer looking at alternative shipping routes. Over 10,000 hanjin containers stranded at the port with little chance of immediate evacuation clogging up ports and truck yards, tying up trailers that cannot be used to handle other cargo.
Terminal operators in the California ports of Long Beach and Oakland are not taking back empty containers. Many in the industry doubt Hanjin will pay storage costs, and a growing number of empty containers and the trailers they sit on are stranded.
9.5 Importer
Effects for importers bringing goods from Asian factories to U.S. malls by creating a shortage of trailers to move ocean-shipping containers on U.S. roads
They are paying high charges to the another shipping line and ports. Apart from these, their SCM (Brings raw materials and export finish product ) has been disturbed
9.6 Exporters /shippers
Many shippers were unaware that when they book with carrier Yang Ming their container will actually have been moved on a Hanjin-operated vessel.(This is as per vessels slot arrangement)
Some ports have imposed surcharges on exporters and importers who used Hanjin as a carrier and are waiting for their products in the destination port to cover the port costs unpaid by Hanjin. This is also increasing exporters' costs,"
Shippers moving boxes away from Hanjin B/L this week to other carriers will bear additional costs, while terminals will have issues moving boxes to meet a different vessel and uncertainty over who will pay the handling fees. This will all be very messy and an additional burden."
9.7 Legal actions against Hanjin
Vessels arrested and legal problems
One vessel has also been seized by a creditor in Singapore while firms in the United States have launched legal action against Hanjin to seize vessels and other assets over unpaid bills.
10. Solutions over the problems
The CKYHE Alliance will cease to operate in 2017 as a result of consolidation in the container shipping industry. Evergreen Line will join the Ocean Alliance along with Cosco, which merged with China Shipping Container Lines in 2015, while "K" Line, Yang Ming Line, and Hanjin are joining THE Alliance.
Hanjin was due to leave the CKYHE Alliance next year as part of the reshuffling of carriers into new groups and form a new pact with Hapag-Lloyd, K Line, MOL, NYK and Yang Ming called
THE Alliance. Hanjin's impending exit immediately puts this grouping on the back foot, erasing any pre-planning and meaning that it will be diminished in size in comparison to 2M + HMM and the Ocean Alliance (CMA CGM, Cosco, Evergreen.