Suppliers marooned by Hanjin - collapse scramble for Thanksgiving rush

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(Business Today Friday 9 September 2016)

Suppliers marooned by Hanjin - collapse scramble for Thanksgiving rush

An Alliance to Ease Disruption

Hyundai Merchant Marine, South Korea’s second-largest container mover, said yesterday

it is forming an alliance with three other local lines to offer services in South-east Asia,

deploying 15 vessels and helping ease the disruption

seoul — Suppliers to companies such as Nike and Hugo Boss are scrambling to ensure their T-shirts and sneakers reach buyers in time for the year-end holiday season after the collapse of Hanjin Shipping left an estimated US$14 billion (S$18.9 billion) worth of goods adrift.

Esquel Group, a Hong-Kong-based manufacturer for fashion brands including Nike, Hugo Boss and Ralph Lauren, is hiring truckers to move four stranded containers of raw materials to its factories near Ho Chi Minh City as soon as they can be retrieved from ports in China. Liaoning Shidai Wanheng, a Chinese fabrics importer and a supplier to Marks & Spencer Group, has made alternative arrangements for shipments that were scheduled with Hanjin.

“Our production lines are waiting,” said Mr Kent Teh, who runs Esquel’s Vietnam business. “We potentially have to take airfreight to deliver the garment items to clients in the US and UK.”

Apparel, handbags, televisions and microwave ovens are among goods stranded at sea after Korea’s largest shipping company filed for bankruptcy protection last week, setting off a series of events that roiled the global supply chain. A US Court on Tuesday provided a temporary reprieve, which may help vessels call on ports such as Los Angeles without the fear of getting impounded. Any major bottlenecks ahead of Thanksgiving and Christmas could put a dent in the two-month shopping season, which netted some US$626 billion of sales last year in the US.

Supporting Hanjin’s Chapter 15 US Bankruptcy Court petition, Samsung Electronics said in a court filing that about US$38 million of its goods were on board two Hanjin vessels off Long Beach, California. If the cargo is not unloaded immediately, the firm will be forced to transport alternative parts by air to help meet contractual obligations at “great costs”, Samsung said. For example, it would have to charter at least 16 planes at a cost of about US$8.8 million to move 1,469 tons of goods, it said.

About 86 of Hanjin’s ships are stuck at 50 ports in 26 countries, with vessels turned away out of concern the company has no cash to pay various docking fees and handling charges.

With cargo stuck on ships, Esquel’s Mr Teh estimates a production delay of about a week and a doubling of transport costs. Besides truckers, a faster ship will be hired to transport the items from Hong Kong, he said. He also plans to fly finished products out of his factories to meet deadlines.

Some manufacturers are switching to other shippers, said Mr Hoang Ngoc Anh, deputy secretary general of Vietnam Textile and Apparel Association.

Over in China, Shanghai Lansheng Corp, which exports shoes, office supplies and musical instruments, said it is asking each of its business divisions to check if they have any stock stuck at sea.

As retailers gauge the impact of the disruptions, handbag maker Michael Kors Holdings says it has had concerns about Hanjin for some time.

“We did have a limited number of containers hung up on those ships; there’s going to be some pricing pressure at this point,” CEO John Idol said Wednesday at a conference in New York, adding that he does not expect “significant long-term impact”.

At the same event, Mr Emanuel Chirico, CEO of Calvin Klein and Tommy Hilfiger owner PVH Corp, said Hanjin handles a small portion of the company’s business, and “it really hasn’t impacted us at all”.

“Retailers’ main concern is that there’s millions of dollars worth of merchandise that needs to be on store shelves that could be impacted by this,” Mr Jonathan Gold, vice-president for supply chain and customs policy at the National Retail Federation trade group, said last week. Bloomberg