HANJIN SHIPPING

MEMBERS:• ROXANA CORREA• MARILYN MARTINEZ• MADELYNE SOLEDISPA• MICHELLE SIGUENZA • KELLY TANDAZO

LOGISTICS IIMAX ALBERTO GALARZA

HERNANDEZ

GRADE: 10

What  are shipping cycles?

• Shipping cycle is an economic concept that explains how shipping companies and freight charges respond to supply and demand.

• It examines how and why ships build up in sea trading ports.

• The cycle also seeks to explain what affects the selling price of ship fleets and what types of ships sell during slow business periods.

• The four stages of the shipping cycle, all based on customer demand, are trough, recovery, peak and collapse.

Recovery: Inthisstage,supplyanddemandmovetowardequilibrium.Shippingcontainersbegintomoveoutofthetradingports,asdemandstimulates new orders. During this stage, optimism about themarketremainsshaky. Peak: The levelsofsupplyanddemandarealmostcompletelyequal.Quite a bit of market pressure occurs between supply and demandlevels,which could cause the peak to fall at any time.  Cash flow forshippingcompaniesisquitehigh.Collapse:Occurswhensupplylevelsbegintoexceeddemand.Freightratesbegintodeclineduringacollapse.Shippingcontainersandfleetbegintoaccumulateintradingportsonceagain.

Trough: Shipsbegintoaccumulateattradingports,whileothersslowdown shipments by delaying their arrivals at full ports. In a trough,freight costs tend to start falling.  Shipping companies start toexperience a negative cash flow, selling prices for ships tend to belower.

Recovery:The recovery phase is not much seen in the case of Hanjin. By the time Hanjin closed up 30% with respect to the sale of its assets. But a jury determine if the company continues or is settled. Yet it can be mentioned that in the month of

September Hanjin had a recovery before the bad moment that happened.

TROUGH: 

• Freightcosts• Excessofcapacity

• Shipsareacumulated

PEAK:• BySeptember,theglobalshippingindustryisalreadyintowhatisitsbusiesttimeoftheyearaheadoftheChristmasseason. 

• Other shipping lines weremoving to take over some of the Hanjintraffic but at a price, with vessels already are operating at highcapacity because of the season. The price of shipping a 40ftcontainerfromChinatotheUSjumpedbyupto50%inasingleday,saidNerijusPoskus,directorofpricingandprocurementforFlexport.COLAPSE: 

• Hanjin’scollapsecouldalsohitthebottomlineatseveralcompaniesas it came during the peak shipping period ahead of the year-endholidayseason.

• Thecompany’scollapseislargelyduetoovercapacity;wildgrowthinthe number and capacity of container ships has outstripped theamountofgoodstobecarriedasglobaltradehasslowed.

• Hanjin vessels have been arrested and ports are refusing to workHanjinshipsforfeartheywillnotbecompensated.

Why Hanjin broke?

• Banks withdrew backing forHanjin, saying a funding planby its parent group wasinadequatetotackledebtthatstood at 6.1 trillionwon as ofend-June.

• The company’s demise islargely due to overcapacity;wildgrowthinthenumberandcapacityofcontainershipshasoutstripped the amount ofgoods to be carried as globaltradehasslowed.Theindustryas a whole will lose as muchas$10billionthisyear.

• A weakened economy sincethe2008recessionhurtglobaldemandandtradeatthesametime that steamship linescontinued to build more andlargervessels.

• Immense ships that wereconceived as cost-effectivewhenfreightcostswerehigherseveralyearsago.

What happens with Hanjin now?

The matrix has pledged 80 million euros, a third of

which come from the personal assets of the

company's CEO, Cho Hon Yan, to help resolve the situation of these ships.

With this figure, however, it is not enough for Hanjin to pay their outstanding

bills.The company employs 1,500

people. Hanjin Shipping shares closed up 30% in the hopes of

selling assets. Until Wednesday, the shares had fallen about 34%

since late August, before this indicates that its shares have lost

nearly two-thirds of its value in the past year.

While the trial should last between one and two months,

the court handling the case has asked the company to submit a viability plan on 25 November

and then decide if its continuation is possible (though

under strict plan setting) or whether to proceed to

liquidation.

Hanjin left the top 10 and now

is ranked seventeenth.

DECLARED IN SUSPESION OF PAYMENTS

HANJIN TIMELINE

SOURCES 

http://www.ehow.com/info_8466520_four-stages-shipping-cycle.html

http://www.bbc.com/news/business-37241727

http://www.joc.com/special-topics/hanjin-shipping-bankruptcy

http://economia.elpais.com/economia/2016/09/09/actualidad/1473435543_108090.html

http://ecommerce-news.es/actualidad/afecta-la-quiebra-hanjin-shipping-al-comercio-electronico-47500.html