Hanjin docks on hold.

Hanjin docks on hold.

With the recent bankruptcy announcement of Hanjin Shipping (one of the top 10 providers of ocean transportation services globally), there has been a large amount of speculation of the impact that this will have on American importers this peak season. What effect will this have on the Musical Instruments/Guitars market? It could be significant. 

At a minimum, we know that many Hanjin operated vessels are anchored at sea in fear that if they docked, their vessels would either be seized as collateral or not unloaded, as the ports would require payment prior to unloading.

Related news received as of Sept. 7:

A federal judge granted Hanjin Shipping's request to have its rehabilitation in bankruptcy court in Korea be recognized under the U.S. bankruptcy code for Chapter 15. Judge John K. Sherwood of the U.S. Bankruptcy Court in Newark, N.J., granted the order on an interim basis and will hear arguments Friday (Sept. 9) to ensure creditors receive adequate protection. Further, the Hanjin Group conglomerate's chairmen have said that it would provide $90 million to help resolve transport disruptions. This should give U.S. importers awaiting cargo on ships anchored outside U.S. ports hope that they will get their goods soon.

The Wall Street Journal Reported:

About 95% of the world’s manufactured goods—from dresses to televisions—are transported in shipping containers. Though Hanjin accounts for only about 3.2% of global container capacity, the disruption, which comes as retailers prepare to stock their shelves for the holiday season, is expected to be costly, as companies scramble to book their goods on other carriers.

While Hanjin was granted protection by bankruptcy courts in Korea and the U.S., conditions are “bordering chaos,” said Lars Jensen, chief executive of SeaIntelligence Consulting in Copenhagen. “With so many Hanjin ships barred from entering ports, shippers have no idea when their cargo will be unloaded.”

The courts’ protection permits Hanjin ships to move in and out of certain terminals in those countries without fear of asset seizures. But shippers and brokers say the rulings don’t solve the shipping line’s problems in the U.S., as it is unclear whether Hanjin will be able to afford to have the ships unloaded once they dock. Moreover, the courts’ rulings don’t necessarily apply to ports in Asia and Europe.

What effect will this have on musical instruments, especially guitars? That remains to be seen. Guitar Center reported:

As we wait for the situation to unfold over the next few months, we expect that ocean capacity will remain very tight on the Asia-to-U.S. shipping lanes.

We anticipate this will radically slow the delivery of guitars into the US, which will make supply scarce for a while.