SPARKS, Nev. (BRAIN) — Many suppliers got a short email notice Thursday from the Sporting Goods Shipping Association (SGSA) with an article from the Journal of Commerce attached.
What had been a bright spot for most suppliers — record low rates for ocean freight shipping of 40-foot containers (see the October 1 issue of BRAIN) — is coming to an abrupt halt with the bankruptcy of Hanjin Shipping Company. Hanjin filed for bankruptcy Wednesday in Seoul, South Korea.
Angie Munson, SGSA's executive director, told BRAIN that it was too early to tell how the bankruptcy would affect container shipments for the industry from key Asian ports. However, container rates are going up immediately, said Munson as well as several major publications that track the transportation industry.
Shippers imposed spot rate increases on trans-Pacific shipping Thursday. Rates had already been trending up slightly. Rates for West Coast-bound ships could go up 54 percent or more, while East Coast-bound rates could see a 50 percent increase.
Munson, who manages shipping rates for companies in the sporting goods industry as well as some in the bicycle industry, said she doesn't think — at this point — that the impact in terms of delayed shipments, primarily to the West Coast, will be significant for the bicycle industry.
But for major retailers the bankruptcy could not have come at a worse time since many, like Amazon, are stockpiling goods for the holiday season.
Suppliers with goods that have yet to leave Asian ports, and that had been scheduled for Hanjin ships, are hustling for new shippers. That means unloading already-packed containers, repacking them and trucking them to a different terminal at the port. That will also increase the cost of goods.
A number of shippers, including some used by the industry, have told their clients they have stopped putting containers on Hanjin ships. Those include members of the CKYHE Alliance — Evergreen Line, Cosco Container Lines, K Line and Yang Ming Line. The Alliance also includes Hanjin.
Hanjin, a Korean company and the seventh-largest ocean freight company in the world, sparked turmoil in international markets when it filed for bankruptcy protection.
Hanjin's ships are now idling outside West Coast ports like those at Long Beach, Los Angeles, Seattle and others unable to unload their containers out of fear creditors will seize the ships.
Freight brokers told The Wall Street Journal that about 25,000 containers cross the Pacific daily on Hanjin ships.
Michael Forte, Felt's general manager and chairman of the BPSA's statistics committee, said bicycle suppliers generally experience two spikes in shipping — May and June when early season models are brought in, and late fall as suppliers bring in inventory for the new season. "That tracks with BPSA data," he said.
As for Felt, the Southern California company uses Evergreen and Yang Ming to deliver its bicycles to the West Coast and Canada.
Through the first half of the year, suppliers had been enjoying a nearly 25 percent reduction in ocean freight costs — approximately $17 million — due to a glut of container ships, a fall-off in goods coming from China, and a major pullback in Chinese demand consumer goods and for commodities like iron ore, oil and other bulk items.
