Saturday, September 10, 2016

Hanjin "Crisis"Ended Today: Never Was a Problem

So its over, as I predicted.  Ho hum.  But note the hype continues in spite of the facts.

Fresh off of sensationalizing the ITT demise, the Wall Street Journal was just  hyping the Hanjin problem, and Zero Hedge is hyping the hype: ghost ships, crews gone crazy, chaos!  Those were the headlines a day ago.

The very articles promoting the-end-of-the-world internally contradict themselves.  And the search for victims settles on small business.  Small businesses have no problem with this, we know these things happen, so we are prepared and survive.  As I mention how below, but first the hype.

$90 million dollars has been coughed up to address the problem, not a lot when its takes a million to fuel up one of the bigger ships, and there is a lien for a million on the ship.  But it is a start.

Before I address the reality, let's look at the hype:

Zero Hedge quotes a labor Union official:
"Our ships can become ghost ships,” said Kim Ho Kyung, a manager at Hanjin Shipping’s labor union.
Well, now.  "can"? There is a possibility we can all lose sleep over. Except it will never happened.  In salvage law an empty ship belongs to whoever first boards it.  No, a quote including the word ghost might make for exciting copy, it's not in the cards.

As to the earlier fear of cannibalism Zero Hedge hinted at:
As a result, The company has started providing food, water and daily necessities to crews on six Hanjin ships anchored at ports including Rotterdam and Singapore.
Next... an industry finds no problem yet...
Nate Herman, a senior vice president for the American Apparel & Footwear Association, said: “This is not impacting store shelves now,” however he added that “It will impact store shelves if the situation isn’t resolved.” 
And won't since this is over already. And this...
One Hanjin captain operating a ship in international waters near Japan said his vessel has been given permission to enter a Japanese port Wednesday to unload cargo, but will be required to head back out soon after.
Oh.  So if you cannot pay your bills, well, unload the goods and leave.  This is crisis stuff?

And this from a consultant:
The problem retailers face is that there is little precedent how to deal with the fallout. 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.
Well, sounds like he is looking for clients, knowing the words "bordering chaos" will get quoted along with him.  As to little precedent, what nonsense.  Admiralty law has thousands of years of precedents, apparently unknown to the consultant.  I do some consulting.  Our industry motto is "seldom informed, never in doubt."  Lars Jensen is stellar.

Recall above Hanjin is sending in food, water, etc to its ships.  Now read this clever piece, again alluding to cannibalism:
But while manufactured cargo can survive indefinitely, crews on ships can not, and as Hanjin ships drift at sea, their crews face increasing uncertainties and diminishing supplies. “We usually have food and water for about two weeks,” said the captain of a Hanjin-operated ship speaking by satellite phone from the South China Sea. But, after 12 days at sea, “everything is getting tight—food, water and fuel,” he said.The captain added that he is rationing water and cutting back air conditioning to save energy.
“The heat is driving the crew crazy,” he said. His ship was carrying lubricants and home appliances from South Asia to a Chinese port, but last Thursday, he was told to stop, as the ship could be seized at its destination.
Spot the problem?  A Hanjin-operated ship?  Meaning an independent tramp steamer who picked up a load for Hanjin on contract.  Who told him to stop?  Hanjin, or the owners of his ship?  If Hanjin is not supplying them, it is only because it's not Hanjin's boat.  Hanjin captains are national navy grade officers.  No responsible officer would talk like that. Also, any ship in distress can ask passing ships for relief and are extremely likely to get it.  That's just the merchant marine.  Sounds like someone trying to shake Hanjin down.

The Wall Street Journal is not very well informed:
Adding to the confusion, the WSJ adds that shippers and brokers said the Korean government has designated only three so-called base ports—Los Angeles, Singapore and Hamburg—where Hanjin vessels can unload shipments without risk of being seized by creditors.
The Hanjin Boston has been seized.
One of three Hanjin ships moored off Southern California’s shores was seized by U.S. Marshall’s officers, officials confirmed Wednesday.
And that is good.  Yesterday the Hanjin Boston, which had been one of the "choatic, crazy-crewed, cannibal ghost ships" referred to by Zero Hedge, unloaded its goods and now sits back in the bay at anchor with a US Marshall on board until Hanjin coughs up the money to pay its bills.

(A seized ship has a marshall on board, so no "ghost ships.")

Seven days ago I predicted the problem would be over in 6 days.  Exactly right.  Zero Hedge was calling it years.  I kept my eye on the Hanjin Boston, which I specifically mentioned,  for that was obviously one of the ships in question.

How come I knew there would be no problem?  Because there is nothing special here.  There is comprehensive law to deal with such common events.  Read this through and you see what the rules are, what happened, and what will happen.

Back to Zero Hedge, this is just odd.
The Korean Shippers Council, which represents more than 60,000 trading companies, said Wednesday  its members “have not been able to figure out the whereabouts of their freight.”
What's your booking number?  Email me, I'll tell you in about 5 seconds where your freight is.  Someone just doesn't have their facts straight.
Meanwhile, executives with freight-booking platform Shippabo warned that companies should expect delays as many cargo containers have been rerouted on different vessels. “For the top 25 importers, this is a blip,” said Frank Layo, a retail strategist at consulting firm Kurt Salmon. “They’re diversified, they’re not shipping it all on one line.” But for smaller retailers with less sophistication, “this could be devastating,” he said.
This is no problem for small businesses.  We know how to deal with this.  We never do volume.  We always do frequency.  There are no practical economies of scale in shipping, no matter what business schools teach.  They are simply wrong.  We don't try to ship the largest amount possible, we ship the smallest amount rational.  We invented "just-in-time' inventory.  If one of our small shipments is held up a week on a ship, no problem anyway, but if a container goes overboard (happens more than you think) and we have a pallet on that can, well, no problem, we have another pallet on another ship coming in a week.

Of course I've been teaching this tactic for 30 years, and I have seminars listed on the upper right corner of this blog page.

The only real news the Zero Hedge has, and this is right, is this:
Another word for devastating? A "justification" to miss earnings for yet one more quarter.
Exactly.  the dinosaurs will use this too as an alternative narrative...  "we are not dying."  O yes they are, but this was a no- event.  They are dying because the ex-nihilo credit regime is over.  And this is great news for small business international trade.

As an aside, if any reporter ants to know what is going on in int'l trade, they should ask me.  But that ain't gonna happen, because no hype quotes rom me.

Feel free to forward this by email to three of your friends.


Anonymous said...

Great article John. I learned alot about the shipping industry the last two weeks by reading your blog posts. CNN Money was way off, "U.S. retailers warn of shipping crisis as holiday shopping looms" (September 2, 2016). They should read your blog! A week ago, If a crew of Somali pirates approached any one of those ships they would find a port very pronto.