This is a mess because Hanjin's top management was in denial about the possibility of bankruptcy. Just like the typical startup. They've been trying for months to get a bailout deal from somebody, anybody - a merger, loans, their parent chaebol, their stockholders (Korean Air is the largest), or the S. Korean government. Everybody turned them down. There's too much container ship capacity right now; nobody needed Hanjin's fleet.
Management didn't have a plan for an orderly shutdown, so when the company went into receivership, everything just stopped. Just like many failing startups, the web site continued to indicate nothing was wrong. They've now put up a spreadsheet with current vessel status, but that took weeks. The status has entries such as "Arrested", "Unpaid Canal Fee (Suez)", "Arrested by Bunker Supply Co. (Panama Canal)", and "Port labor rejected" (they're way behind on their payments)". There are about 500,000 containers stuck with Hanjin.
Admiralty law is especially harsh on bankrupt shipowners. In many jurisdictions, ships can be seized regardless of bankruptcy status. Some Hanjin ships have been seized. Some are waiting offshore until somebody puts up the money for unloading and refueling. There were four stuck off the coast of California. Hanjin has come up with enough money to get two of them into the port of Los Angeles and unloaded. Those appear to be ships Hanjin leased, rather than owned, and a court in Korea has told them to unload and return all their leased ships ASAP. Courts in about 15 countries are involved, trying to untangle this mess. The US Maritime Commission is trying to get cargoes unloaded, but they don't have much authority. Ports are unwilling to let Hanjin ships in unless they have enough money to fuel up, pay a crew, and leave - they don't want them stuck at their docks. Meanwhile, some of the ships are running low on food and water.
Then there's the empty container mess. In the container business, you pay a per-day fee when you hold someone else's container, so everyone tries to return their borrowed empties quickly. But most of Hanjin's empty container return points are shut down, and are not taking empties back. Many of those empties are on trailer bodies, and are tying up trailers needed to move freight. Truckers are angry about this. Shippers are having trouble getting enough empty trailers.
This will all get unwound, but it's going to take weeks or months. There are going to be really big post-Xmas sales as the delayed cargo is unloaded.
> This is a mess because Hanjin's top management was in denial about the possibility of bankruptcy. Just like the typical startup.
Just like pretty much anybody. Everyone keeps hoping against hope, everyone is afraid to show weakness, and nobody likes to tell the boss no. Typically the staff knows for months that the end is nigh until some minor event precipitates the final undeniable crisis.
Megan McArdle has some interesting things to say about this in her book "The Up Side of Down." Chapter 5 is about handling crises (in general) and the GM failure (in particular).
"Wagoner [the head of GM] seemed to believe that by not admitting GM might declare bankruptcy, he could somehow keep it from happening. What he thought would take place when the company ran out of cash is not clear. Nor is it clear why his executives and his board of directors nodded and said 'Yes, Rick' rather than insisting that he confront reality. Instead, they helped him sustain his delusion by formulating a mad plan to merge with Chrysler, as if strapping together two nearly bankrupt auto firms would somehow make both of them solvent."
Tulip-bulb, gold rush, hockeystick optimism when reality moves more like bounded diff equ's with a carrying capacity or an impulsive arc overshooting sustainability, not Malthusian exponentials forever on magic rainbows.
Yet when GM did go bankrupt in 2009, GM Legal did a great job of doing it, at least from GM's perspective. They had a prepackaged bankruptcy ready to go. They made it happen in NYC, not Detroit, by using some GM dealership in Manhattan as the base. They had a contract they forced on suppliers to keep parts flowing. (GM's terms were very tough; they didn't want to pay pre-bankruptcy debts or pay for custom tooling made but not paid for, but demanded suppliers keep shipping to them post-bankruptcy on extended payment terms.) That got them through the first few weeks without shutting down the business. Then there was a major downsizing; all the bad stuff went to Motors Liquidation Corp., and the new GM Company kept the good stuff.
This is one thing I love about HN. Whenever there is something big going on in some industry, there will be people posting comments here who work in the industry and will explain what is happening, and usually in very clear terms.
I guess this is because every big industry runs on commuters nowadays, so there are all these people who both are in the industry and read HN.
What happens to the crews of these ships? Can they leave? How? Who pays to transport them to shore? Under what authority are they permitted to walk on shore?
Office and factory workers of a suddenly-derelict company can walk off the premises and go home. Imagine finding out that not only will the paychecks stop, you also can't leave your desk.
There is the occasional ship stranded in Charleston SC and there are local church groups who will put together a food & supply boat to go out there for the crews. They can't leave the ship as they don't have visas. USCIS doesn't really want them to anyway, as there's no guarantee they'll return to the ship or their home country.
> They can't leave the ship as they don't have visas.
What's to stop them? Can't they take a life boat, head for shore, get arrested for illegal entry and get deported home?
Obviously not ideal, but at least you get fed and eventually get back home.
They may have problems in leaving, but that's not as big issue because they generally anyway had been contracted to stay there for many more months.
On the other hand, unlike factory workers in a totally bankrupt organization, the ship crews will get paid - they get "priority" on the ship and cargo; if the ship gets sold in some auction or restructuring, the new owner can't take possession until the previous crew gets paid.
I think lack of basic supplies, and wages, now isn't really remedied by getting a share of monies from a sale at some point in the far future.
1: "I need water"
2: "Don't worry, next year you'll (probably) have enough money to buy some"
Surely there are international agreements with remedies for such situations? When do the coastguard step in and save the crew from dehydration/starvation?
I don't know that much about accounting, but isn't this the exact kind of situation insurance is supposed to smooth over?
I'd imagine in many cases, the cost of solving the problems caused by not being able to pay fees is going to be higher than the fees themselves. So are there not insurers who benefit from paying these fees, rather than paying out larger claims later?
It's a classic tragedy of the commons. If all their creditors let them unload in an orderly fashion, they'll get a better return on what they're owed (making a complete guess at some numbers, maybe 30% instead of 20%). But if one creditor can sieze a ship they might be able to get back 100% of what they were owed, and screw the other guys.
The way this is supposed to be solved is bankruptcy protection; no-one can claim their specific debts, the administrator will figure out the best way to get as much money as possible and distribute it equally. I suspect the problems in this case are mostly caused by the international aspect: Korea may recognize a bankruptcy but that doesn't necessarily mean all the ports around the world do. I'd guess that international bankruptcies are probably rare enough that the system hasn't really been ironed out yet.
>Management didn't have a plan for an orderly shutdown, so when the company went into receivership
The structure of present day shipping implies there could not be an orderly shutdown.
Continuously moving modern freight is akin to a bank. Any efforts to quickly "wind-down" the operation leads to a shortfall in cash, accelerating the bankruptcy process rather than stopping.
Maybe they knew things were going to end badly, and hoped that making sure they were not organized for bankruptcy could get them bailed out. This could be a result of the bank bailouts.
> This will all get unwound, but it's going to take weeks or months.
Does "this" just refer to Hanjin's mess, or does it also include the possibility, described in the OP, of several other shipping companies also going under?
basically, yes, in most developed countries ships are provided with large amounts of fuel oil (bunker fuel) on credit, trusting that the large shipping company will pay in the very near future by wire transfer. In really sketchy 3rd world locations ships have to use cash from the captain's safe to buy fuel. If a ship is delinquent in its account with the local fuel supplier, the fuel supplier will file something in their local admiralty court for what is essentially a lien to seize the ship.
A 10.000+ container vessel uses 100-120 tons of fuel per day (see https://people.hofstra.edu/geotrans/eng/ch8en/conc8en/fuel_c...). Bigger ones are more efficient per container, but it'll still be more than 120 tons of fuel. If you fuel up, that's a lot of bunkers to take in. That's not paid in cash. Credit is used.
I'm curious - and surprised nobody seems to have mentioned or asked - what happens to all the sailors working aboard the ships, which are now stranded offshore?
Do they continue working aboard, knowing that they probably won't be paid (because the company is bankrupt)?
What's morale like? Can they leave, and how would they logistically?
What kind of laws and rights (if any) apply to them in these circumstances?
It's funny to me to be thinking about how our Christmas may be "ruined", meanwhile hundreds or thousands of workers may be out of jobs and effectively indefinitely stranded at sea.
I wondered about that too. What if they all decided to simply abandon ship and head for land, leaving a ship to flounder and possibly become a hazard to other vessels or cause an environmental problem when it crashes into a reef or similar?
But suppose they ran out of food. And suppose there was no shuttle from the ship due to owner going bankrupt. I think they could probably call a mayday signal and get rescued by some other vessel.
They can and will obtain supplies and food at no cost (essentially, with the ship and cargo as collateral) but they can't really abandon it.
Do note that calling mayday gives the rescuing vessel significant rights to the ship and cargo. If your ship is not at risk of sinking, that would be a really expensive way to solve a comparably minor problem, ordering a daily helicopter delivery from the closest McDonalds would be much cheaper.
What happens to the ship isn't really the crew's problem.
Eating? Paying rent? These are the crew's problem. You can't seriously expect them to prioritize the employer that isn't paying/feeding them over their own well-being.
It is their problem; they will get paid in full by staying on ship (no matter what happens to their employer) but will forfeit that pay by abandoning the ship, and for the officers, there is the abovementioned criminal liability if the abandoned ship causes any harm (e.g. by leaking chemicals from cargo).
They're sitting on a ship + cargo that is far more valuable than their outstanding pay, and legally they have a priority claim over all of that.
While the cargo is owned by others, and the ship may be sold during bankruptcy, but maritime law prescribes that none of them can get their stuff until the crew has been paid in full; so in essence they can (and will) hold these billions of dollars of goods as hostage. $16b / 66 Hanjin ships means that an average ship will have cargo $250 million worth, and if anyone wants to receive that cargo, they'll find a way to pay the outstanding wages, which is, rounding to whole millions, approximately 0.
They can also get food and 'maintenance fuel' (enough for running the internal systems, not the huge amount required for main engines) with the ship/cargo as effective collateral, even though they're not the owners - it's the owners legal responsibility to supply that, the crew is authorised to run up a bill and the owner (the new post-bankruptcy owner) will have to pay that or get the ship seized until they do.
The main trouble of these seamen is that it will take an unknown amount of time to get this settled, not that they'd not get paid for these months.
There's nothing a captain can do about a bankrupt company. There is definitely a lot a captain can do about a ship that they've been given exclusive control over. That's part of being a captain: your sole responsibility is to get the ship where it's supposed to go without running into things or sinking or injuring the crew.
This bankruptcy means that companies shipping goods are no longer going to be able to treat shipping as a fungible commodity and instead are going to have to price in a risk component as well. That suggests that the largest and best financed players are likely to be able to command a premium which will accelerate losses at smaller players. This would increase the spreads further and create a viscous loop.
Does anybody have visibility into shipping rates to see if larger players are getting a bigger premium?
We're talking about the industry(shipping) that insurance was invented for. No industry has more experience with calculating risk than the shipping industry.
This will undoubtedly have some effect, but I doubt anyone on Hackernews can reliably predict it.
> They will just buy insurance, and the insurance companies will figure it out.
It's not that simple.
Yes, premiums will adjust depending on the finances of the carrier but the cost of insuring the risk itself is quite variable and can be ruinous. The value of a delayed shipment of iPads is much higher than a delayed shipment of board games, yet Apple can tolerate the former while the latter could sink a company. The board game company might not be able to afford to insure the risk, even though the premium could be lower.
The fact is an Apple can manage the risk by spreading the load (they already do it multi modally, and probably already do it for ships too). A small company with one container or less of goods, cannot.
That's what I meant by "multi modal": they put most of it on ships but buy up enough air capacity to make the early deliveries. Once the ships start arriving they can abandon the air.
Hmm, I've never heard this. All the coverage a few years back was that they use air for everything, so they can scale their production operations in near-real-time as demand fluctuates. That was supposed to be Tim Cook's whole crowning achievement when he was COO. Do you have a source that shows this has changed?
You're talking about a change that takes years to complete, not something that will happen overnight. And production of any good requires some materials which quite likely will need to be shipped in anyway.
The shipping company doesn't own the cargo, but I've read speculation that the creditors can seize the ships, then demand payment to unload the cargo, and if they don't receive payment seize the cargo to discharge the "debt". I don't know how a bill of lading would work in that situation, where the creditor wasn't the original party that the customer signed a contract with, and I'm curious how much latitude a creditor has in situations like these to abrogate previously-entered contracts.
It's really complicated. There are articles by lawyers.[1] There are many countries involved, with very different bankruptcy laws. Much of this involves admiralty law, which has a very different order of priority of creditors than regular bankruptcy law. Lawyers are struggling to figure out all the conflicts of law.[2]
Obviously if the cargo has any value, then the result is simply a higher freight cost than originally expected.
Yes, it is likely that cargo owners will have to pay extra to get their cargo delivered where they want - they have paid for a service, Hanjin won't provide that service, and anyone else will require payment for that same service. Even if the service (or a part of it) is practically unavoidable e.g. the cargo is at a ship and needs to be unloaded, so someone needs to pay for the loading. Maybe they have insured that, maybe not, but they can get their cargo anyway if they want.
That will have the same result. Insurance companies will price based on risk, with the safer carriers having lower risk and hence lower prices. The less safe carriers will have more expensive insurance and be at a disadvantage to the safer carriers. Lack of customers will put them closer to bankruptcy and the circle continues.
Hanjin doesn't really qualify as a "smaller player", do they? So, it seems to indicate any shipping company could end up in trouble, if the sixth largest in the world can fail so catastrophically in such a short time. Given the size of the expenses involved, and how thin the margins are (particularly in a market that has more capacity than cargo), it seems like it's not easy to predict who will be solvent six months or two years out; I imagine the contracts are negotiated on a relatively long time-scale, since these voyages take weeks in the best of cases.
I don't either. I have no familiarity with the industry. Are there only eight companies doing it? I guess it's just that there's no such thing as a small company operating in this business. The scale just seems massive, to me; a single ship costs millions in operations alone.
This is an overly sensational piece. It might slow things down for a few people temporarily, but there's no way this is making retailers worried about sales this Christmas.
In response to slv77:
The bankruptcy means (1) demand has substantially decreased for shipping services, or (2) large established shipping companies are not lean enough to survive and losing market share.
In no way could this accelerate losses for 'small players'. In fact, this should grow their business. I also have no idea what this vicious loop is you are talking about.
Shipping costs may go up slightly, but it will likely already be priced into current the market.
I think this is not as big of a deal as the article is making it out to be.
You occasionally hear about immigrants being smuggled into (a) country in shipping containers. Is that common enough that it's likely that one or more of the stalled containers has a bunch of people stuck in it? That seems like a really unfortunate scenario...
That doesn't happen on container vessels, but shipping containers on trucks. On a container vessel you might have a stowaway. Meaning: someone sneaking onboard. They usually run out of food and are then discovered.
Due to all the anti terrorist rules, it's not easy getting onboard of a container vessel.
It's not just retail goods on those ships. There is also a great deal of parts that are needed by US manufacturing lines. That creates a ripple effect down the line as missed parts causes snags in the lines. Businesses have gotten pretty good with Just In Time building, so the loss of a few containers will put a snag into it. Some places may have predicted this and gotten alternative parts flows, but that puts a strain on the people making the goods to go into the containers to come here.
Third quarter reporting should be very interesting for the markets.
If someone needed those parts to keep their assembly lines running, why wouldn't they just put up the money to have the ships unloaded? We're only talking about a few million to move these goods.
A company that desperately needs parts stuck on one of these ships is only going to have at most, a handful of containers onboard. Those containers might be worth several million but then that one company would be shouldering 100% of the unloading costs for a negligible portion of the ship's cargo. Nobody wants to be the party that blinks first as the longer they wait, the greater the likelihood of another party paying those fees becomes.
It's in every party's best interest to get these ships docked and unloaded but no single party will own more than a fraction of the total cargo. Cooperation is possible but it will take months for hundreds of primary owners to come to an agreement. Before that happens, each one of those primary owners will need to come to agreements on cost-sharing with all the party's downstream from them in the supply chain first.
It's the very definition of "tragedy of the commons" played out in private enterprise.
Business X has ten containers on a ship. The ship has 4000 containers on it. Should Business X pay to unload the whole ship? That seems rather burdensome.
Should Business X pay to just unload their own containers? But containers are in large stacks on the ship; it is improbable that the containers they want are all on top. They'd have to unload at least some others to get the ones they want.
Should Business X join with all the other businesses that have containers on board? That might be the most equitable, but it's a huge coordination problem (their could be a thousand businesses), and it's still unjust - Business X (and all the others) had to pay for unloading on top of what they already paid Hanjin.
It might be better than the alternative (having your assembly line idled), but it's not an easy or cheap solution...
The obvious solution is to agree that any receiving containers from the ship owe an equitable sized fee based on their fraction of all the containers.
Also to charge creditors that 'arrest' a ship the mooring fee for the port (since they're the ones demanding it stays there).
The ship, any unclaimed cargo, and any unclaimed containers, would then be fire-sold with the base price of the remaining debt for that ship and the condition that whoever buys them is then responsible for them. Any additional proceeds go first to lessening the unload fees (presumably already paid for by the cargo's owners in their transit fees) and finally back to the former owner of the ship.
I forgot to add: The nation receiving the cargo should have an economic stability interest in backing the loans to do this, but those receiving cargo obviously also need to be in on the underwriting of these efforts.
Second edit: It also becomes obvious to me that the equilibrium price for 'when is it bad enough to execute this' is when those who need to claim the cargo from the ship value what they're getting enough to bail out the price of selling the vessels for scrap.
The one doing the sale isn't the company, it's the government overseeing the bankruptcy of the fragment they're handling (the vessel).
As for the input costs, they'd probably (and should) enforce the standard market rate of processing fee.
The idea isn't that the company is bidding on the value of their cargo; it's that the companies FIRST get to declare if they're writing off their cargo or paying whatever their split of the loading fee is (possibly a maximum value they'd claim at) and THEN anything left is sold off (to get rid of it).
It seems like the receiving ports and their respective authorities should consider creating a process by which the ship can unload and cannot be seized while unloading or prior to leaving the port.
> It seems like the receiving ports and their respective authorities should consider creating a process by which the ship can unload and cannot be seized while unloading or prior to leaving the port.
That's already happening in the U.S. (well, not "creating a process" so much as "using an existing process, to wit, Chapter 15 bankruptcy protection".) [0]
It's much easier to ship it via air. If this is for some assembly line you'd have weekly shipments by container vessel. Instead of putting it into a container vessel to arrive 4+ weeks later, just air it and have it in a 1-2 days at most.
This was about a factory line possibly shutting down. In those cases it'll be shipped via air.
To be clear: I work in this industry. In case of an (factory) assembly line shutting down they'll resort to airfreight. I noticed people downvoting my reply, while it is entirely factual.
> In late August, Hanjin Shipping, South Korea’s biggest container line and the world’s seventh-largest, filed for receivership. Some 66 of its ships, loaded with $14.5 billion of goods, including quantities of electronics heading for America, were left stranded at sea. Ports around the world did not want to let Hanjin’s vessels dock because the bankrupt line had no money to pay unloading fees.
A lot more cargo is getting shipped by rail to Europe from China with new tracks being opened up through Central Asia. Also, energy pipelines are getting set up between Russia and China, reducing the need to ship crude oil. This is largely due to the "One Belt, One Road" initiative that China is working on. It's basically a plan to build transport infrastructure all throughout Asia.
The amount of cargo that moves (in terms of number of TEUs per month) from China to Europe via rail is minuscule compared to the ocean cargo capacity. A train full of double stacked containers is a tiny fraction of the capacity of one medium sized 8000 TEU ship.
Oil is much less of a factor in shipping costs than people realise. These container ships are incredible, in terms of what they can carry versus the cost of the fuel.
The amount of fuel these ships burn is absolutely nuts, as much as 200-300 tons per day, approximately 65,000 to 95,000 gallons of the stuff, but the size of the ships is even more stupidly crazy, upwards of 150,000 tons, that they're actually quite efficient when you do the math.
It probably takes 5,000 trucks to carry the containers stacked on one of the larger cargo ships and they burn way more than 19 gallons of fuel per day.
Shipping has always, and by always, I don't mean "since 1932", but since prehistory, been vastly cheaper than overland freight. The old time differential was about 20:1.
Today, marine freight can move a ton nearly 1,000 miles on a gallon of fuel. Rail maxes at about 400 ton miles/gallon, trucking is about 50 tm/g.
Adam Smith's Wealth of Nations has a telling comparison of ship vs wagon travel from Edinburgh to London in the 1770s. Smart money was in boats.
Exactly. I found an analysis I wrote a couple of years ago on it. For something like bananas, which are relatively expensive because they require refrigerated shipping, the total fuel cost for the sea part worked out at about 0.09 cents/lb.
And as you say, the cost of road shipping dwarfs that.
Oil went down, so Hanjin's costs went down. So did everyone else's costs.
But the problem was overcapacity. Everyone was lowering their rates, trying to get enough business to fill their ships. Lower oil meant that Hanjin could survive on lower rates. But lower oil meant that everyone else could, also, and they lowered rates to a place where Hanjin couldn't make it.
You should read the article, it's exactly about the question you asked.
> Hanjin’s bankruptcy—and the abysmal performance of so many lines—is the result of overcapacity in the shipping industry. Since the financial crisis, too many vessels have been built and not enough scrapped, while the growth in global trade has decelerated.
The bunker price is charged separately to customers. So low or high bunkers doesn't affect it that much. However, if a competitor is much more efficient with its bunkers you'd have a problem. At the moment, oil is cheap and there's no advantage of having efficient vessels. Hanjin doesn't even have efficient vessels. Their vessels aren't that big anymore, so they have a cost disadvantage vs the bigger companies.
If we take your "nothing" to mean "nothing practical" to do with oil, then you are completely correct.
If a boat could be operated for free, then overcapacity wouldn't matter, just ship boats underloaded. Of course there are costs so that notion is silly. I suspect he thought that fuel costs were among the biggest costs in shipping. I bet licensing and legal fee are the biggest costs, then I bet personnel cost come in second, then boat maintenance, then somewhere below that oil.
Long answer, when the global financial crisis hit it lowered demand. But shipbuilding has a long lead time and shipyards can't/won't stop production(what do you with a half finished ship, you can't just put in storage). So all the ships that were ordered get built. By now the economy is starting to recover but your shipping capacity is greater than demand. So prices fall and the least efficient companies go bankrupt.
It'll be interesting to see this play out. If the bankrupt company is unwilling or unable to unload their cargo, could another company start repossessing the ships? I'd imagine it would have to on the behalf of several companies; likely, the most heavily invested insurance companies act as a group.
yes but that is the major fear the docks have. No debt holder is going to repossess a ship at sea they are going to wait for them to dock then file a court order to prevent them from undocking until the repossession proceedings finish. This means they are stuck at the dock taking up space the dock owners want to use to unload other ships so they just ban these ships from their docks letting another dock deal with it and basically every dock yard does the same thing so there is no where for them to dock
> When you repossess a truck you don't get to leave it at someone else's loading dock for free.
"Repossess" is an inaccurate term here. Arrest of a vessel is a different (though conceptually related) process [0]. Notably, the creditor does not take ownership or possession of the vessel, and so can't be responsible for fees; the ship is taken over by the government and its operation restricted unless it is either "bailed out" by the owner providing alternative security, the underlying litigation resolved, or the ship ordered sold by the government while the litigation proceeds.
If its sold, the costs incurred will be paid out of the sale proceeds, but they may take some time.
It's probably the bankrupt party's responsibility until the title is transferred. Just like if the city boots and tows your car, you pay the fines.
Also, the ports don't want the money from extended docking fees, they want a flow of ships. Docking fees alone won't compensate all of the teamsters, longshoremen, etc. idled while the berth is blocked.
Today's news: Hanjin has now raised enough money to unload their ships and shut down properly.[1] But it may take until the end of October to unload 90% of the ships.
Low interest rates definitely explains part of it. The one-year treasury bond rate is at 0.6%, which means that unloading the goods now instead of next year is worth only $87M if you assume no losses from business disruption.
"No losses from business disruption" is doing a lot of work there. These containers aren't full of fungible raw materials, they're largely full of products meant to be sold this fall.
nitpick -> I see 0.006 * 14.5bn as 87m? Or am I doing something wrong? Also you have to factor in that a large proportion of the goods might have sizable negative time value, especially if they're perishable, but also if there is any (highly likely) proportion of obsoletable tech in there. Perhaps that's what you mean by business disruption?
And yeah, obsolete tech is a business disruption, as is perishable goods. I wanted to also include things like having to pay a premium to expedite replacement inventory so that your store or factory keeps working while the goods are stuck on a ship.
We have overcapacity that could lead to the formation of cartels if profit margins remain small.
We need more companies in this game, not less, but with overcapacity, who would like to join?
Unsupported assertion. There are both positive and negative aspects to more companies. Consolidation isn't just profitable because it turns an industry into a cartel, but because there are real economies of scales in some industries, especially logistics. This could go either way.
> with overcapacity, who would like to join?
No one needs to join until the overcapacity goes away, do they?
The Hanjin California was seized and moored down the road from my house in Sydney. I was actually down at the water to see it before I knew about the parent firm's collapse. It's pretty interesting seeing such a big ship in what's otherwise (contemporarily) a small recreational/transport channel (Glebe Island, Sydney).
Paging Mark Cuban or Mr. Jack Ma ... complete some deliveries and liquidate assets at the right time for a good price, either when the economy picks up or steel prices climb.
I shipped my stuff from Beijing to LA a month and a half ago, without seeing it on this side yet (takes 1-2 months). Hoping it is not stuck on one of these boats!
Where are they offshore? Pirates are not globetrotters with ports all over the world. But if this was off the coast of Somalia type things you'd think it would happen. Unless they are only interested in the ransom in which case probably mot a good score anyway.
> What about the crews just taking what they want and leaving?
Most people dont steal because they know its wrong. Not because they couldn't get away with it before. And where are they off to? If you're a Filipino on a ship sitting off US coast, what your going to fill a lifeboat full of Chanel perfume, head for the coast, lug it from lifeboat and hail a taxi? Sell it somewhere and try and get out of the country you have no visa for and get back home... doesn't sound too appealing.
What are you going to steal from these ships? Everything's in containers and those are packed really tightly together, there's no accommodation for opening these doors while the ship is loaded.
If you have another self-loading container ship you might be able to pull off a big heist, but who has one of those just kicking around?
As a thought experiment... let's say your pirate crew has an unloading port someplace. Why not take the ship and get going to said port? Would the crew alert the navy/coast guard? Probably.
But then what?
The navy kills the pirates and liberates the vessel... And Hanjin refuses to take it back? The navy now has the responsibility of getting it to port and unloading it, despite ports not wanting to do that?
Pirates do hit container ships, actually some even hire hackers to locate the high value cargo to steal. A bankrupt shipping company doesn't really change much, since the ship is still worth millions. If pirates stole and abandoned the ship then at worst salvage laws apply, and a salvage company would go out and take over. The ships aren't worthless because the company is bankrupt, there's just an issue with operating costs and companies not wanting to shoulder them.
Thank you for actually contributing to my understanding rather than just saying "it'll be dealt with by someone!" as if the situation as-is shouldn't already have been dealt with by someone.
Unloading these ships with state of the art equipment takes upwards of twelve hours. Many of those containers have GPS tracking devices embedded in them.
The sorts of ships routinely subjected to piracy are those carrying an easily transportable commodity (e.g. oil) that can be pumped out or stolen quickly and offloaded on a market without arousing suspicion.
You'd spend weeks going through all those containers to look for anything useful. Many, I'm sure, contain half-finished products, super cheap consumer goods, promotional merchandise, and niche application bulk supplies with almost zero value on the grey market.
If you had someone on the inside that could position the crate you wanted to steal right on top and ready to pick off, you'd just do that with a helicopter anyway and save yourself the trouble of hijacking it.
Very interesting! That's actually pretty shocking that they can be unloaded in 12 hours. I would've expected far longer than that, though now thinking about it I suppose it seems reasonable with all those crazy crane systems that industrial docks have.
Hanjin has max 13.000 TEU vessels. That's maybe 8000 containers. One crane can unload at around 30 containers per hour. You might be able to use 6 cranes on such a vessel. It works out to 45 hours to unload such a vessel if completely full. I might be off a bit in some of the calculations, but 12 vs 45 hours is quite a big difference.
There's various physical limitations. You cannot have too many cranes working on a vessel (need to have space between cranes). Further, most cranes aren't that quick. Depending on a region you might hit 45 containers per hour, but that's pretty high (usually only seen in Asia).
This seems like a rather pointless thought exercise, but the Navy has a responsibility to enforce law and order (...in addition to extra-legal responsibilities), and impact on "bottom line" is not really a factor considered directly in military operations.
I didn't say it was. I'm asking "and then what?" Can they force a port to take in and unload a ship? Would they just leave it adrift? Would they unload it themselves?
If it became a nautical or environmental hazard they'd be compelled to act. If it's just anchored in international waters there's nothing they could or should do.
Or privateers? (I'm half-way serious here. It seems like everyone wants this to get resolved but there's a "log-jam" in the system. Possibilities for a creative solution?)
FWIW the person you're replying to represents everything that is bad about HN. If you read his post history you'd be lead to believe he's an industry insider in: Shipping, Irrigation, Crypto Currencies, Genetics, Nano Technology, Manufacturing, Microkernels and a lot more if you keep going back.
There was a time I believed his posts, until I read one of his mini-essays on a topic I happened to know about (cryptography) and it was painful obvious that it was someone who spent 10 minutes googling the topic and took it upon themselves to give a dangerously incorrect "authoritative" lay of the land. Since then I've tagged those people as "faux experts". I don't blame him, I did the same thing for high-school essays, albeit with a more jilted writing style. Just be careful who and what you believe
Animats (John Nagle) is a long-time SV type, bright (founded his own company, has a few patents), and has interests in a bunch of areas. Apparently reads and thinks a fair bit.
He's not representing himself as an insider. Most of what I've seen checks out fairly well, and he's got a maturity and insight I wish were more frequently found here. He's not infallible, and doesn't portray himself as such. Few of us are.
I think he's annoyed because I criticized the poor auditability of Bitcoin. Yes, you can tell if someone received Bitcoins at some address. What you can't tell is whether they still have exclusive control of them. If someone else has a copy of the private key, the coins can disappear at any time. This happens in practice all too often.
(Yeah, multi-sig, etc.. Not that it helped Bitfinex.)
That wasn't what I was referring to, and although I hold very little interest in bitcoin, I do know enough that "[...] you can't count it without access to the keys that let you spend it." is fundamentally wrong. However, I'm glad you have since refined your stance to something more tenable, but anyway, let's not get too off topic.
As I know absolutely nothing about the shipping industry or Hanjin, what is your background or interest in it?
I appreciate your first comment calling out that people should check sources on their own and verify claims made in discussions. I do not feel that you and Animats are adding value by furthering the discussion here.
I read every comment 'Animats writes --- he's probably forgotten more about computing than I'll ever learn --- and while I've disagreed with a lot of things he's said, I've never come across a crypto comment that made me feel he was channeling Wikipedia. I think I'd have noticed.
That aside: comments like this are extremely inappropriate for Hacker News. We don't write comments whose sole purpose is to take down other commenters.
I'd be embarrassed to have written something like this in public. Maybe you were just having a bad night or something.
Hanjin doesn't own the goods; they're just transporting them. The owners of the goods are also by now creditors of the bankrupt company (for late fees if nothing else). That's why it's a snarl.
Wonder if it'd be feasible and/or make sense for the owners of the goods to pool their money together in order to pay the docking fees so they could receive their goods.
It'd be a neat resolution, but that's basically telling one set of creditors to make a second set of creditors whole out of their own pockets. And there's likely thousands of them with multiple layers: eg, your new iPhone 7 is stuck on one of these ships. Are you the owner, or is Apple? or Foxconn? etc.
The answer to that question is not complicated. It's either Apple or Foxconn, and it's clearly determined in their contract. One of them has it on their books as current inventory, not both.
That would be a quite naive solution for the owner of the goods. The owners do not have to pay anything essentially. Hanjin is still responsible to unload the goods at any cost (e.g. selling their ships to someone else).
Expensive, slow and dangerous. Not all containers will be accessible at sea. Getting to some of them may require removal of cables used to steady tall stacks. And unloading any containers haphazardly risks unbalancing the ship.
Probably some cargo has bonds and other cargo does not...even on the same ship. While just about anything from the delivery of a container full of Pokemon to the water tightness a new metal roof for the next twenty years can be bonded, it will only get bonded if someone is willing to pay the cost of bonding.
It is common for businesses to assess risks and forgo adding the cost of bonding to a contractual transaction.
This seems like a really good sign. We can only hope global shipping continues to shrink until we can get down to a level of consumer purchasing that is sustainable for the ecology of the planet.
The less money people have the less they care about the environment. That's why as quality of life went up in Western countries the environment became more and more important to people, to the point that it's almost an obsession for some people now.
I'm not sure I follow your logic - data would help your point.
For example, there may be a missing middle step there - as quality of life went up
(due to massively increased international trade which allowed suppliers in emerging markets to bypass strict first-world environmental regulations and massively pollute)
Then the reaction to the worsening environment because of overall consumption increase caused a backlash and increase environmental awareness...
You think the only way for people to increase their quality of life is to pollute?
And you think people want a better environment as a backlash? That's such upsidedown thinking. People always want a better environment, but if they are searching for their next meal they have better things to worry about.
But once they are secure then they worry about their local environment, and when they are very secure they worry about remote environments as well.
So the best way to improve the environment is to significantly increase the quality of life of everyone. And one way (not the only way) is trade, and yes, lots of consumption.
You have to remember: It's impossible for us to run out of resources because those atoms aren't going anywhere. All we need is energy and anything is possible.
You want an amazing environment? Then find a way to MASSIVELY boost energy output. With all that energy we can do anything, including fix the issues caused by using all that energy.
But for some reason environmentalists want people to go the other way, and reduce energy usage. This will just cause an environmental catastrophe because now people will have a lower quality of life and would not care in the slightest about the environment.
I'll get hammered for this, and I know it would take some time to tool up, but were the 50's through the 70,s that much of a lower quality of life? (Relied a lot less on overseas shipping--for a few reasons.)
Oh, yea, we would have to get used to paying more for some things, get used to paying Americans a decent wage, get used not being able to manufacture in the cheapest countries, get used to the poor having better opportunities to join the middle class, and probally a lot of more get's.
And yes--I know--our reliance on manufacturing in the cheapest country helps those poor people live better lives. Those people at Foxcon, and other Chinese/whatever countries workers seem like they are treated so well. These foreign countries care so much about the enviorment. Some of these countries have become so rich they built up their military--like China. Some foreign enterprising individuals become rich, and buy American houses, even though they don't live here. That last one is great.
At one time, we got along fine without the cheap goods from other countries--with the exception of one commodity--oil. Oh yea, the cheap cost of goods at Apple don't seem to be passed on to consumers?
> but were the 50's through the 70,s that much of a lower quality of life
For the vast majority of the people who don't live in the USA or Europe, life was certainly much worse back then. Foxconn might not be the best place in the world to work, but it beats the hell out of living in a small town under a Maoist government.
> even though they don't live here
We could have made a crapload of money off their insecurity by taxing non-occupied housing, perhaps even building ghost cities/property tax farms from scratch. We could have used the revenue on infrastructure or social services. But no, we didn't have the political will to do that.
> were the 50's through the 70,s that much of a lower quality of life?
Yes, they really were. At least, I remember the '90s, and quality of life was a lot worse back then, I assume the trend continues as you go further back.
> Those people at Foxcon, and other Chinese/whatever countries workers seem like they are treated so well. These foreign countries care so much about the enviorment.
Chinese wages are trending upwards and China is putting a lot more environmental regulation in place - to the extent that some manufacturers there are now offshoring to poorer countries. Will it take them time to catch up? Yes. Are they doing it a lot faster than the US did the first time around? Also yes. It would be a bizarre kind of ethics that said that it would be fine for Chinese workers to earn less and Chinese factories to pollute more as long as we weren't buying from them.
> Some foreign enterprising individuals become rich, and buy American houses, even though they don't live here. That last one is great.
Their reasons for doing that are the same as Americans' reasons for doing that (which they do quite a lot - it's just easier to blame everything on evil foreigners). Fix the incentives and you'll fix the problems. If you don't like empty houses, how about strong squatters' rights?
> At one time, we got along fine without the cheap goods from other countries
We didn't "get along fine". We survived, but life was a lot worse.
> Oh yea, the cheap cost of goods at Apple don't seem to be passed on to consumers?
I have no idea why people buy expensive things from Apple when they can get better versions cheaper from their competitors, but that's their lookout.
That's pretty abstract. If you weren't alive in the 70s you don't know or care what the standard of living was then. The only question is, what are you asking people to give up now, and what are you offering them in return?
Wouldn't it do more to encourage local food production and consumption? Thus reducing pollution while at the same time boosting farm economies in poorer countries which were previously flooded by lower-cost imports from richer highly efficient food-producing countries?
> Wouldn't it do more to encourage local food production and consumption? Thus reducing pollution
No, local food production increases pollution. The lowest pollution is obtained when food is grown in the climate most suited to it.
Transportation energy (or pollution) is absolutely minuscule compared to energy used in growing the food.
Optimizing for transportation costs in food production is a horrible idea from an environmental point of view, because the other costs so dwarf it as to make it utterly irrelevant.
Yes, absolutely. There's a reason that growing the food in another country and shipping it is still cheaper than growing it locally. All those energy costs get compounded together in the final cost of the product, and typically being cheaper means it cost less energy. (There are other factors that come into play of course, like farm subsidies.)
I agree that you need to grow food suitable for the climate you are in. How does this clash with local food production? If you locally grow food that is adapted to your climate, surely that's the best solution?
I have difficulty believing that eating imported pineapples in the UK pollutes less than eating local apples
> If you locally grow food that is adapted to your climate, surely that's the best solution?
So what you are saying is no one should eat bread in the UK? (The UK is not great at growing wheat.) I don't need to give a lot of examples, you get my point I hope.
> I have difficulty believing that eating imported pineapples in the UK pollutes less than eating local apples
Do apples grow well in the UK? Do you need lots of chemicals to grow them? (Pesticide, herbicide, fertilizer, etc, etc.) Do you need to spend a lot of time (i.e. energy) managing the trees, or do they just grow themself?
Importing a pineapple costs basically nothing (both in terms of energy and money). If growing a pineapple in HI uses less stuff than growing an apple in the UK, then yah, eating imported pineapples pollutes less. (I don't know if that's the case or not.)
It's easy enough to tell: Just compare the cost of the fruit (per weight).
Local food production is a noble goal. Just sort of hoping that some industries will fail and force people to grow food locally, or starve, is not a very good strategy for achieving that goal.
It's a delicate curve. Perhaps gradually increasing tariffs can support the actual increase of local production. Perhaps taxing oil consumption to subsidize poorer countries farmers is another way to go.
Me personally? Buying local food supports the local economy, providing some support for a local food supply. It's a little bit crazy, i know, but if something weird happened, at least some food could be sourced locally. Most farmland around me tends to get paved. So supporting local farmers helps a bit with wildlife habitat and gives rain a place to soak back into the aquifer. I can talk with farmers about what they spray on their food. Finally getting stuff right when its in season tastes really good. Sweet corn from the farmers market or the side of the road is just unreal about 1 week of the year. I can never quite catch that in the grocery store.
> Wouldn't it do more to encourage local food production and consumption?
It would, only by making food more expensive -- specifically, by driving up the transportation costs so that the more-expensive-to-produce local food was competitive with less-expensive-to-produce imported food. This might be pleasing to those with an ideological preference that other people should eat locally, but the other effect is increased cost of living for everyone.
Fresh food is better than preserved food, I won't argue that. But people got by with preserved food for a long, long time. We've gotten used to eating fruits and such out of season, but maybe that's going to get expensive again.
Which parts of the world would those be? From what I've read the problem is often the opposite - cheap grain imports from the USA destroying agricultural economies in Africa for example.
I really don't think there are large parts of the world that would not be viable through local agriculture.
Obviously, there will be islands etc for whom this isn't viable, but I doubt they were getting food by massive ships anyway.
Most of the northern hemisphere. You know, all those places where nothing grows for 6 months out of the year where prior to shipping food we had to rely on canned and preserved foods.
Come on... "Most of the northern hemisphere... where nothing grows for 6 months"? In northern finland maybe, due to lack of sunlight. They grow greenhouse tomatoes and cucumbers all year round in the Netherlands, and cabbage, spinach, root vegetables can be grown in winter without heating.
Decreased shipping wont change the culture of consumption - that will only end when the culture changes. My loosely held belief is that the ecology of the planet will only be saved because of capitalism.
We will only get to a sustainable ecology when 1) solar power provides energy for less than fossil fuels, 2) the majority of human women have control of their fertility, and 3) the majority of humanity's basic needs are fulfilled enough that they can worry about the environment. #1 will lead to less pollution and climate restoration, #2 will lead to decreased or sustainable global population, and #3 will lead to the preservation and restoration of ecosystems. All of these things are only possible because of the wealth generated by capitalist economies.
What about this idea of a business plan ? buy 5 of those ships very cheap, get rid of/deliver the goods, merge them in international waters nearby San Francisco, make a top notch/self sustaining mix of offices and Corp housing on top of them. Anybody could work there waiting for their H1B or just simply contracting or bootstrapping their companies.
You know what would probably be both cheaper (in terms of capex and opex) and also more convenient than welding a few old cargo boats together? Building this office park on land, in Gilroy. There's a train line down there and everything - bet it'd be cheaper to bribe Caltrain to beef up the service than to set up transportation to the open ocean.
How about we find a way to transmit data packets across the globe so that people who do digital jobs can work from a nice place that suits them, anywhere in the world.
Management didn't have a plan for an orderly shutdown, so when the company went into receivership, everything just stopped. Just like many failing startups, the web site continued to indicate nothing was wrong. They've now put up a spreadsheet with current vessel status, but that took weeks. The status has entries such as "Arrested", "Unpaid Canal Fee (Suez)", "Arrested by Bunker Supply Co. (Panama Canal)", and "Port labor rejected" (they're way behind on their payments)". There are about 500,000 containers stuck with Hanjin.
Admiralty law is especially harsh on bankrupt shipowners. In many jurisdictions, ships can be seized regardless of bankruptcy status. Some Hanjin ships have been seized. Some are waiting offshore until somebody puts up the money for unloading and refueling. There were four stuck off the coast of California. Hanjin has come up with enough money to get two of them into the port of Los Angeles and unloaded. Those appear to be ships Hanjin leased, rather than owned, and a court in Korea has told them to unload and return all their leased ships ASAP. Courts in about 15 countries are involved, trying to untangle this mess. The US Maritime Commission is trying to get cargoes unloaded, but they don't have much authority. Ports are unwilling to let Hanjin ships in unless they have enough money to fuel up, pay a crew, and leave - they don't want them stuck at their docks. Meanwhile, some of the ships are running low on food and water.
Then there's the empty container mess. In the container business, you pay a per-day fee when you hold someone else's container, so everyone tries to return their borrowed empties quickly. But most of Hanjin's empty container return points are shut down, and are not taking empties back. Many of those empties are on trailer bodies, and are tying up trailers needed to move freight. Truckers are angry about this. Shippers are having trouble getting enough empty trailers.
This will all get unwound, but it's going to take weeks or months. There are going to be really big post-Xmas sales as the delayed cargo is unloaded.