The collapse of South Korea's Hanjin Shipping has had a sweeping impact on global trade as exporters scramble to find freight alternatives.
Hanjin yesterday filed for court receivership after its banks decided to end financial support.
And ports from China to Spain, the United States and Canada have refused entry to Hanjin vessels in what is traditionally the industry's busiest season ahead of the year-end holidays.
Hanjin Shipping Co, one of the world’s largest shipping lines, has stopped taking new cargo as US ports begin turning away its ships.
Hanjin moves manufactured products and consumer goods from electronics to clothing, furniture and toys destined for Amazon.com Inc. and other retailers.
LG Electronics, the world's No.2 maker of TVs, told Reuters it was cancelling orders with Hanjin and was seeking alternatives to ship its freight.
Asia-based freight brokers estimate about 25,000 containers are crossing the Pacific each day on Hanjin ships.
Three of its ships that were scheduled to berth at the ports of Los Angeles and Long Beach, California drifted off the coast yesterday.
Their contents bound for retail shelves, factories and warehouses is marooned indefinitely.
Seizure by creditors
Uncertainty about Hanjin’s future raised concerns that its ships could be subject to seizure by creditors, clogging the ports.
South Korea's shipping and shipbuilding industry is one of the hardest-hit by a prolonged downturn in global trade.
A drop in orders has led to overcapacity and depressed freight rates, as well as an increase in debts.
"Korean shipping companies have suffered large losses largely because charter rates on leased vessels were fixed in 2010 at a high level while actual shipping rates have fallen," Nomura analyst Young Sun Kwon said.
The South Korean government is now looking to undertake a painful reorganisation of the entire industry, which will require major retrenchments.
The state-run Korea Development Bank (KDB), Hanjin's main creditor, said earlier this week Hanjin’s restructuring plan was not enough to survive amid an industry-wide slump, caused by falling global trade.
Hanjin entered a voluntary debt-rescheduling plan in May to resolve its cash shortage, which creditors had expected to increase to as much as 1.3 trillion won (US$1.2 billion). The troubled shipper submitted a new restructuring plan to creditors, which unanimously viewed as insufficient.
Hanjin reported a loss of 474.1 billion won (US$425 million) in the January-June period, turning into the red from a 103.3 billion won profit a year earlier. The company posted losses for four of the past five years.
Falling orders along with continued losses resulted in an increase in debts. Hanjin had a total debt of 6.1 trillion (US$5.8 billion) as of end-June.
Shares of Hanjin remain suspended in Seoul after plunging by nearly 30% on Tuesday.