Suppliers to companies such as Nike Inc. and Hugo Boss AG arescrambling to ensure their T-shirts and sneakers reach buyers intime for the year-end holiday season after the collapse of HanjinShipping Co. left an estimated $14 billion worth of goodsadrift.

|

Esquel Group, a Hong Kong-based manufacturer for fashionbrands including Nike, Hugo Boss and Ralph Lauren, is hiringtruckers to move four stranded containers of raw materials to itsfactories near Ho Chi Minh City as soon as they can be retrievedfrom ports in China. Liaoning Shidai Wanheng Co., aChinese fabrics importer and a supplier to Marks & SpencerGroup Plc, has made alternative arrangements for shipments thatwere scheduled with Hanjin.

|

“Our production lines are waiting,” said Kent Teh, who runsEsquel's Vietnam business. “We potentially have to take airfreightto deliver the garment items to clients in the U.S. and U.K.”

|

Apparel, handbags, televisions and microwave ovens are amonggoods stranded at sea after Korea's largest shipping company filedfor bankruptcy protection last week, setting off a series of eventsthat roiled the global supply chain. A U.S. Court on Tuesdayprovided a temporary reprieve, which may help vessels call on portssuch as Los Angeles without the fear of getting impounded. Anymajor bottlenecks ahead of Thanksgiving and Christmas could put adent in the two-month shopping season, which netted some $626billion of sales last year in the U.S.

|

Supporting Hanjin's Chapter 15 U.S. Bankruptcy Court petition,Samsung Electronics Co. said in a court filing that about $38million of its goods were on board two Hanjin vessels off LongBeach, California. Its visual display division has parts andfinished goods in 304 containers meant for its factory in Mexico,while its home appliance unit has refrigerators, washing machines,dishwashers and microwaves in 312 containers.

|

If the cargo isn't unloaded immediately, the company will beforced to transport alternative parts by air to help meetcontractual obligations at “great costs,” Samsung said. Forexample, it would have to charter at least 16 planes at a cost ofabout $8.8 million to move 1,469 tons of goods, it said.

|

“All these costs and delays will be a loss not only to Samsung,but also to major retailers in the U.S. and, ultimately, to U.S.consumers,” Samsung said.

|

As parent Hanjin Group and the South Korean government considersteps to salvage the shipping company, retailers in the U.S. havecalled for measures to help temper losses. About 86 of Hanjin'sships were stuck at 50 ports in 26 countries, with vessels turnedaway out of concern the company has no cash to pay various dockingfees and handling charges. A favorable ruling from a U.S.bankruptcy court this week protected Hanjin's assets in the U.S.against creditors, while the shipping line proceeds with itsreorganization in South Korea.

|

Using planes

|

With cargo stuck on ships, Esquel's Teh estimates a productiondelay of about a week and a doubling of transport costs. Besidestruckers, a faster ship will be hired to transport the itemsfrom Hong Kong, he said. He also plans to fly finished products outof his factories to meet deadlines.

|

Some manufacturers are switching to other shippers, said HoangNgoc Anh, deputy secretary general of Vietnam Textile and ApparelAssociation.

|

Over in China, Shanghai Lansheng Corp., which exports shoes,office supplies and musical instruments, said it is asking each ofits business divisions to check if they have any stock stuck atsea.

|

As retailers gauge the impact of the disruptions, handbag makerMichael Kors Holdings Ltd. says it has had concerns about Hanjinfor some time.

|

“We did have a limited number of containers hung up on thoseships; there's going to be some pricing pressure at this point,”CEO John Idol said Wednesday at a conference in New York. “We don'texpect significant long-term impact.”

|

At the same event, Emanuel Chirico, CEO of Calvin Klein andTommy Hilfiger owner PVH Corp., said Hanjin handles a small portionof the company's business, and “it really hasn't impacted us atall.”

|

Nike and Ralph Lauren declined to comment, while Hugo Bossdidn't respond to an e-mailed request for comments.

|

“Retailers' main concern is that there's millions of dollarsworth of merchandise that needs to be on store shelves that couldbe impacted by this,” Jonathan Gold, vice president for supplychain and customs policy at the National Retail Federation tradegroup, said last week.

|

Another group, the Retail Industry Leaders Association, hasurged U.S. Secretary of Commerce Penny Pritzker and FederalMaritime Commission Chairman Mario Cordero to intervene.

|

In last-ditch efforts to pull the shipping company back from thebrink, Hanjin Group said Tuesday it will provide 100 billion won($92 million), including 40 billion won from Chairman Cho Yang Ho,to help contain disruptions in the supply chain. Separately, SouthKorea's ruling Saenuri Party asked the government to offer about100 billion won of low-interest loans if the group providescollateral. Hanjin Shipping filed for bankruptcy protection lastweek after its proposal for restructuring failed to pass musterwith lenders led by state-owned Korea Development Bank.

|

“The disruptions have dented South Korea's image,” said Lee SangJae, an economist at Eugene Investment & Securities Co. inSeoul. “If this prolongs, it will only cause more concern tocompanies.”

|

Bloomberg News

|

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.