The Fall of a Giant: How Hanjin Shipping’s Bankruptcy Shook Global Trade

In late 2016, the maritime industry witnessed one of its most disruptive events—the collapse of Hanjin Shipping, then the world’s seventh-largest container carrier. Its bankruptcy didn’t just rattle the Korean shipping sector—it rippled across oceans, ports, and entire supply chains.

When Did It Happen?
On August 31, 2016, Hanjin Shipping filed for court receivership, and the South Korean courts officially declared its bankruptcy on February 17, 2017.

Scope and Impact ?
At the time of its collapse, Hanjin accounted for nearly 3% of global container shipping capacity. The consequences were immediate and severe:

• Stranded Goods: Billions of dollars worth of cargo were left floating at sea or stuck in ports, as port operators and logistics companies refused to handle Hanjin’s vessels over fears of non-payment.
• Spike in Freight Rates: Shipping rates surged dramatically—especially on routes between Korea and Northern China—with price hikes of up to 50%.
• Global Supply Chain Disruptions: Retailers, importers, and exporters worldwide faced delays, losses, and logistical chaos.

Underlying Causes of Bankruptcy
Hanjin’s downfall was not sudden. It was the outcome of multiple compounding challenges, both industry-wide and internal:

1. Overcapacity and Rate Wars

• The shipping industry had been suffering from excessive vessel capacity, with more ships than market demand.
• Fierce competition led to aggressive rate-cutting, driving freight charges to unsustainable lows.
• Hanjin, like many competitors, operated with unprofitable pricing, eroding profit margins and pushing operations into loss territory.

2. Crippling Debt Burden

• By the time of its collapse, Hanjin’s debt had reached $5.5 billion USD.
• Its debt-to-equity ratio soared to 850%, highlighting a dangerously fragile financial position.
• Heavy investments in shipbuilding and leasing—based on overoptimistic growth forecasts—added to the strain.

3. Limited Government Support and Creditor Disputes

• The Korea Development Bank, a key creditor, demanded restructuring and fresh capital
• Unlike rival Hyundai Merchant Marine (HMM), Hanjin didn’t receive substantial government aid, partly due to disputes about responsibility for the financial burden.

4. Management and Strategic Failures

• Reports pointed to poor governance, flawed strategic decisions, and a lack of adaptability.
• The company’s senior management struggled to respond effectively to shifting market conditions.

5. Alliance Breakdown

• Hanjin was part of the CKYHE shipping alliance, which was undergoing reorganization.
• The company failed to join the emerging “THE Alliance,” signaling waning competitiveness and market confidence

Timeline of the Collapse

• Aug 31, 2016: Filed for receivership.
• Sep 1, 2016: Ports refused to service Hanjin vessels; hundreds of ships were denied entry or stranded at sea.
• Sep–Oct 2016:
  • Cargo worth $14–15 billion USD was trapped aboard ships or in terminals.
  • Companies like Samsung had millions in goods immobilized.
  • Shippers paid two or three times the normal fees to release cargo via alternative carriers.
  • The crisis hit during peak holiday shipping season, compounding the pressure.
• Feb 17, 2017: Official bankruptcy and asset liquidation commenced.

🧭Aftermath and Long-Term Impacts

• Following the bankruptcy, Hanjin’s ships, terminals, and trade routes were sold off. Competitors absorbed its assets, but the industry didn’t walk away unscathed

Key Lessons Learned:

• Industry Consolidation: Accelerated mergers and acquisitions aimed at stabilizing shipping capacity.
• Financial Vigilance: A renewed focus on company solvency and transparent financials.
• Risk Diversification: Importers and shippers emphasized carrier diversity to hedge against disruptions.
• Alliance Restructuring: Reformed strategic alliances for better crisis resilience.
• Government Reflections: Sparked debates on how states should respond to major collapses affecting global supply chains.

The collapse of Hanjin wasn’t just a financial failure—it was a wake-up call. It exposed vulnerabilities in logistics networks and shifted the global maritime narrative, influencing practices, regulations, and partnerships for years to come.