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Infrastructure in the News 9.2.16


Washington Post: Hanjin bankruptcy causes global shipping chaos, retail fears

The bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion, with giant container ships marooned and merchants worrying whether tons of goods will reach their shelves.

Wall Street Journal: Hanjin’s Demise: Why Global Shipping Glut Isn’t Going Away (full article follows clips)

A shipping company drowned at sea has kicked up a storm of worries. The gales should subside even if the industry’s long-term problems don’t.

Wall Street Journal: Retailers Seek U.S. Help With Shipping Crisis (full article follows clips)

U.S. retailers, bracing for a blow as they stock up for the crucial holiday sales season, asked the government to step in and help resolve a growing crisis caused by the near-collapse of South Korea’s Hanjin Shipping Co., one of the world’s largest container shipping companies.

CityWatch: Coming Together on Infrastructure Spending, Falling Apart on Unintended Consequences

It's no secret that taxpayers want their transportation, energy, communications and other infrastructure paid for, and built ASAP.  It's probably also no secret that the era of bipartisan discord on infrastructure prioritization is coming to an end.  But the 800-pound gorilla in the room is how spending will occur, and whether it'll lead to solutions or new problems.

Small Business Trends: Keep on Truckin’: Transportation and Material Moving Jobs Grow by 190 Percent, Indeed Says

Every day, products, packages and people are criss-crossing the nation on a vast network of highways. And, largely, it’s small businesses getting them here, there and everywhere.

ETN: US Transportation Bureau announces new transit map

A national, openly available map of fixed-guideway and fixed-route transit service in America will allow the US Department of Transportation (DOT) to demonstrate the importance and role of transit in American society and to identify and address gaps in access to public transportation.


Rolling Stone: Can New York Be Saved?

It's a bright spring day in New York, with sunlight dancing on the East River and robins singing Broadway tunes. I'm walking along the sea wall on the Lower East Side of Manhattan with Daniel Zarrilli, 41, the head of New York's Office of Resilience and Recovery – basically Mayor Bill de Blasio's point man for preparing the city for the coming decades of storms and sea-level rise.

Houston Public Media: Galveston County Holds First Ever Transportation Conference

Hundreds gathered in Texas City. Officials say they’re looking forward to some road improvement projects, but they still have big concerns.

LaCrosse Tribune: WisDOT rules out no-pave option for La Crosse transportation study

State transportation officials say La Crosse’s future transportation needs cannot be met without new pavement but insist they will seek to avoid damaging neighborhoods and environmentally sensitive lands before moving ahead with any new highways. (Atlanta): Panel: Transportation tax votes could put Atlanta area under spotlight

A wave of transportation initiatives on the ballot in Fulton County and Atlanta this November could place the region’s infrastructure investment in the national spotlight for the next decade, if voters grant their approval, a panel of transportation experts said Thursday.

KION 5 (California): Public weighs in on Santa Cruz transportation projects

Santa Cruz County has roughly $7 million in federal funds to spend on transportation projects. The County is asking residents how they’d like to see the money spent.

East Village Magazine (Michigan): City infrastructure replacement plan takes “holistic” approach, could cost $2 billion

Rebuild Flint the Right Way, an ambitious plan released in August to repair, replace and upgrade the city’s infrastructure, outlines Mayor Karen Weaver’s vision for fixing the city in the wake of the water crisis. Implementing the plan might cost as much as $2 billion, the document states.

Washington Post: Maryland leaders suggest options to canceling late-night Metro service

A group of more than 40 Maryland elected officials are calling on Metro to rethink its proposal to permanently nix weekend late-night service and cut back Sunday hours.

USA Today (Wisconsin): Riders, officials 'believe in the bus'

At a public transportation forum Thursday evening at the Appleton Public Library, Jan Dallman shared a telling story.

Morning transportation will return Sept. 6.

Hanjin’s Demise: Why Global Shipping Glut Isn’t Going Away

A shipping company drowned at sea has kicked up a storm of worries. The gales should subside even if the industry’s long-term problems don’t.

South Korean Hanjin Shipping, the world’s seventh-largest container shipping line, filed for bankruptcy this week, leaving ships stranded from ports or seized by creditors. This has stirred worries among retailers globally about surging freight rates and potential disruption of sea-freight trade routes. The reality is, the shipping industry has long been sitting on more capacity than it knows what to do with, and this cleanse is much needed. Unfortunately, it will barely move the needle in the longer run.

The timing of Hanjin’s fall has amplified its effect. Many thought the government-run Korea Development Bank, the main creditor, would keep Hanjin afloat rather than let it fail in the midst of peak shipping season with Christmas gifts packed on the high seas. That has sent a gauge of freight rates on certain routes like Shanghai to Rotterdam up 39% this week, according to the World Container Index. Globally Hanjin Shipping accounts for 3% of capacity but approximately 10% on the Asia-to-Europe routes.

But freight rates aren’t likely to stay elevated for long -- so the industry’s wider troubles of too much capacity and too little demand aren’t going away. Eventually Hanjin’s stranded ships will get unloaded and business will go elsewhere. And while freight rates have risen, this is from multiyear lows and still far from levels that help most large container shipping lines grow profits.

Shipping’s low season starts next month, which could put a halt on the current uptick in freight rates. Despite efforts to consolidate and idle fleets, container ship capacity is growing at 3.2% a year, while demand for container cargo is a tepid 1.8%, notes Rahul Kapoor of maritime specialists Drewry Financial Research Services.

Container shipping lines have created alliances in a bid to stay viable and now the 10 big players hold approximately 80% of the capacity. Hanjin’s failure may cut supply on the margins, but with more of its vessels chartered than owned, that tonnage will come back into circulation soon enough. And the ships Hanjin does own are relatively modern, so that means they won’t be sent to the scrapyard anytime soon.

Hanjin’s demise just adds to the flotsam and jetsam already washing up on the shores of the shipping industry.

Retailers Seek U.S. Help With Shipping Crisis

U.S. retailers, bracing for a blow as they stock up for the crucial holiday sales season, asked the government to step in and help resolve a growing crisis caused by the near-collapse of South Korea’s Hanjin Shipping Co., one of the world’s largest container shipping companies.

“While the situation is still developing, the prospect of harm is significant and apparent,” Sandra Kennedy, president of the Retail Industry Leaders Association, wrote in a letter to the Department of Commerce and the Federal Maritime Commission. Hanjin’s recent bankruptcy filing “presents an enormous challenge to U.S. shippers,” she said, and “could have a substantial impact on consumers and the economy at large.”

The trade group is urging the U.S. to work with ports, cargo handlers and the South Korean government to resolve the widespread disruption in freight shipments caused by the Hanjin bankrupcy filing. A spokesman for the Retail Industry Leaders Association said they’re hoping the South Korean government could help provide clarity and speed to the bankruptcy proceedings, which are being considered by courts there.

Hanjin handles about 7.8% of the trans-Pacific trade volume for the U.S. market, Ms. Kennedy’s letter said. Since the shipping company filed for bankruptcy protection in a Seoul courtWednesday, terminal operators, ports, cargo handlers, truckers and others have refused to handle its cargo, for fear they won’t get paid. That is causing turmoil at U.S. ports and beyond, said shippers, importers and freight forwarders.

U.S.-bound cargo has been delayed at the point of origin, and cargo-laden Hanjin ships are unable to get into U.S. ports. Already delivered cargo is sitting unhandled, clogging ports and occupying containers needed elsewhere.Several Hanjin ships have been seized by creditors or barred from shipping cargo from Busan, South Korea’s main port, and vessels have been turned away from ports in the U.S., China, Canada, Spain and elsewhere.

An official at the Korea International Trade Association said about 10 Hanjin vessels were either seized or denied access at Chinese terminals in Shanghai and Tianjin over the past 48 hours.

The ships were seized after legal action by shipowners who leased them to Hanjin and didn’t get charter fees, workers who didn’t get paid, terminals which weren’t paid docking fees and bunker fuel suppliers.

Earlier in the week another Hanjin vessel was seized in Singapore.

Because Hanjin is part of an alliance of six shipping companies, the problems are even more widespread.

Freight brokers in Asia said about 540,000 containers are expected to face delivery delays that one of them said could range from a few days to more than a month.

Shipping rates soared as freight capacity shrank overnight. Cargo owners said rates from Busan, South Korea, to Los Angeles had risen to $2,300 a container by Thursday, up from $1,700 four days earlier. One U.S. importer said he was getting rate quotes of $2,000 a container, compared with $700 before the Hanjin news.

The turmoil can only aggravate problems for retailers grappling with the challenges and high costs of e-commerce and at a crucial time. Those most likely to be affected include Wal-Mart Stores Inc., Target Corp., J.C. Penney Co. and clothing retailers.

A Home Depot Inc. spokesman said Hanjin isn't its only carrier so it doesn’t expect a material impact. The company is working through contingency plans, he said.

A Target spokeswoman said the retailer is watching development closely and assessing the situation.

Marilee McInnis, a spokeswoman for Wal-Mart, said, “Right now, we are waiting to hear the final determination on bankruptcy proceedings and the implications to their current assets before we will be able to assess any impact.”

The $25 billion U.S. toy industry has been sweating the Hanjin news, as it prepares for the holiday season, which accounts for half its annual sales.

Jeff Bergmann, managing director of the Toy Shippers Association, said his customers are fortunate that only about 20 containers are on Hanjin or affiliated vessels. They’ve been told their freight will be delivered to the ports, but from there, “nobody knows,” Mr. Bergmann said.

Beyond that, the general concern is how long the turmoil will last. “The ripple effect could be tremendous,” he said.

Jessica Dankert, senior director at the Retail Industry Leaders Association, said the congestion is coming during one of the worse possible times for retailers as they stock up before the critical holiday-shopping season. “These concerns would be trouble at any time, but this is a particularly bad time for it to happen.”She saidretailers are considering contingency plans that include using other carriers and working to get their cargo released.

Reclaiming cargo won’t be easy.

Cargo owners may have to wait for months to get their cargo off Hanjin ships, analysts said.

”In 2001, Cho Yang, a much smaller Korean carrier, went bust and it took six months before a mere 200 containers, handled by a single freight forwarder, could be taken off to ports,” said Lars Jensen of Copenhagen-based SeaIntelligence Consulting. “This is at a much bigger scale so I would not be surprised if scores of boxes on stranded Hanjin vessels ever actually make it to their destination.”

Another issue is the crews. Hanjin ships carry crews of 15 to 25 sailors, and with the vessels unable to call at ports, the sailors could be stranded at sea for weeks or longer.

“They have food and water for a couple of weeks,” said Basil Karatzas of New York-based Karatzas Marine Advisors & Co. “Beyond that, things may become very difficult because suppliers will no longer extend credit to Hanjin and everything must be paid in cash.”

Mr. Jensen said Hanjin quickly must file for bankruptcy protection in Europe and the U.S. to keep its ships moving. Hanjin has secured an injunction protecting its ships against seizure by creditors in Korea and is seeking a similar injunction for protection in ports abroad.

“They got the injunction in Korea, but most of their ships are out at sea or at foreign ports. Ship seizures will continue and increase around the world if there is no bankruptcy protection.” Mr. Jensen said. “But sorting out such legal matters at various jurisdictions is complicated, as Hanjin has no control on how fast foreign courts will examine its case.”

Corrections & Amplifications:

Cho Yang, a smaller Korean carrier, went bust in 2001. An earlier version of this article misspelled the company’s name. (Sept. 1, 2016)