Dividends and South Korean shipping firm left adrift

Earlier in this month of September Hanjin Shipping Co filed for bankruptcy. Hanjin was the 7th largest sea container shipping firm and the largest company in South Korea in controlled about 8% of the trans Pacific trade volume for North America. Think about your household or favorite electronics store – do you see South Korean goods in it? One of the largest accounts is LG (Life’s Good) who sent between 15 and 20% of their goods through Hanjin. What is important to know is retailers similar to everyone else try to have close to just in time inventories and know that the months between September and December have higher sales than other months. If the items are is transit being held up by bankruptcy courts, the items are not in the store and will not be sold. LG similar to other companies around the world ship using more than one firm and another South Korean shipper Hyundai Merchant Marine says it will add more vessels – but that takes time – a couple of weeks.

In the world of shipping, many of the ports are run by a few companies and the container ship company which pays the fee to the port company. The stuff that is inside the container the owner pays the shipping company and you can see what happens when a company can not pay their fees. A couple of days after filing for court protection, the ports blocked more than half of the container ships from docking to unload. If they do not unload they do not get paid and someone will need to sort it out. Sorting it out takes time.

Linking to dividend paying companies, all companies in the world are dependent on somebody or something. It used to be companies were vertically integrated or doing everything themselves but most companies contract something out because it is cheaper and it is very hard to be excellent in all areas needed. It is far easier to take a piece that the company lives and breathes and do that well. The supply chain works till it does not and ideally the supply chain is not dependent on one company for the most critical aspect of the business. When you investigate your companies – you will want to know about supply chains and what could be a weak link in the chain.

There are more questions than answers, till the next time – to raising questions.

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