ASSIGNMENT 3Due date: Time: Value: Length: Based on: Submission:Wednesday, 10 May XXXXXXXXXX:30...

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ASSIGNMENT 3Due date: Time: Value: Length: Based on: Submission:Wednesday, 10 May XXXXXXXXXX:30 hours (Australian Eastern Standard Time) 20% 1800 words ± 10% or maximum Modules 3, 6, 7 Learning outcomes 4-6 Electronically through MyLO Assignment submission folderBefore attempting this assignment:Ensure the 'Assessment' section in this Unit Outline is read and understood. If you have any questions, please do not hesitate to contact the lecturer.Ensure you understand the assignment question(s) and/or tasks. Once again, consult your lecturer should you be unsure of any matters.Task description & requirementsQuestion 1Explain how the four shipping markets (e.g. the freight market, the sale and purchase market, the shipbuilding market, and the demolition market) integrate from a practical viewpoint. Use the relevant information and data to support your analysis.[10 Marks]Question 2: Case studyThe attached article 'Hanjin bankruptcy causes shipping chaos', The Sydney Morning Herald, viewed 2 September 2016, , reports the impact of Hanjin Shipping's collapse on the shipping industry. Based on the information provided in the article and relevant sources, answer the following questions:1. Analyse the financial struggles of Hanjin Shipping from perspectives of the freight market, shipping market cycles, and the financial system. Use relevant examples/data to support your analysis.[6 Marks]2. Provide some recommendations to other shipping companies to avoid the financial struggles. [4 Marks]See the Essay/report assessment criteria sheet on the following page for information about the criteria and the standards by which your work will be judged.Department of Maritime and Logistics Management —JNB328 Maritime Economics 18Hanjin bankruptcy causes shipping chaos2 September 2016. Source: http://www.smh.com.auibusiness/world-businessihaniin-bankruptcy-causes-shippingz chaos XXXXXXXXXXgr7h68.htmlThe 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 tonnes of goods will reach their shelves.The South Korean giant filed for bankruptcy protection on Wednesday and stopped accepting new cargo. With its assets being frozen, ships from China to Canada found themselves refused permission to offload or take aboard containers because there were no guarantees that tugboat pilots or stevedores would be paid.es•.10. -e • ¦¦11€}1A ton N€ XXXXXXXXXX%, '1 wt.). 0 H N 1117In- _ 1.1” - 4 i SI :I INThe South Korean giant filed for bankruptcy protection on Wednesday and stopped accepting new cargo."Hanjin called us and said: 'We're going bankrupt and we can't pay any bills, so don't bother asking'," said J. Kip Louttit, executive director of the Marine Exchange of Southern California, which provides traffic control for the ports of Los Angeles and Long Beach, the nation's busiest port complex.As of Thursday, three Hanjin container ships, ranging from about 700 feet (213 metres) to 1100 feet long, were either drifting offshore or were anchored away from terminals. A fourth vessel that was supposed to leave Long Beach on Thursday morning remained anchored inside the breakwater.That left cargo headed to and from Asia in limbo, much to the distress of merchants looking to stock shelves with fall fashions or Christmas toys."Someone from the garment industry called earlier today asking: 'How long is this going to go on, because I've got clothing out there'," Mr Louttit said.There were reports that some Hanjin ships had been seized in China on behalf of creditors.The National Retail Federation, the world's largest retail trade association, wrote to US Secretary of Commerce Penny Pritzker and Federal Maritime Commission Chairman Mario Cordero on Thursday, urging them to work with the South Korean government, ports and others to prevent disruption.Department of Maritime and Logistics Management —JNB328 Maritime Economics 19

David · Accepted Answer

Abstract 
Shipping business is vast and complex and primarily influenced by the booms and busts of 
global economy.  The whole shipping business is conducted through four different but 
interrelated markets dealing with new ship building, freight m second hand ships and demolition 
of ships. The recent study explores the practicalities of each of the four markets and the role they 
perform in the industry. The study further examines of the dynamics of how each of the four 
markets is connected by cash flow.  An understanding of economic principles and theories lays 
the foundation of our analysis.  The study gains a deep insight about the financial challenges 
facing by Hanjin shipping and its ripple effects across the global supply chain. The paper 
suggests some important guidelines that would help to combat such financial struggle of the 
shipping companies.
2 
 
Table of Content
Descriptions Page No. 
Introduction 3 
Task 1 4 
A. Four major markets 4 
B. The cash flow in the shipping market  6 
C.  Fundamental principle of demand –supply in shipping market  7 
D.  Unit cost functions for shipping industry 8 
Task 2 9 
a)  i)   Bankruptcy of Hanjin 9 
a) ii)   Turmoil in global sea freight 9 
a) iii)  Effect on retailers  9 
a) iv)  Impact on Stranded Ship Crew 10 
b)  i)   Recommendations 10 
b) ii)   Conclusion 11 
References 12
3 
 
Introduction 
Shipping industry is huge, complex and highly volatile in nature. It is predominantly a capital 
intensive industry and plays an important role in global economy. Shipping market structure has 
some unique features that are different from others.  The industry is highly influenced by the 
volatility of global economy.  Interestingly, the development in remote part of world also has far 
reaching consequences in shipping market. Economies of scale play the dominating role in 
shipping economics. 
Hanjin is the world’s seventh-largest container shipper has completely collapsed. The bankruptcy 
is associated with ripple effects across the supply chain at the global level. Whether hundreds of 
tons of goods being carried by this giant shipping company will be reached to the shelves is a 
worrying concern today among the ports and retailers around the world. The turmoil inside the 
industry started from the period of global financial crisis when Hanjin has lost $15 billion. The 
loss was estimated as $1.1 billion in 2009 too. Since then the South Korean shipping giant failed 
to rebound back and finally filed for bankruptcy in August 2016. (Braden 2016)
4 
 
Task 1  
A. Four major markets: 
Shipping market consists of for major markets that are closely integrated to one another.  They 
are ship building market, freight market, the sale and purchase market and the demolition 
market.  Let us elaborate the key role and functions of these four types of markets and the risks 
they face while operating in the market.
 The new building market:  This key participant of the market is the ship builders and the 
brokers who act as the mediators between the shipbuilders and the ship-owners.  Payments for 
ship building are a complex procedure and usually done in parts according to the progress of the 
new ship building. Due to high fluctuations of demand in the demand side and the time taken to 
build new ship in the supply side, the cost of new ship building is not necessarily much higher 
than the second hand ship. (prezi.com 2013) 
 The freight market:  
As the new ship building is completed, the ship owner comes into freight market to charter the 
ship. Every ship is made to have a particular capacity, dimension, speed and cargo handling gear. 
When the ship is ready and available for cargo, ship-owners sometimes appoint brokers to act on 
behalf of him. The key role of the broker is to negotiate and finalize the deal within the stiff 
competition with other brokers. Contractual agreements are made under a voyage charter where 
the ship-owners agreed to carry a specific cargo at a specific location in a specific rate per ton.  
(Gottschalk 2006) 
5 
 
FFA’s Forward Freight   Agreements market is considered as the leading broker of freight 
derivatives.   Since 2002, they are instrumental   and develop FFA market with the aim to protect 
ship-owners, charters and traders from the inherent volatility of the freight rates. (prezi.com 
2013)
https://prezi.

ASSIGNMENT 3 Due date: Time: Value: Length: Based on: Submission: Wednesday, 10 May XXXXXXXXXX:30 hours (Australian Eastern Standard Time) 20% 1800 words ± 10% or maximum Modules 3, 6, 7 Learning...

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