The financial crash that many have anticipated may have finally arrived.

On Wednesday South Korea’s largest shipping company and the world’s seventh-biggest container carrier, Hanjin Shipping, filed for court receivership after it lost support from its banks. The result was frozen assets as ports from China to Spain and beyond refused access to its ships, Zero Hedge reported.

If you’re not familiar with Hanjin, from its web site:

Hanjin Shipping is Korea’s largest and one of the world’s top ten container carriers that operates some 70 liner and tramper services around the globe transporting over 100 million tons of cargo annually. Its fleet consists of some 150 containerships and bulk carriers.

As Reuters reported further, banks that were led by the government-run Korea Development Bank pulled their backing from Hanjin earlier this week, saying that a funding plan drawn up by the shipping giant’s parent group was not good enough to address a mounting debt that stood at $5 billion at the end of 2015.

Hanjin’s bankruptcy is a big deal in several ways. First, a court must now decide whether the company should remain intact or be dissolved, a process that can take 2-3 months but which will most likely be speeded up because of the company’s size.

For another, Haijin’s bankruptcy marks the largest one ever for a container shipping company in terms of capacity according to consulting firm Alphaliner, bigger even that the 1986 collapse of container shipper United States Lines.

In the meantime, Hyundai Merchant Marine, South Korea’s second-largest shipper, will consider acquiring Hanjin’s economically viable assets. But the failure of Hanjin could also mean failure of the world’s global supply chain, because South Korea’s oceans ministry is estimating a two- to three-month delay in the shipping of some Korean goods that were supposed to be shipped by Hanjin.

That will result in production delays as well as shortages of key components, products and other items for companies in the U.S. and abroad that depend on the South Korean supply to remain in business. So it’s possible that Hanjin’s failure will have an economic domino effect and cause major financial losses in business and industry sectors all over the world.

Emergency measures are already being considered, Reuters noted, but will they come fast enough? No one knows.

What’s worse, the news agency added that the Korea Development Bank’s decision to pull the plug was already affecting Hanjin’s operations, in particular freezing various shipping assets right off the bat. Ports in China, Spain, and the U.S. state of Georgia have blocked Hanjin vessels from entering after concerns rose the company would not be able to pay docking fees.

Whether or not Hanjin’s failure leads to additional failures abroad remains to be seen, but when the world loses one-seventh of its container ships, the global economy will definitely take a hit one way or another.

Sources:

ZeroHedge.com

Reuters.com