Are freight companies in the same boat as Hanjin Shipping Co.?

The strongest guage of world trade activity is often reflected in the profitability of the shipping and cargo industry where huge payloads of containers are carried across the world's oceans with colossal-sized freight liners that produce a cost efficient advantage when utilising this mode of transportation.

But as prosperous as globalisation has made the industry's business model is as fast as its crippled many companies in the sector with the protracted downturn in China's economic growth that had been the direct link of a flourishing boom in recent years.

To add further woes to the situation the overcapacity of containers and ships leaving ports with partial loads have all complicated the outlook by squeezing margins in an industry that requires a steady flow of mass quantity to produce maximum returns.

Hanjin Shipping is trying to stop its ships from being seized https://t.co/ekhUlh3xXA

— Fortune (@FortuneMagazine) September 5, 2016

Big name casualties are beginning to emerge with the seventh largest shipping company, Hanjin Shipping last week filing for bankruptcy in Seoul in a bid to ward off creditors who are becoming incredibly frustrated by the lack of service of its debts. The company is said to be over indebted by $5 billion with the Korean Development Bank and other lenders refusing to grant additional funding to the troubled company that could've possibly seen it through these desperate times.

And as if this wasn't enough, a number of the shipping company's freight liners have been seized in foreign harbours namely Singapore and China, with port authorities saying the seizure of assets were due to the high measure of debt owed to them in lieu of services rendered whilst docked.

Having exhausted contingency plans put in place to halt the slide, shipping companies have reached a point where they can no longer starve off the necessary action needed to once again find balance. If the period of downturn which has been expected to last for a brief time is now being revised and extended, the chances of more of the same outcomes we've seen occur with Hanjin Shipping is inevitable to increase.

Overcapacity, oversupply, and overproduction are terms that have become a frequent phrases that have featured more prominently in recent times as the world economy bears the weight of indecisive, reckless and fruitless policy yet they send a stark reminder to policymakers that the self correcting nature of free markets are necessary when or else fails.