South Korea’s Hyundai Merchant Marine (HMM) has withdrawn from a joint bid with Mediterranean Shipping Company (MSC) for a controlling stake in the US port operator that runs Long Beach, California’s biggest container terminal, reported The Wall Street Journal.
Hyundai is instead planning to later take a minority stake in Total Terminals International (TTI), which bankrupt Hanjin Shipping owns a 54% stake in and has faced pressure from Northwest Seaport Alliance of Seattle and Tacoma over guaranteed continued payments.
It hasn't been the only backtrack as Korea Line Corporation (part of the SM Group) also withdrew its bid for Hanjin’s stake in the facility earlier this month.
Brokers are reporting that MSC, which currently owns 46% stake in TTI, will win due to its position as the world’s second largest container operator by capacity.
C.K. Yoo, Hyundai’s Chief Executive, told The Wall Street Journal: “Considering our low credit ratings, we thought it would be better for MSC to make a solo bid. We agreed to buy a stake from MSC later.
“We intend to get a low double-digit stake in the terminal, which we need to save costs for cargo unloading.”
Los Angeles and Long Beach are the two biggest US ports in terms of capacity, moving more than 15 million containers annually and handling the majority of imports and exports between the US and Asia. Hanjin’s business at the port once accounted for 12.3% of Long Beach’s containerised volume.
HMM, now South Korea’s largest shipping line following Hanjin’s bankruptcy, has been unprofitable for several years while amassing debt and recently declared that it intends to take 5% of the global market share by 2021.
It recently gained limited access to the 2M network after making an agreement with MSC and Maersk Line that will see the two container shippers take over a number of its charters and operations.
However, changing alliances such as these look to be negatively impacting the Port of Long Beach and rewarding the Port of Los Angeles.
Cargo figures have shown that the Los Angeles port increased volume by 7% through November of this year, compared with its neighbour’s nearly 6% decline over the same period.
The port has also faced challenges after its executive director, John Slangerup, stepped down in September — just weeks after Hanjin declared bankruptcy.