SM Line Fights for Top 20 Container Shipping Spot


South Korea is repairing its reputation after Hanjin’s shipping debacle by pushing forward SM Line Corporation (SM Line), an “expansionist newcomer” that will soon break into the Top 20, according to global shipping analyst Drewry.

Founded in December 2016, SM Line is part of South Korean conglomerate Samra Midas Group (SM Group), which also has interests in manufacturing and construction among other activities.

SM Group already established itself through its ownership of bulk carrier Korea Line Corporation, acquired in 2013, but SM Line is its first attempt to break into container shipping by seizing opportunities after Hanjin Shipping’s bankruptcy.

SM Line has grown through the ashes by purchasing the defunct carriers’ Transpacific non-ship assets for a reported $23 million, followed up by acquisitions of 11 former Hanjin container ships and two terminals in Gwangyang and Inchon.

This abundance of cheap second-hand ships means that SM Line has rapidly build its fleet into one that is now on the verge of joining the Top 20 of carriers by operated fleet, according to a new Container Insight Weekly by Drewry.

In its report, Drewry stated: “It would already be in that group were it not for the short-term chartering out of six former Hanjin ships to MSC and Maersk Line [see Table 2 below].

“As of August 2017, the company owns a total of 18 ships with an aggregate capacity of 99,800 TEU, along with another five ships totalling 6,000 TEU on charter.

“Including those ships hired out it would rank 19th in the current global carrier rankings, only about 20,000 TEU behind its much longer-established compatriot KMTC.

“SM Line has said that it plans to operate 30 ships by the end of this year so its entrance into the Top 20 is only a matter of time.”

Table 2: SM Line's shopping spree: owned containerships as of September 2017

Source: Drewry Maritime Research

In the six months since the start of operations in March, SM Line has grown its operations to nine weekly services.

These include six in the Intra-Asia trade — one of which as a slot charterer, two in the Asia-India trade — both as slot charterers, and one in the Asia-West Coast North America trade, scaled back from two Transpacific loops.

Drewry added: “More services will follow as SM Line aims to boost its current 50,000 TEU operated capacity at least four-fold, with new services inked for the ‘near future’ that will connect the Far East to the Pacific Northwest, the US East Coast, West Coast South America, Australia, the Middle East and Red Sea [see Figure 1 below].”

Source: Drewry Maritime Research

To help its international expansion strategy, SM Line is to merge with two other SM Group companies, Woobang Engineering and Construction and Korea Shipping Corporation — formerly Samsun Logix before its takeover by Korea Line Corporation in December 2016.

SM Line will also group with 13 other Korean shipping lines through the Korean Shipping Partnership (KSP) agreement that aims to bolster domestic trades.

Drewry said: “It is understood the KSP will set out to improve the lot of the Korean lines by providing some form of organised structure, headed by the Korea Shipowners Association, with regard to fleet expansion and rationalisation of Intra-Asia service networks.

“The sheer number of carriers involved demonstrates just how competitive the environment is, but the lack of fanfare from any carrier involved suggests that they may merely be playing lip service to a government initiative designed to repair the country’s shipping reputation.

“Previous new entrants to trades have tended to destabilise the market to varying degrees as they bought their way in with discounted rates, yet that hasn’t proved to be the case with SM Line in the Transpacific, where freight rates didn’t falter upon its arrival in April.

“This will be comforting to those incumbent lines that stand to see their pricing power increase as the number of competitors shrink through the M&A process, but the sudden emergence of SM Line should act as a reminder that container shipping is not a closed shop just yet, particularly with the barriers to entry being so low.

“SM Line will not become a rival to the elite global lines in the short-to-mid-term, but is rapid trajectory suggests that it will find a niche in the medium-size category. The abundance of cheap ships on the market means that there are still opportunities for ambitious newcomers to force their way in.”

SM Line timeline:

Another analyst group recently said that KSP would not be able to survive

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