South Korea’s shipping companies may be about become one with Hyundai Merchant Marine (HMM), the 15th largest ocean shipping company in the world, as plans are reportedly in place to create a single national alliance.
According to South Korean news outlet Pulse, the Korea Shipowners’ Association is orchestrating the move by partnering the country’s 14 container carriers in a memorandum of understanding (MoU) to create the Korea Shipping Partnership (KSP) shipping consortium.
The signing will take place next Tuesday (August 4, 2017).
Operational guidelines are planned for the end of this year with an aim to launch a full-fledged operation in January 2018.
Under the terms of the agreement, the carrier lines will cooperate to improve shared cargo capacity by adding new shipping routes and co-managing overseas terminals.
The Korean shipping industry has been struggling to compete with other nations since the country’s once-leading Hanjin Shipping, once the world’s seventh biggest carrier, went bankrupt last year.
After almost facing the same fate as Hanjin, government support from the state-run Korea Development Bank (KDB) has meant that HMM has managed to stay afloat and fill the void that was left after the demise of the country’s principal sea flag carrier.
But HMM’s recovery is still in the balance as its first-quarter earnings results show the company is still struggling with oversupply and low shipping rates that have plagued the industry since the 2008 financial crisis.
In the January-March quarter, the company's net losses widened to US$652 million from $245 million a year earlier, according to a regulatory filing.
But HMM’s move into the KSP alliance and a potential plan with its 2M partners may be a turning point for its balance sheet.
Yonhap recently reported that HMM is consulting its 2M partners, Maersk Line of Denmark and Mediterranean Shipping Company (MSC) of Switzerland, as to whether it should focus its vessels on delivering trade to the US.
The shipping company expects a shortage of container carriers on the high-traffic routes from August to October as US customers want more products from China and Southeast Asia.
HMM’s spokesperson said: “As Maersk and MSC also deliver their products through our container carriers and vice versa on the US routes, we need to consult with them first.”
Hyundai Merchant Marine (HMM) recently denied reports that it is seeking US$8.9 billion in funding from the KDB.