South Korea’s largest ocean carrier revealed its planning to secure ultra-large containerships, expand service coverage, enhance cost-competitiveness and prepare for new environmental regulations.
Hyundai Merchant Marine (HMM) plans to become one of the container industry’s “super carriers” by 2020, controlling a fleet with a capacity of more than 1 million TEUs.
C.K. Yoo, whose term as chief executive officer was extended through 2021 at the HMM annual meeting on Friday, said employees will “give our all to leap forward as one of the top global shipping carriers.”
The company said it expects to be “equipped with eco-friendly, mega smart containerships in the near future,” which Yoo said will give HMM “great cost-competitiveness and strengthen its sales power.”
Speaking earlier this week, Lawrence Burns, senior vice president of trades and services at Hyundai America Shipping Agency, Inc., noted the wave of bankruptcies, acquisitions and mergers among container carriers has led to the point where the industry is now dominated by seven super carriers all controlling fleets with a capacity of more than 1 million TEUs.
“There’s still a couple more players including Hyundai Merchant Marine that are expected to join… and reach that threshold of a million TEU.”
He noted the government of South Korea is now the company’s largest shareholder, and “on the drafting table, currently we have plans to actually reach a million TEU by 2020.”
Burns made his comments during a talk this Wednesday at the Port of Long Beach’s Pulse of the Ports Peak Season Forecast.
Ocean carriers that have fleets with a capacity exceeding 1 million TEUs include Maersk Line, Mediterranean Shipping Co., CMA CGM, COSCO/OOCL, Hapag-Lloyd, Evergreen Line, and starting April 1, Ocean Network Express, the merged container services of Japanese carriers NYK, MOL and “K” Line.
In the wake of the bankruptcy of the other major South Korean container carrier Hanjin in 2016, HMM last year saw its cargo volumes soar by 30 percent to over 4 million TEUs, while revenues skyrocketed 20 percent.
The company has said it plans to “leap to be a global leading carrier” by securing ultra-large containerships, expanding service coverage, enhancing cost-competiveness and preparing for new environmental regulations.
Burns cautioned shippers that the requirement by the International Maritime Organization that shipping companies use low sulfur fuel or reduce emissions by burning liquefied natural gas or using scrubbers could lead to further consolidation or a reduction in global container carrying capacity.
He told the Long Beach audience to not underestimate “the underdog in this industry.”
“I have seen through my career that carriers that were really never on the radar all of a sudden become the major players in this industry,” Burns said. “So whatever we’re seeing today, I have a prediction that we may not be seeing in the next five years as the same line up of the largest carriers.”
Last month, HMM announced plans to launch a standalone service in the Asia-North Europe trade in April, in addition to six loops it offers through its cooperation with the 2M Alliance of Maersk and MSC.The new Asia-North Europe Express (AEX) will operate with 10 ships with an average capacity of 4,600 TEUs, much smaller than the 20,000-TEU-plus ships operated in the trade by other global carriers, including the 2M.
Neil Dekker, a consultant at ClipperMaritime, wrote earlier this month in a column on maritime news outlet Splash 24/7, that the service “is an opportunity for HMM to assess the viability of a longer-term return to the key Asia to North Europe market as a vessel deployer.”
“With the demise of Hanjin in 2016, the presence of a strong and reliable South Korean shipping line with a global coverage for shippers is very important at both a strategic and political level,” Dekker said.
Burns said he expects in 2018 the ports of Long Beach and Los Angeles will continue to be the largest gateway for Asian cargo, but he also expects that as container carrying capacity increases, “supply growth is going to locate itself more on the East Coast than it will the West Coast in this coming year and that’s mainly through the expansion of the Panama Canal and the ability of the ports on the East Coast to be able to take that supply.”
Burns noted that ocean carriers are often asked to offer bundled rates that include both ocean transportation and inland transport.
“This is where it becomes difficult for the ocean carriers in 2018,” he said. “Carriers are going to have to push back on this a bit.”
Carriers have been able to deliver ocean transport at a low cost, but “we all know the land costs are increasing and that is going to increase the pressure on us being able to bundle that back into the package,” Burns said. “We’re going to need to pass those costs on to the importers and the exporters.”
Burns also suggested to his audience that they need to make contingency plans in case contract renewal talks between longshoremen and their employers on the East Coast and Gulf Coast do not go smoothly.
While the International Longshoremen’s Association (ILA) and United States Maritime Alliance put out a statement last Friday that indicated they had made “significant progress” on terms for a six-year renewal of their contract that expires at the end of September, Burns noted the contract, even if approved today, will need to be approved by ILA wage scale delegates.
“So I would also ask you,” Burns said, “what is your contingency plan, what is your timing of the trigger of your contingency plan?”
He suggested shippers should work with their carriers to make sure that they have the ability to deliver cargo from all coasts and to determine what they would do if a labor agreement were not reached.
HMM plans to become one of the ‘super carriers’ by 2020
