South Korea’s second largest shipping line seems to be turning a corner in its debt restructuring of late, and has now set its sights on joining the leading vessel sharing agreement by capacity on the major east-west trades.
Struggling South Korean ocean carrier Hyundai Merchant Marine (HMM) has entered into discussions with Maersk Line and Mediterranean Shipping Co. (MSC) regarding joining the 2M Alliance, the company said.
HMM, South Korea’s second largest shipping line, has been struggling to turn a profit in recent years and has amassed considerable debts in the process. The company earlier this year began a “self-rescue” plan that has included asset sales, a restructuring of its debts and negotiating a charter rate reduction with ship owners in order to stay afloat.
Just a few weeks ago, HMM was able to reach an agreement with ship lessors for a 20 percent reduction in charter rates for containerships and 25 percent for its bulk vessels. In exchange, HMM will pay about 530 billion South Korean won (U.S. $455 million) of the full charter amount of 2.5 trillion won for the next three and a half years with newly issued shares and long-term bonds.
The company said at the time that reducing the cash outlay and paying the shipowners with stock and long term bonds would improve its liquidity.
This latest announcement comes as a bit of a surprise, not only because HMM is currently a member of the G6 Alliance, which runs through the end of 2016, but because it also expressed a strong interest in following fellow South Korean carrier Hanjin Shipping into the recently announced THE Alliance vessel sharing agreement.
Three of the four current major east-west VSA’s, the G6 Alliance, the CKYHE Alliance and the Ocean3 Alliance, will all run their course by the end of first quarter 2017 and be replaced with new groupings called THE Alliance and the OCEAN Alliance.
THE Alliance will include current G6 members Hapag-Lloyd, Mitsui O.S.K. Line (MOL) and Nippon Yusen Kaisha (NYK); and CKYHE members Kawasaki Kisen Kaisha (“K” Line), Yang Ming and Hanjin. In addition, the OCEAN Alliance, announced just a few weeks prior, pulls together six of the other large carriers from three of the four major container alliances: CMA CGM and China Shipping from the Ocean3 Alliance; COSCO and Evergreen from the CKYHE Alliance; and APL and OOCL from the G6 Alliance.
Lost in the shuffle, however, was HMM, which said it planned to join THE Alliance, though there was little to no public indication of interest on the part of the VSA.
“The 2M carriers and HMM are ideal partners as we can work together in order to create a great synergy for the alliance by supplementing each company’s operation,” an HMM spokesperson said in a statement.
HMM said cooperation with the 2M carriers would allow the company to reduce costs, strengthen its service competitiveness and achieve additional operational efficiencies.
“For the 2M carriers, a partnership with HMM can provide major benefits such as reinforcing the alliance’s service competency in Asia and improving network cover in the trans-pacific area by utilizing HMM’s current routes,” it added.
NEWS FLASH: HMM enters talks to join 2M Alliance
