After escaping bankruptcy, Korean container liner Hyundai Merchant Marine (HMM) looks to newbuilding orders, reports Xiaolin Zeng
Hyundai Merchant Marine plans to order mega container ships in 2018. The revived South Korean liner operator’s CEO Yoo Chang[ds_preview]-keun made the company’s position official for a first time recently. He said: »During the last year, HMM has faced many changes such as regaining customer trust, recovering profitability, and ranking number one in service reliability etc. I would like to extend my sincere gratitude to people of South Korea for supporting HMM and to all HMM employees who overcame the difficult situation.«
While media reports claimed that HMM could order a dozen 20,000TEU ships and eight 13,000TEU ships by June 2018, Yoo stopped short of disclosing figures and the vessel sizes.
»This will be the mega-ship building project in accordance with the national expectation for being a leading shipping nation. HMM is now located in the good position to be a world-class leading shipping company by overcoming new environmental regulations starting from 2020.«
Growth through blockchain
Having pulled off a remarkable escape from bankruptcy in June 2016, after its banks agreed to a debt-for-equity swap when the company succeeded in renegotiating its charter-hire and bond payments, HMM’s goal is to become a world-class liner operator.
HMM is now South Korea’s flagship carrier after its former larger rival, Hanjin Shipping, went bankrupt on 17 February.
Yoo also said that HMM will concentrate on finding ways of strengthening manpower through professional education, and achieving innovative growth through blockchain technology. The company has been piloting the technology on a few voyages. The deployment of new vessels, opening new services, expanding business network, and reducing operation costs were also discussed.
On 1 December 2017, HMM executed a rights issue that saw the company offering 120 million shares that raised 550 bn KRW (510mill. $), of which 400 bn KRW would go towards ordering newbuildings and acquiring container terminal assets worldwide. A spokesman told HANSA that the company is awaiting the government’s approval for the establishment of Korea Maritime Corporation. To be set up in mid-2018 with capital of 5tr KRW, the Korea Maritime Corporation would assist the rejuvenation of the country’s struggling shipping and shipbuilding businesses.
Waiting for political approval
Korea Maritime Corporation is set to replace and combine the functions of three existing bodies that were set up by previous governments to develop the local shipping and shipbuilding industries, Korea Maritime Guarantee Insurance, Korea Shipping and Maritime Transportation and Maritime Exchange Information Center. Its incorporation is pending the National Assembly’s approval.
The spokesman added: »When the Korea Maritime Corporation completes its establishment, HMM may receive support from the organisation for ordering new vessels or investing in terminals.«
When asked about the number and size of vessels, the spokesman said: »HMM plans to order new ships in preparation of the International Maritime Organization’s new environmental regulation (in 2020), but the time, type or size of vessels have not been decided yet.«
HMM’s collaboration with the 2M alliance comprising Maersk Line and Mediterranean Shipping Company (MSC) expires in March 2020 and given its relatively small size among liner operators amid the current wave of consolidation, the company may find the going tough should it find itself without an alliance partner. The largest container ships in HMM’s fleet are only at 13,000TEU, while the company’s rivals have been ordering and taking delivery of vessels with capacities nearing 20,000TEU. There is thus concern that HMM could lag behind its competitors.
IHS Markit’s Maritime Portal data shows that 65 mega container ships (from 18,000TEU onwards) totaling more than 1.35mill. TEU are under construction. The ships were ordered by COSCO Shipping Lines, CMA CGM, Mediterranean Shipping Company, Maersk Line, Evergreen Marine Corp, Orient Overseas Container Lines (OOCL), and Mitsui OSK Lines (MOL). Another 65 mega container ships, totaling more than 1.24mill. TEU, are already part of the active fleets of Maersk Line, MSC, United Arab Shipping Co, Ltd, MOL, COSCO Shipping Lines, and OOCL.
Tanker and terminal growth
HMM recently placed firm orders for five VLCCs, with options for another five tankers, with Daewoo Shipbuilding & Marine Engineering. The company also ordered two 11,000TEU container ships from Hanjin Heavy Industries & Construction. Korea Shipping and Maritime Transportation, a ship finance provider established by state policy lenders in January, is expected to bankroll these orders. While HMM has no plans to expand its dry bulk fleet, the company hopes to secure long-term shipping contracts with oil refineries in South Korea and elsewhere.
There has been speculation that HMM would return to DSME when the company decides to build mega container ships, as Korea Development Bank is their largest shareholder. However, HMM’s spokesman asserted that competitive tenders would be sought from eligible shipbuilders.Besides ships, HMM has plans to acquire container terminal assets to reduce handling costs as it aims to achieve an operating profit by the third quarter of 2018.
The company now owns eight overseas terminals, including the recently purchased terminal that Hanjin Shipping used to operate in Algeciras, Spain. HMM has also announced plans to develop ports in Vietnam as part of a wider plan to own more terminal assets in Southeast Asia to take advantage of lower handling costs and help restore profitability.
Xiaolin Zeng
