Hyundai Merchant Marine (HMM) has entered a strategic cooperative partnership with the world’ largest shipping alliance 2M, the Korean container line said Sunday. HMM has long vowed to become one of 2M’s full-fledged shipping members, but the deal fell short of industry expectations.
Critics called the deal a “half deal,” but HMM said it was the best outcome for the company since it would provide momentum to improve its profitability.
“I believe the strategic cooperation deal is no different from a full-fledged membership in the alliance,” HMM CEO Yoo Chang-keun said during a media conference at the company’s headquarters in Jongno-gu, central Seoul, Monday.
“Of course, the tie falls short of what we had expected, but the agreement is still very meaningful because we are now granted to share cargo exclusively with 2M-affiliated shipping companies.”
According to Maersk Line, the world’s largest container line under the 2M alliance, Sunday, it and Mediterranean Shipping Company (MSC) have entered into the strategic cooperative agreement with HMM, a combination deal of slot exchanges and slot purchases between the three parties, as well as Maersk Line and MSC taking over a number of charters and operations of vessels currently chartered to HMM.
The agreement is scheduled to begin in April 2017 subject to regulatory approval. The initial term of the cooperation is three years with an option to extend and cover key East-West trade.
Maersk Line added that the cooperation is “outside the scope of MSC and Maersk Line’s 2M vessel-sharing agreement through membership to the alliance.” Joining a global shipping alliance is one of the key conditions set by its creditors for its rehabilitation program and debt rescheduling, but Korea’s second-largest shipping company was rejected for full-fledged membership.
One possible reason Maersk Line and MSC did not grant HMM’s membership request to 2M is that they have already taken over the country’s other debt-ridden shipping line Hanjin Shipping’s market shares in the region.
According to Busan Port Authority, Hanjin Shipping’s market share in the Asia-to-North America route marked 7.78 percent last October but plunged to 1.1 percent in the same month this year. Likewise, its share in the North America-to-Asia route has nosedived from 8 percent to 0.01 percent over the same period. The government had counted on Hyundai Merchant Marine (HMM) to fill the gap, but HMM was outbid in purchasing the assets of Hanjin Shipping’s Asia-North America route, as well as its stake in a California terminal by mid-size bulk shipping operator Korea Lines.
In the meantime, 2M’s market share in the Asia-to-North America route increased by 3.5 percent to 17.5 percent while its shares in the North America-to-Asia route rose by 7.8 percent to 24.16 percent.
“It is not what HMM promised its creditors when it underwent the restructuring program,” said a creditor group official.
“The matter is, however, now out of our hands. Fortunately, Maersk Line will take over ships that HMM has charted from independent owners. It will relieve HMM’s financial risks since it does not have to pay the charter fee anymore.”