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Hyundai Merchant Marine’s Problems Intensify, Expected to Part Ways with 2M Alliance

Shipping Line Hyundai Merchant Marine’s Problems Intensify
Costas Paris Dec. 4, 2018

Financially ailing South Korean container operator set to leave giant shipping alliance as its government-backed owner considers bigger overhaul

South Korean flag carrier Hyundai Merchant Marine Co. is set to leave a powerful shipping alliance that guarantees its ships are used to move cargo across the oceans, complicating its efforts to reverse a slide and compete with much bigger rivals.


HMM Expected to Part Ways with 2M Alliance

Hyundai Merchant Marine (HMM) judges that it will be difficult to extend its shipping alliance with the 2M Alliance which will expire in April 2020.

Hyundai Merchant Marine (HMM), Korea’s largest containers carrier, is considering joining a new ocean alliance when its ties with the 2M Alliance expire in April 2020, industry analysts say.

The 2M Alliance consists of Maersk Line and MSC, which rank first and second in terms of the share of the global shipping market. HMM is currently not a full member of the alliance. Under an agreement signed in 2016, HMM purchases and exchanges slots with the two powerful shipping lines.

The contract is disadvantageous to HMM as it is not a full member of the alliance. Lately, HMM’s status fell as the 2M Alliance inked a partnership deal with Israel’s Zim Integrated Shipping Services.

HMM’s contract with the 2M Alliance is a conditional cooperation agreement which runs from April 2017 to March 2020. At the time, 2M agreed that it would accept HMM as a full membership company based on an assessment of HMM’s financial structure and liquidity improvement.

Taking current situations into account, HMM and 2M are highly likely to part ways. Typically, a shipping alliance runs at least five to 10 years, but HMM has a three-year contract with 2M. In addition, since HMM is not a full member, it has to endure disadvantages in terms of routes. HMM also faces restrictions in expanding its sales power because 2M requested HMM to restrict new shipbuilding orders when it signed the deal with HMM.

2M strongly protested against HMM’s orders for 20 large container ships, which were placed in April under the Korean government’s five-year shipping industry reconstruction plan. “2M is hampering HMM’s fleet expansion even though the Korean shipper urgently needs to recover its competitiveness,” said an official in the Korean shipping industry.

2M is also skeptical about maintaining its alliance with HMM. The alliance recently decided to establish a strategic partnership with Zim Integrated Shipping Services, an Israeli shipping company, for U.S. routes, putting HMM in a more disadvantageous position.

Currently, HMM leases space on 2M ships to carry freights without offering its own Asia-U.S. East Coast services. HMM negotiated with Zim Integrated Shipping Services to address this issue. However, the Israeli shipper joined 2M and HMM’s plan was scratched off.

Some shipping industry experts say that HMM will join a new shipping alliance other than 2M based on its enlarged fleet as the 20 ships ordered by HMM this year will be delivered starting in 2020. In particular, when HMM completes the acquisition of a stake in Busan New Port 4 which handles a high volume of transshipment cargoes, it will be able to secure a favorable position in negotiations with global shipping alliances.

“After 2020, the number of eco-friendly containerships will increase significantly, and HMM’s acquisition of the stake in the new port will save HMM cost in using ports. HMM’s breakup with the 2M Alliance may create an opportunity for HMM,” said an official in the Korean shipping industry.

Shipping analysts say HMM is likely to join the Ocean Alliance, which includes France’s CMA CGM, China’s COSCO and Taiwan’s Evergreen.
Source: Business Korea