- Hyundai Merchant Marine Co. is joining THE Alliance, gaining access to significant new business.
- HMM’s move to join the group came after the rival 2M Alliance refused to make HMM a full member when its associate status ends in April next year.
- Joining THE Alliance will boost the group’s trans-Pacific capacity and give HMM some breathing space, says Chief executive of SeaIntelligence Consulting
- HMM’s agreement with THE Alliance deal will take effect in April 2020, pending a series of regulatory approvals.
According to an article published in The Wall Street Journal, Hyundai Merchant Marine Co. is joining THE Alliance, a cooperating group of major container shipping lines. This collaboration will give the South Korean flag carrier access to significant new business as it seeks to gain financial stability.
Rejection by 2M Alliance
The move to join the group, comprising Germany’s Hapag-Lloyd AG , Japan’s Ocean Network Express and Taiwan’s Yang Ming Marine Transport Corp., came after the rival 2M Alliance refused to make HMM a full member when its associate status ends in April next year.
Being part of an alliance will help HMM cut costs by sharing ships, cargo volumes and port calls with its partners.
Profits expected over accumulated Losses
Jae-hoon Bae, who became HMM’s president and chief executive in March, is under pressure by the carrier’s creditors to make it profitable after an accumulated $1.6 billion in losses over the past 3½ years.
The Korean carrier holds 1.8% of the global shipping market, according to research group Alphaliner. The carrier has relied heavily on government support to stay afloat.
Edge over HMM’s rivals
HMM narrowly escaped default in 2017, thanks to a $660 million state bailout, and received a further $5 billion last year to finance the order of 20 mega ships and port assets to boost its capacity and take over rivals.
Korea Development Bank
The Korea Development Bank is the biggest creditor to HMM and its main angel in keeping the operation running, and has insisted the company join a world-wide shipping alliance as a condition of its support.
According to a report in April, the 2M partners: A.P. Moller-Maersk A/S and Mediterranean Shipping Co., were eager to end the relationship after HMM ordered 20 megaship container vessels for $2.8 billion, adding a big surge in capacity for an already crowded Asia-Europe trade lanes.
Boost in Trans-Pacific capacity
Lars Jensen, chief executive of Copenhagen-based SeaIntelligence Consulting, said
“Joining THE Alliance will boost the group’s trans-Pacific capacity and give HMM some breathing space.” He added that this is a vital anchor for HMM after being kicked out by 2M.
Ocean Alliance
A third grouping called Ocean Alliance, which consists of China’s Cosco Shipping Holdings Co., France’s CMA CGM SA and Taiwan’s Evergreen Marine Corp., has 19 weekly round-trip sailings between Asia and North America. The Alliance has 16 and 2M has 14, of which three, are provided by HMM.
HMM’s agreement with THE Alliance deal will take effect in April 2020, pending a series of regulatory approvals.
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Source: WSJ
