Korean Carrier to Customers: We’re Not Sinking

HEUNG-A container ship
Photo: MarineTraffic.com / Geir Vinnes

By Mike Wackett (The Loadstar) – Another South Korean shipping line under financial pressure has had to write to customers to dispel market rumors of a second box carrier crash.

According to Alphaliner, intra-Asia liner and chemical tanker and logistics operator Heung-A has written to shippers to reassure them that its recent decision to terminate services on a number of intra-Asia routes was due to their “low profitability”, and it was part of “a normal restructuring process”.

Heung-A also denied it was in arrears on charter hire or other payments, including terminal and port costs.

It said it was “studying and planning to announce new routes or slot purchases in the near future to further complement its existing services”.

Since the shock bankruptcy of South Korea’s leading line, Hanjin Shipping, in August 2016, shippers are much more cautious in committing bookings to carriers with weak balance sheets.

Indeed, some major shippers have told The Loadstar their internal compliance procedures now required clearance from their finance departments before negotiations on contracts with carriers can commence.

According to Heung-A’s financial statements, the shipping group recorded a net loss of $69m last year, following a deficit of $16m the year before. Heung-A was carrying debt of $594m by the end of 2016, but has not so far reported its current level of indebtedness.

According to vesselsvalue.com, Heung-A’s fleet of 12 small containerships and 17 chemical tankers has a current asset value of $286m, or $50m as scrap.

Alphaliner ranks Heung-A as the 29th biggest container line, operating a fleet of 37 container vessels (including 21 chartered-in ships) for a total capacity of 46,068 teu.

In August 2017, Heung-A joined a coalition of 14 South Korean carriers, including Hyundai Merchant Marine (HMM), with the aim of combining operational resources and developing new routes, dubbed the KSP (Korea Shipping Partnership).

However, since its inception, the KSP has been in the news more for rationalization of services than development plans. Indeed, Alphaliner reported last week further service cuts, the latest of which was the removal of one of the 13 weekly services from the Korea-North Vietnam route.

The consultant said: “The KSP’s slow progress and failure to bring about any meaningful cooperation among the highly fragmented Korean shipping companies is expected to persist.

“In the absence of a fully-fledged consolidation of the Korean carriers, the KSP’s efforts will likely remain futile.”

Heung-A was incorporated in 1961 and is headquartered in Seoul. It has 895 employees and is scheduled to hold its AGM on Saturday (24 March).

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