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Loss-Making HMM Stays Bullish, But Its Goal of Becoming a Leading Carrier Seen as ‘Pipe Dream’

The Loadstar
Total Views: 9
February 27, 2018

Photo: Sheila Fitzgerald / Shutterstock.com

By Mike Wackett (The Loadstar) – Hyundai Merchant Marine’s long-term aspiration to become a “leading global carrier” with a market share of 5% is a pipe-dream, according to maritime consultant Drewry.

It advises the ambitious South Korean carrier to instead “focus its energies on restoring its profitability and reputation”.

HMM’s 2018 strategy is referred to, in a slightly more detailed 2017 earnings commentary released yesterday, as “a leap toward a vision” of regaining a top global ranking, which it said it would achieve by building on its status as South Korea’s biggest container line.

A 30% surge in liftings last year, to 4.03m teu, did nothing to improve profitability; HMM reported a net loss of KRW1.2trn ($1.1bn, which followed a deficit of KRW484bn in 2016.

Nevertheless, an undaunted HMM advised that it would invest $95m in the purchase of 30,000 new containers and is reported to be about to sign a memorandum of understanding with a South Korean shipyard for the construction of 12 22,000 teu and eight 13,000 teu vessels.

The funds for the newbuilds are to come via the state-owned Korea Shipping and Maritime (KSMART) tonnage bank initiative of the South Korean government, launched in January 2017 to support the nation’s ailing maritime industry.

The Korean government was highly embarrassed by the Hanjin Shipping bankruptcy and has vowed to support HMM and the country’s shipbuilding industry “at all costs”, according to an official The Loadstar spoke to in Busan in October.

Thus HMM will be state-subsidised in its expansion strategy and can also look forward to continuing support from Korean manufacturing behemoths.

Meanwhile, the industry still awaits official confirmation that HMM is launching a standalone Asia-North Europe express service, which it dubbed AEX, in April. The AEX loop, deploying ten 4,700 teu panamax vessels, would operate outside its slot charter agreement with 2M alliance partners Maersk Line and MSC.

One forwarder source told The Loadstar HMM had been “touting its new service in the market” for some time. He said the HMM rep had told him “it was happening”, but added it was still finalising ports of call.

HMM told The Loadstar last week it was “still reviewing” its plans for the launch of the AEX.

Notwithstanding the attraction of faster transit times – something shippers have almost given up on as liner port-to-port times and reliability have deteriorated – like any new service, HMM will need to be patient in building support for the AEX. as shippers will want to be certain it will not be pulled after just a few weeks.

Moreover, HMM risks losing cargo bookings from its 2M service if shippers prefer the shorter transit service offered by the AEX, in which case it will still be liable for the slots not taken up on Maersk and MSC ships.

The Loadstar is fast becoming known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.

Check them out at TheLoadstar.co.uk, or find them on Facebook and Twitter.

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