A mega merger story that refuses to die down has reemerged in South Korea today. Lim Jong-ryong, chairman of the Seoul watchdog, the Financial Services Commission (FSC), refused to rule out a merger when discussing the plight of the nation’s top two shipping lines, Hyundai Merchant Marine (HMM) and Hanjin Shipping, both of which are going through huge restructuring.
“Reviewing whether or not to merge two companies is better for the shipping industry or not will be reviewed only after both companies have been normalised,” Lim said today when quizzed by local journalists on mooted merger plans, something that has been regularly denied by both lines and even the government.
“Hanjin Shipping at the moment is focusing on improving our financial stability and normalisation of our business,” a spokesperson for Hanjin told Splash, declining to comment specifically on Lim’s comments today.
“The comment made by the FSC is based on the government’s recent discussion over the reconstruction of Korea’s shipping/shipbuilding industry. Therefore, HMM does not have any plan regarding the matter as of this moment,” a spokesperson for HMM said.
Commenting on the possible merger of South Korea’s top two lines, Rahul Kapoor, a director at Drewry Financial Research Services, said: “Container shipping is undergoing a transformation. In absence of top line growth the synergies from costs savings are compelling. As we said before and again reiterate, there is space for a limited few on the global east-west trades and a combination of HMM-Hanjin certainly fits in there but it is difficult for both to sustain as a standalone entity.”
Hanjin Shipping has joined new container grouping THE Alliance, while HMM has said it will negotiate entry to the six-strong alliance soon.
Lars Jensen from SeaIntel Maritime Analysis, commented: “We have entered into a phase of consolidation in the industry, setting the stage for the next decade. APL is being merged with CMA CGM, UASC will likely join forces with Hapag Lloyd, CSAV, CCNI and OPDR have been acquired and we have seen two Chinese carriers become one. But even then, the industry remains fragmented and lossmaking and more consolidation will to take place.
“In an industry where scale is paramount, and where two large Chinese carriers saw the necessity to merge, it is clearly questionable whether there is a long-term future for two Korean global carriers. Whether these two will merge, or whether one of them might merge with a non-Korean carrier is indeed an open question, but there is clearly a survival game going on and only the carriers with the will to transform their business are likely to be part of the landscape in 2025.”
While HMM has completed key charter renegotiations with tonnage providers as stipulated by its creditors, Hanjin is still mid-way through this process.