What a merger between Hanjin and HMM would look like

With details of the mega merger between Cosco and China Shipping expected to be revealed within days, it is across the Yellow Sea in South Korea where rumours of another shipping tie-up have brought much more fevered speculation.

There are many conflicting reports about whether or not the government in Seoul has or has not asked Hyundai Merchant Marine (HMM) and Hanjin Shipping to merge. My sources in the Korean capital say the pair have been asked to look at a merger, and that we should hear news on this development very shortly – certainly before year-end.

While HMM and Hanjin – South Korea’s top two shipping lines – have been fierce rivals for decades, their scant financial reserves mean they need to put their enmity aside if they are to prosper in today’s radically altered world of containerisation where scale now does count for so much.

Both lines have regularly skirted with bankruptcy over the decades and have had to metamorphose during shipping’s peaks and troughs; offloading assets in the bad times, roaring back in better periods. In the current dark era for shipping, their asset sales have both been aimed at making them much leaner organisations focused on containers.

Combining the pair would catapult them up to fourth spot in the global liner trades, according to Alphaliner, breaking the 1m slot barrier and positioning them as Asia’s largest containerline, larger than Taiwan’s Evergreen. The pairing would have a very strong position on the transpacific in particular and could conceivably help drive Busan, Korea’s main port, to grow quicker.

Statistics provided exclusively to Splash by (see infographic) show the combined entity would rank as the 19th largest shipping line in the world with a combined fleet worth more than $4bn.

What if Hanjin & HMM Combined - PROOF 05 copy

Seoul has made plain its keenness to rationalise its maritime sphere. Shipyards in particular are set to go through a major period of rationalisation. So too are the nation’s lines – South Korea, lest we forget, has had more shipping bankruptcies than most since Lehman Brothers collapsed.

A month ago South Korea’s minister of oceans and fisheries, hinted at Seoul’s possible merger, saying smaller and mid-sized container shipping lines could become extinct, just like the dinosaurs. Yoo Kijune, attending the Danish Maritime Forum, said the rush to order ever larger boxships had brought overtonnaging and made it hard for many to operate. The leading container companies will drive out small and mid-sized ones, he said.

As to what happens to the various container alliances is anyone’s guess. China Shipping look likely to quit the Ocean3 if they merge with Cosco, sources tell , while Hanjin’s and HMM’s continued participation in the CKYH and G6 alliances respectively remains unclear.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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