SINGAPORE — South Korea’s Ministry of Oceans and Fisheries has clarified its position with regards to ongoing speculation on a possible merger between Hanjin Shipping and Hyundai Merchant Marine, the country’s two biggest shipping companies.
In a press statement released in response to South Korean newspaper Joong-Ang Daily’s report of a “coerced” merger between Hanjin and HMM, the ministry denied it had told the newspaper that “there is a need to deeply analyze the need to maintain the existence of the two companies”.
“There is a need to maintain the existence of the two companies when considering the impact a merger could have on South Korea’s import and export-oriented economy and global shipping alliances, as well as Busan port’s transshipment competitiveness,” according to the statement, written in Korean.
Hanjin is part of the CKYHE Alliance that includes COSCO, ‘K’ Line, Yang Ming and Evergreen, while HMM is part of the G6 Alliance that includes Mitsui OSK Lines, NYK Line, APL, Hapag-Lloyd, and OOCL.
Until recently, both companies operated terminals in Busan. This month, Hanjin Shipping divested its remaining stake in Hanjin Newport, which ran a terminal in Busan. HMM still maintains Hyundai Busan Container Terminal, the largest container terminal in South Korea.
Hanjin Shipping told IHS Fairplay, a sister company of JOC.com within IHS, that such a merger would not be realistic while HMM denied receiving any request from the government to merge with its bigger compatriot.
The ministry concluded, “The creditor banks of the shipping companies are checking if each company’s self-help plan is realistic before deciding whether to give further support.”
A South Korean broker said both HMM and Hanjin would not want to merge to preserve their identities but the market is not in their favour.
“Both companies have been cutting costs and selling assets and have started to post profits. But container rates are so low that is hard to see the profits being sustained. Their main creditor is (state-owned policy bank) Korea Development Bank and the government can always tell it to cut off support,” said the broker.
Both Hanjin and HMM have been struggling to bolster liquidity since 2013, after suffering two consecutive full-year losses.
Both companies have divested their dry bulk and LNG shipping businesses as well as container terminal assets.
Hanjin affiliate Korean Air has since become its major shareholder through capital injections that saw the airline take a 33.2 percent stake in the shipping line. Korean Air boss Cho Yang-ho also became Hanjin’s CEO.
HMM’s parent Hyundai Group has also sold stakes in Hyundai Logistics to Japanese finance house Orix although a stake sale in Hyundai Securities to the same party fell through in October. The company has also said it would consider selling stakes in affiliated tour operator Hyundai Asan to raise more cash.
Source: JoC.com
Source: JoC.com