Membership was condition of Korean shipping company’s deal with creditors; Maersk discussing ‘other cooperation possibilities’
Maersk Line, the senior member of the world’s largest container-shipping alliance, Thursday said it is no longer considering Hyundai Merchant Marine for membership in the group, dealing a major blow to the troubled Korean shipping company.
The so-called 2M Alliance—made up of Maersk and Mediterranean Shipping Co.—moves a third of all seaborne cargo, and membership would have guaranteed HMM a steady income during one of the industry’s worst down-cycles, as well as reducing its operating expenses through the sharing of ships, networks and port calls.
“The parties have discussed the possibility of HMM joining 2M as an operating partner and now decided to look at other cooperation possibilities,” Maersk Line spokesman Michael Storgaard said Thursday.
Mr. Storgaard said the two companies are now exploring a more limited agreement involving putting containers on each other’s ships and Maersk taking over some of HMM’s charter deals.
On Friday in Seoul, HMM shares plunged by as much as 12% before closing down 6%. A HMM spokesman said talks were still under way and that the company still expected to be regarded as a member or partner of the alliance.
Mediterranean Shipping didn’t respond to requests for comment.
In July, HMM and the 2M alliance signed a memorandum of understanding for the Korean carrier to join. But 2M recently backtracked amid customer concerns on moving cargo on Korean ships following the collapse of rival Hanjin Shipping Co. in August, The Wall Street Journal reported.
“The 2M was a lifeline (for HMM) to keep their market share,” said George Lazaridis, head of research at Athens-based Allied Shipbroking Inc. “With that gone, they can easily lose it to bigger players and either go down, be sold or shrink and try to survive as a much smaller intra-Asia operator.”
HMM controls a 2.2% share in global container capacity. The company posted a $556 million operating loss in the first nine months of this year as revenue fell 25% from a year ago to $2.5 billion.
The 2M membership was one of three conditions laid out by the company’s main creditor, Korea Development Bank, to approve a restructuring plan last summer that made the bank HMM’s biggest shareholder.
The other two conditions—a debt to equity swap and cutting charter rates for HMM’s leased vessels—were met in July.
KDB spokesman Dong Hyun Kim said the bank was under the impression that HMM and the 2M were ironing out the final details of an agreement. “This is serious,” he said. “We will be looking into it before making a comment.”
The industry’s downturn has kicked off a rare wave of consolidation with many of the 20 biggest operators either joining alliances or merging to weather the crisis. HMM and Israel’s Zim Integrated Shipping Services Ltd., are the only ones in the group left without a partner.
Source: Wall Street Journal (LF)
Source: Wall Street Journal