Hyundai Merchant left out of global shipping alliance

By Park Sae-jin Posted : May 13, 2016, 18:18 Updated : May 13, 2016, 18:18

[Aju News DB]


South Korea's cash-strapped Hyundai Merchant Marine has been left out of a new global shipping alliance, but creditors vowed Friday to push ahead with its  debt restructuring.

The new alliance involving six Asian and European container-shipping operators was formed to challenge the dominance of global giants such as Maersk Line and Mediterranean Shipping Co.

The Japanese trio of Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha and Mitsui O.S.K. Lines; Germany’s Hapag-Lloyd AG; South Korea's Hanjin Shipping and Taiwan’s Yang Ming Marine Transport have joined the new alliance. 


Initially, Hyundai Merchant, one of South Korea's two largest container carriers, was a candidate to be included in the alliance, but it dropped out at the last minute apparently due to uncertainty caused by delayed negotiations with leased ship owners.

Hanjin Shipping, one of the world's top ten container carriers in terms of capacity, was also put under a creditor-led restructuring plan this month, due to a credit crunch aggravated by snowballing debts. Creditors rolled over its maturing debt for three months.

Being part of an alliance has become imperative for container carriers in the industry, which has been hit by oversupply and falling freight rates. Alliance partners can reduce costs by sharing ships, networks and port calls.

CMA CGM SA and China’s Cosco Group, the world's third-largest and fourth-largest shipping lines by capacity, have agreed to form the Ocean Alliance together with Hong Kong's Orient Overseas Container Line and Taiwan’s Evergreen Marine, a move aimed at blunting the power of the major alliance between the world's two largest container lines, Maersk Line and Mediterranean Shipping, which control more than 27 percent of the global container ship fleet.

A prolonged slump in global trade and overcapacity have depressed transportation rates, causing shipping lines to stem losses through job cuts and consolidation.

Hyundai Merchant is under pressure to complete negotiations on lowering rates on leased vessels by the end of this month. The company paid 976 billion won ($838 million) in charter fees last year .

Undeterred by the new alliance, the main creditor Korean Development Bank said there would  be no change in its restructuring timeline. Financial officials have mentioned an inevitable choice of putting Hyundai Merchant under a court receivership if negotiations with ship owners fall apart.

Aju News Lim Chang-won = cwlim34@ajunews.com
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