Aju Business Daily

SEOUL -- Hyundai Merchant Marine, a leading South Korean shipper controlled by creditors, will receive up to two trillion won ($1.67 billion) in material support so that it can reduce usage fees to foreign leasing companies and strengthen global competitiveness.

Hyundai Merchant is in talks with the state-run Korea Ocean Business Corp. (KOBC) on the direct order of container boxes through a special purpose company (SPC) financed by KOBC and two policy banks, Korea Development Bank (KDB) and the Export-Import Bank of Korea.

"It is true that we are considering creating a subsidiary for leasing, but specific amounts and figures have yet to be finalized," a KOBC official said. "The agreement is almost final and we will try to announce it as soon as possible."

Industry officials said the government would own container boxes and lease them to Hyundai Merchant. Container boxes owned by Hyundai Merchant stand at 170,000 TEUs or 21 percent of its total holdings. The rest are all borrowed from foreign companies. TEU is a unit of cargo capacity, based on the volume of a 20-foot-long (6.1 m) intermodal container, a standard-sized metal box which can be easily transferred between different modes of transportation, such as ships, trains and trucks.

Policymakers believe that container boxes can be supported to prevent an outflow of national wealth and enhance South Korea's shipping competitiveness. As part of a government scheme to rehabilitate the domestic shipbuilding industry, Hyundai Merchant signed contracts with three top shipbuilders in September last year to acquire 20 giant eco-friendly container ships by 2020 when new rules imposed by a U.N. maritime safety agency on the amount of sulfur take effect.

Hyundai Merchant has tried to enhance its international competitiveness and profitability since Hanjin Shipping, which used to be South Korea's largest container carrier, terminated its 40-year-long business in February 2017, when South Korean shippers were in trouble due to falling freight rates and a protracted slump in the global economy.

However, Hyundai Merchant's operating loss soared 41.7 percent on-year to 576.5 billion won in 2018 due to high oil prices and low freight rates that have hampered efforts to rebuild South Korea's tattled shipping industry with a massive injection of state money. KDB has promised to consider providing financial support to Hyundai Merchant.