Hyundai Merchant No Longer Considered for 2 Million Alliance, Maersk Says -- Update
December 09 2016 - 2:19AM
Dow Jones News
By Costas Paris
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.
In-Soo Nam in Seoul contributed to this article.
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
December 09, 2016 02:04 ET (07:04 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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