Ship Alliance Backtracks on Hyundai Merchant Marine Membership
November 30 2016 - 3:00PM
Dow Jones News
The world's largest container-shipping alliance has decided not
to allow Hyundai Merchant Marine Co. to join amid customer
backlash, people involved in the discussions said, dealing a blow
to the troubled South Korean shipping concern.
Hyundai Merchant wasn't immediately available for comment.
In a November note to clients, Maersk Line said that rather than
Hyundai Merchant becoming a 2M alliance member, the parties are
looking "at other cooperation possibilities" including taking over
Hyundai Merchant's chartered vessels and deploying them into the 2M
network.
At the time, Hyundai said that joining the alliance is still
under discussion and that there will be an announcement in early
December.
Hyundai Merchant signed a memorandum of understanding to join
the 2M alliance in July, a key step in a painful debt restructuring
that gave the flagship unit of the Hyundai Group breathing room and
allowed it to escape bankruptcy.
A senior executive with the 2M alliance, which consists of
Maersk Line and Mediterranean Shipping Co., said customers balked
at the inclusion of a Korean carrier after the August collapse of
Hanjin Shipping Co. Maersk Line, a unit of A.P. Moller-Maersk A/S
of Denmark, is the world's biggest container line by capacity.
Switzerland-based Mediterranean Shipping ranks as No. 2.
"We reckon that at this point going to bed with Hyundai could
shake customer confidence so we are looking for looser forms of
cooperation," said the executive, who declined to be
identified.
Hanjin declared bankruptcy in late August leaving an estimated
$14 billion worth of cargo stranded at sea for months. The cargo
owners included U.S. retailers like Amazon.com Inc. and Wal-Mart
Stores Inc. and global majors like Samsung Electronics Ltd.
The exclusion could leave Hyundai Merchant in a precarious
situation, shipping executives said, because these alliances allow
the partners to substantially reduce operational costs by sharing
vessels and port calls. There are only three main
container-shipping alliances.
"If Hyundai wants to have a future as a global operator it must
have a strong vessel sharing agreement with one of the alliances,"
said Lars Jensen, chief executive of SeaIntelligence Consulting in
Copenhagen. "A looser deal may evaporate depending on market
conditions."
Hyundai Merchant controls a 2.2% market share in global
container capacity. It was on pole position to cherry-pick among
Hanjin's biggest ships, but lost out to Maersk and Mediterranean
Shipping, which took control of nine of Hanjin's biggest
vessels.
In a further setback, a much smaller local competitor, Korea
Line Corp., outbid Hyundai for Hanjin's business between Asia and
the U.S.
"After Hanjin's bankruptcy, there is concern with all our
counterparties," said Iraklis Prokopakis, chief operating officer
of U.S.-listed Danaos Corp., which has leased 13 ships to Hyundai
Merchant. "But after Hyundai's restructuring earlier this year, its
balance sheet is better, so we worry less."
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
November 30, 2016 14:45 ET (19:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Walmart (NYSE:WMT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Walmart (NYSE:WMT)
Historical Stock Chart
From Apr 2023 to Apr 2024