HMM’s normalization accelerating

With Hanjin Shipping’s bankruptcy declared earlier last month, Hyundai Merchant Marine, now South Korea’s only major shipping line, is expected to fill the vacuum, supported by government rescue schemes and positive signs in the industry, analysts and industry watchers said Tuesday.

“After hitting the bottom in 2015 and 2016, the shipping industry seems to be improving with increased freight rates and eased competition,” Um Kyung-a, an analyst at Shinyoung Securities said Tuesday.

“Hyundai Merchant Marine is expected to benefit from the government’s rescue plan to rebuild the shipping industry and to fill the vacuum created by the collapse of Hanjin Shipping.”

Hanjin Shipping, once the world’s seventh-largest liner, was declared bankrupt on Feb. 17 amid fierce market competition and historically low freight rates.

HMM, which avoided bankruptcy in June 2016 after its banks agreed to a debt-for-equity swap deal, is now the biggest shipping line in the country and the world’s 13th largest, with 46 million transportation units.

The Korea Development Bank, which is its biggest shareholder with a 14.2 percent stake, remained positive on the shipping line’s future and vowed to offer full support for the normalization of the liner and the strengthening of the country’s shipping industry.

“The recent upgrade of the rating is a signal that HMM is recovering its financial strength and we expect to see a more positive impact from the upgrade,” an official at Korea Development Bank said.

Earlier this month, South Korea’s credit rating agency Korea Investors Service, owned by Moody’s Investors Service, upgraded HMM’s rating to BB (stable) from D (default).

The rating agency said it took into consideration HMM’s elevated status after Hanjin Shipping’s collapse.

The South Korean government has also unveiled a rescue plan worth 6.5 trillion won ($5.72 billion) to minimize repercussions from Hanjin’s collapse and support the shipping industry. A government official told reporters on Feb. 16 that it plans to foster a shipping company with 100 million transportation units in order to boost the competitiveness of the shipping industry.

Korea Shipping and Maritime Transportation, which was created with 1 trillion won of capital, plans to purchase 10 freight worth 720 billion won in March from HMM as part of efforts to finance the company. KSMT will lease them back to HMM so the liner can retain competitiveness in shipping fare.

A global ocean fund to be launched in the first half of this year will support HMM’s acquisition of terminals and other equipment, the government official said.

The shipping line has been moving to regain competitiveness in the market. On Tuesday, the company signed a contract with two intra-Asia trade carriers Heung-A Shipping and Sinokor Merchant Marine to form a “HMM + K2 consortium,” which will begin operation Wednesday.

The consortium will allow HMM to fully access Heung-A and Sinokor’s Intra Asia networks, which focus on Korea-Japan and Korea-China trade, the company said.

By Park Ga-young (gypark@heraldcorp.com)