The possibility of merging Korea’s two top money-losing shipping firms is growing after the financial regulator revealed the government’s plan for their restructuring program early this week.
The Financial Services Commission on Monday said it would consider the merger of
Hanjin Shipping Co. and
Hyundai Merchant Marine Co. once they complete their separate restructuring programs.
 |
(Yonhap) |
“If Hanjin succeeds in normalizing its business, (the agency) will evaluate whether the merger is better than leaving them to compete with each other,” said FSC Chairman Yim Jong-yong in a press conference.
“For now, however, Hanjin is in the initial stage of normalization with the carter rate deal. It first needs to wrap up the charter rate negotiation well.”
Struggling with losses by an industrywide slump, shipping lines have sought to lower the charter rates as their creditors demanded steep cuts in the charter cost as the core condition of a debt revamp plan.
As Hyundai succeeded in making a charter cut deal with it creditors, the company is now seeking a next step to join an international alliance of shipping firms, which is another condition for the rehabilitation plan.
Hanjin’s revamp plan, on the other hand, has been delayed as it has faced difficulties in reaching the charter cost agreement.
Speculation over the merger of the two shipping firms was first raised in September last year amid the continuous business downfall of the two companies.
Some have claimed that merger would be more beneficial in raising operational efficiency, as the two share similar business structures and navigation routes.
More than 90 percent of the Hanjin’s sales of 1.6 trillion won ($1.36 billion) in the first quarter of this year were brought from container ships. About 80 percent of Hyundai Merchant’s sales of 979 billion won was also drawn from the same business in the same period.
The fall of freight flows also added voices to the merger speculation.
At Busan Harbor in the first quarter, Hanjin’s container traffic dropped by 18.8 percent to about 405,000 twenty-foot equivalent units. Hyundai also showed a decline in its container traffic by 3.2 percent to about 290,000 TEU.
“Considering the characteristics of shipping businesses, the amount of container traffic that the company can manage at once determines its competitiveness. The economy of scale is, especially, crucial in such sluggish economy,” industry sources were quoted as saying.
By Lee Hyun-jeong (
rene@heraldcorp.com)
