South Korea: Hyundai and Hanjin need mega-ships to compete

South Korea’s new Minister of Oceans and Fisheries Kim Young-suk said Hanjin and Hyundai Merchant Marine, the country’s two biggest shipping companies, need ultra-large container ships if they are to be competitive.

Speaking at his first press conference since he took office on Nov. 11, Kim noted that both companies were facing liquidity issues and would face problems committing to capital-intensive investments. However, the minister said he planed to hold discussions with related agencies to enable banks to provide financing that would allow Hanjin and HMM to acquire the mega ships.

“There are many ways of leasing ships, such as through bareboat charter following the establishment of funds by Export-Import Bank of Korea and Korea Trade Insurance Corporation, for example.”

Container lines are upsizing vessels in search of better unit costs through fuel savings and economies of scale, with the largest ship on order currently at 21,000 TEUs. The biggest container ships operated by Hanjin and HMM are around 13,000 TEUs.

But the race for large vessels has helped to flood the industry with surplus capacity, especially on the Asia-Europe trade where most of the mega ships are being deployed. Freight rates have tumbled as a result, hitting liner profitability.

In the same speech, Kim was unequivocal that the operations of Hanjin Shipping and HMM should not be consolidated. “I have never believed that the two companies should merge,” he said.

Full content: The Journal of Commerce

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