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LOGISTICS, TRANSPORT AND SHIPPING NEWS TRUCKING INDUSTRY NEWS
13/12/2016
HMM to piggyback on 2M network.

One of the final pieces of the mega-alliance jigsaw puzzle fell into place on Sunday with the news that South Korea’s Hyundai Merchant Marine (HMM) will not after all become a full member of the 2M network alongside Maersk Line and MSC, but will instead only get access to the two carriers’ East-West network through a “strategic cooperation.”

The three parties have been engaged in discussions since the summer, which at the time Drewry considered to be one of the oddest developments in the industry considering that HMM was still undergoing intensive debt restructuring and that it would only add a bit more scale to 2M’s services.
 
From the outset, it looked like HMM had more to gain from joining 2M as finding an alliance home was one of the conditions laid out by creditors, whereas for the 2M carriers bringing in a third member with financial clouds above its head risked some reputational damage, particularly in light of Hanjin’s bankruptcy.

HMM’s negotiating position with the 2M carriers, which was already weak to start with, suffered again when leaks told of stalling discussions and when the other alliances firmed up their membership the Korean line was very much in danger of being the only one at the prom without a date.

We must assume that HMM’s creditors were agreeable to the non-alliance membership deal they had previously mandated, and from the little detail that has been published, they understand that the company will be smaller in stature for the foreseeable. Under a three-year agreement (with options to extend) starting April 2017 the three parties will exchange slots with each other, but crucially Maersk and MSC will take over an unspecified number of ships currently in HMM’s deploy. More information on the 2M network changes has been promised for early 2017, when we should get a clearer picture of just how much of HMM’s existing operations have been carved up by Maersk and MSC.

“We are pleased to enter into this strategic cooperation with Hyundai Merchant Marine, Korea’s leading container carrier. It will enable us to enhance our 2M network and presence in the important Transpacific trade. We look forward to leveraging these new opportunities to the benefit of our customers,” said Søren Toft, Maersk Line’s chief operating officer.

Despite the fact the Korean government – itself undergoing some testing times – has pledged to make HMM its national flag carrier and support the local shipping industry with trillions of Won, ultimately HMM was always going to get squeezed by the world’s two largest carriers. We previously speculated that the Maersk and MSC might be offered the carrot of favourable shipbuilding contracts or banks loans in return for letting HMM join its club but in the current climate when shippers are fearful of bankruptcy within alliances the chances of full membership were probably always close to zero, no matter what was on the table.

According to reports HMM could become a full 2M member in a few years if it can repair its balance sheet, which implies that financial risk was a major consideration, but even if that box is ticked it’s hard to see how such a junior partner would be able to secure equal footing.

 

 

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