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HMM declines SM Line’s trans-Pac pact offer    12/01/2018
Hyundai Merchant Marine has rebuffed fellow South Korean carrier SM Line’s offer to collaborate on trans-Pacific services to the US East Coast.

Even though SM Line was a small player, it had managed to pick up vessels at the lowest prices seen in 20 years after Hanjin Shipping went bankrupt. Photo credit: Port of Long Beach.

SM Line, which came out of the collapse of Hanjin Shipping in 2016, said in December that it hoped to jointly operate services to the United States in 2018. That month SM Line management also indicated that it was preparing to start a second service to the US West Coast. South Korea’s carriers have yet to regain all the market share of US imports from Asia that was held by Hanjin in the year before its demise.

“We’re not reviewing anything regarding SM Line. As HMM is not 100 percent sure about SM Line’s service reliability, an unconditional cooperation seems difficult, with many uncertainties. Cooperations, such as joint operations or slot exchanges, seem unfeasible for a while,” an HMM spokesperson told Fairplay, a JOC.com sister product. HMM received the formal cooperation request on January 9.

In a recent interview with JOC.com, Soo Cheon Lee, co-founder and chief investment officer at investment bank SC Lowy, said SM Line would have to find partners on the trans-Pacific if it was to maintain its competitive edge.

“SM Line will need to find ways to increase its capacity and keep operating expenses down, and that is going to be the long-term challenge. That is going to be when they start looking for partners,” he said.

The combined market share of SM Line and HMM for US imports from Asia in 2017 was 6.8 percent, 0.7 points shy of Hanjin’s market share in 2015, according to PIERS, a sister product of JOC.com. HMM’s 881,608 TEU last year made it the No. 8 carrier on the trade, and SM Line’s 187,781 TEU made it No. 15. CMA CGM/APL is the top carrier on the trade with 14.8 percent of the market, followed by Evergreen Line’s 10.9 percent and Cosco’s 10.8 percent.

Backed by the Samra Midas Group, which also owns Korea Line Corporation and Korea Shipping Corporation, SM Line was established by Samra Midas Group to acquire the trans-Pacific and intra-Asia portfolios of the now-defunct Hanjin Shipping, once the country’s largest shipping company and seventh-largest in the world.

SM Line has 10 weekly services and an aggregate capacity of more than 100,000 TEU. Four of the services are intra-Asia, two are Asia-India as slot charterers, two are feeder services, one goes to the Middle East, and one sails from Asia to the US West Coast, calling the Port of Long Beach.

Even though SM Line was a small player, it had managed to pick up its vessels at the lowest prices seen in 20 years after Hanjin Shipping went bankrupt, and that gave it a significant competitive edge in container transportation, Lee told JOC.com in December. As a result, the company currently does not have any ships on order, according to IHS Markit data. HMM only has two ships of 11,100 TEU on order, making its orderbook one of the smallest among the Top 20 carriers. HMM operates a fleet of 470,869 TEU, making it the world’s 10th-largest.

HMM avoided bankruptcy in June 2016 after its banks agreed to a debt-for-equity swap after the carrier successfully renegotiated its charter hire and bond payments. HMM is now on a quest to become a world-class liner operator and is now South Korea’s flagship carrier.

HMM is already making plans to cooperate with Israel’s ZIM Line on US East Coast services, and has an ongoing collaboration with the 2M Alliance comprising Maersk Line and Mediterranean Shipping Company. That agreement includes slot exchanges on Asia-US West Coast runs and slot purchases for Asia to the US East Coast, northern Europe, and Mediterranean loops. HMM currently sends ships of 5,000 TEU from Asia to the US East Coast every week.





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