Expert: HMM shipping company should invest in doubling its fleet size

According to Mr. Kim In-hyeon, Professor of Maritime Law at Korea University, HMM shipping company should use profits from the shipping fever due to the Covid-19 pandemic to double the size of its container fleet, to 1.7 million TEUs.

Container ship of HMM Shipping Line

Container ship of HMM Shipping Line (Photo: HMM)

HMM is the world's 8th largest container shipping company with a carrying capacity of more than 784,000 TEUs, of which the fleet owned by HMM has a total carrying capacity of 565,000 TEUs and the rest are chartered ships. Currently, the company is also ordering 25 new ships with a total carrying capacity of about 251,000 TEU.

Professor Kim emphasized that currently only 20% of Korea's exported goods going to the US and Europe are transported by Korean shipping lines and said that HMM shipping line needs to develop a larger fleet to compete more effectively against its competitors.

He commented: "The view is that South Korea cannot fully secure transport sovereignty. Evergreen and Yang Ming, two Taiwanese ocean-going shipping companies competing for north-east Asian shipping hegemony, have a total fleet of 2.3m teu, and Japan’s ONE has a fleet of 1.8m teu."

In the context that Yang Ming, ONE and HMM are members of THE Alliance, Professor Kim commented: "As the EU and US strengthen competition laws, it has become difficult for shipping companies to maintain a cooperative system in which they share ship operations, making the future outlook uncertain." And, "To make matters worse, Hapag-Lloyd will withdraw from THE Alliance and join hands with Maersk next year."

According to Mr. Kim, when ordering new ships or buying ships, it is best for shipping lines to avoid borrowing from banks, and currently, companies still have quite a lot of cash after huge profits during the period 2020-2022.

Professor Kim added: "As HMM has secured reserves exceeding KRW10trn ($7.5bn), the company must break away from the practice of financing 70% to 90% of ship acquisitions with borrowings. This will reduce the company’s debt ratio by increasing the self-funded proportion to 50% and avoid being hit in a downturn."

Regarding recent efforts when the sale of HMM to the joint venture Harim Group and JKL Partners failed, Professor Kim suggested that the company's largest shareholder, Korea Development Bank, should regulate the rather "chaotic" atmosphere. It should “seek to stabilise HMM’s management and then go through the sale process again”, he said.

A spokesperson for HMM told The Loadstar that in July 2022, the company set out a plan to develop a container fleet with a capacity of 1.2 million TEU by 2026. He added: "We’re in the middle of implementing the plan. We don’t consider linking our investment plans with the sale process, as those are two different things."

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