Shrinking Carrier Competition: HMM Headed for Receivership
Picture: Shipping21 Hyundai Merchant Marine Dream container ship
Things are not looking good for Hyundai Merchant Marine (HMM).
South Korea’s second largest shipping line has been in financial crisis that it is looking less and less likely to survive.
Just in the last blog post, I wrote about the shrinking competition in international shipping as the world’s shipping lines are about to be dominated by just three carrier alliances, the 2M, Ocean Alliance, and THE Alliance.
I even wrote, “any carrier not in one of these three alliances looks to be in trouble. APL and Hyundai, I’m looking at you.”
Xiaolin Zeng wrote in a JOC article:
HMM was left out of THE Alliance when it was first announced but said that it would join THE Alliance over the summer after its financial situation was more settled.
HMM will be lucky to be in existence by the end of the summer. Its financial situation is about to settled the hard way.
That JOC article was actually about receivership looming for HMM after negotiations with its ship charters ended in failure to get the lower charter rates the shipping line desperately needed.
The Load Star reported a couple numbers that give a glimpse into how bad things have recently been for HMM:
HMM recorded a $525m loss in 2015 and a $240m loss for the first three months of this year.
The shipping line was attempting to get about a 30% drop in charter rates so it could convince its main lender, state-owned Korea Development Bank (KDB), to execute a debt-for-equity swap that would keep KDB from putting HMM in court receivership.
Since negotiations with its ship charters failed, HMM is almost certainly going into receivership.
The Load Star article went on to explain what that would look like:
… it is likely that the creditors, including shipowners, will only receive a percentage of what they are owed.
In terms of charter hire payments, any breach – including reduced payment – allows the shipowner to terminate the charter and take back the ship.
This would invariably result in ships and cargo being arrested; which would mean a very worrying time for HMM’s customers.
“Cargo being arrested” are key words in there for shippers.
Obviously, failure to deliver goods would shatter what little confidence shippers may have left in HMM.
Is the international shipping industry about to say goodbye to HMM?
I hear some music playing for HMM. No, it’s not a tiny violin; it’s the Queen song, Another One Bites the Dust.
