HMM’s charter rate talks go well

Negotiations between Hyundai Merchant Marine (HMM), the country’s largest shipping company, and five foreign shipowners on lowering charter fees, a key to the company’s survival, seem to be going well.

According to Yim Jong-yong, chairman of the Financial Services Commission - who is in charge of the unfolding restructuring plan for the shipbuilding and shipping industries - there have been developments in the negotiations that began in Seoul on May 18. The company was given three days to reach an initial agreement, but failed to do so.

“There has been some meaningful progress,” Yim told reporters after attending a seminar on cooperation for the fintech industries of Korea and France on Monday. “But it might be difficult to see the result today.”

Yim’s remarks suggested a 20 percent cut in fees may be possible, industry observers say. Creditors have given HMM a target of bringing down charter rates by 28.4 percent. This would be the equivalent of saving roughly 720 billion won ($604 million) over the next three and a half years.

HMM is in talks with five container carrier owners, with an aim to lower the rental fees by around 30 percent. The company has been paying more than 900 billion won a year to lease vessels from the shipowners.

It charters 71.6 percent, or 83, of the total 116 vessels it operates, and last year, it paid 975.8 billion won to lease the ships.

The 83 vessels are owned by 22 shipowners, with the top five being Greece’s Danaos, Navios and Capital Ship Management, as well as the U.K.-based Zodiac and Singapore’s Eastern Pacific Shipping. They account for 60 to 70 percent of the charter fees that HMM pays.

If HMM successfully concludes the talks with the five container carrier companies, 17 other shipowners are predicted to follow suit.

On the question of how big the cut will be, Yim said, “Not everything we want will be reflected. A level that is reasonable to normalize HMM is being discussed in the talks now.”

The final negotiation result will be officially announced later this week.

The company’s main creditor, Korea Development Bank, said Monday in a press release that the negotiation is expected to produce a positive result soon.

“There has been significant progress in the talks, and they are expected to reach an agreement in the coming days,” it said.

According to the bank, a final agreement is likely to be made early next month at the earliest.

The shipping unit of Hyundai Group also said in a statement that it hopes the negotiations will reach an agreement as soon as possible.

“There are some meaningful developments in the talks with the five container carrier owners,” the company said. “We are doing our best to pound out an agreement.”

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]