HMM forms alliance with smaller shippers

Hyundai Merchant Marine and two small local shipping companies are forming a strategic alliance to boost trade on intra-Asia routes.

HMM on Tuesday signed a memorandum of understanding with domestic intra-Asia shippers Sinokor Merchant Marine and Heung-A Shipping to form an alliance dubbed the HMM + K2 consortium.

The partnership involves basic vessel sharing, joint investments in port infrastructure and sharing of containership equipment in the longer term, HMM said in a statement.

Which ports will be invested in has not been decided. But Lee Sang-sik, an executive from HMM, said Hai Phong port in Vietnam or Busan port are options.

It is the first time in Korea that a trans-Pacific container shipping line and smaller intra-Asia shippers formed such a partnership. The members hope to strengthen the level of cooperation and include more local partners as the partnership progresses.

Under such a partnership, shippers can use each others’ idle vessel slots in intra-Asian routes to save costs and establish new service networks, according to the consortium in a statement.

HMM, for instance, can freely use established feeder networks of Heung-A and Sinokor on routes to Japan. The two have feeder services that cover over 40 ports between Korea and Japan. Feeders are small-capacity ships that collect containers from different ports and transport them to central container terminals.

Heung-A and Sinokor on the other hand can establish new cross-trading networks such as routes connecting China, Japan and Thailand with Southeast and Southwest Asia or connecting Thailand and Vietnam with Myanmar, Bangladesh and the Philippines banking on the support of HMM.

“Korean shippers have mostly been delivering cargo from Korea or to Korea but we felt the need to secure new routes between third countries. The members of the consortium can help each other in analyzing markets and lowering entrance risks,” said Kim Young-moo, executive vice chairman of the Korea Shipowners’ Association. The association helped form the consortium.

Last year, the three companies handled 3.73 million twenty-equivalent units (TEU) of cargo on intra-Asian routes, resulting in revenues of $1.65 billion. Hyundai handled 930,000 TEU of cargo with revenues of $550 million, Sinokor handled 1.57 million TEU with revenues of $630 million and Heung-A handled 1.23 million TEU with revenues of $480 million.

Through the consortium, the three aim to handle a total 4.42 million TEU of containers this year and reach $2.1 billion in sales on intra-Asia routes.

“The intra-Asia market is roughly an 18 million TEU market, 10 percent of global trade, which is actually huge, but through our service alone we haven’t even explored half of the market,” said Lee Hwan-ku, senior executive vice president of Heung-A Shipping.

“While Taiwan’s Wan Hai Lines or Singapore’s Pacific International Lines are taking most of the services in the intra-Asia market, we believe the consortium is a new foundation for us to enter into a bigger market.”

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]