Idea of Reviving
Korea Shipowners’ Association Vice Chairman Kim Young-moo said on Oct. 12 that the most ideal plan for Hanjin Shipping, which is currently in receivership, is its transformation into a liner shipping company running 50 ships with a cargo volume of 300,000 to 400,000 TEU. “Its business to and from the Americas, which is its main strength, should be at the center of the reform and approximately 400 billion won to 500 billion won is estimated to be required to this end,” he explained.
He pointed out that the revival of the company requires in-depth discussions, suggesting two options. One is revival through a legal process with its name maintained. He said that this option allows the company’s networks to be utilized as they are although the brand name of the company is scarred now. As a disadvantage of this option, he mentioned creditors’ consent required for it, shippers’ potential complaints regarding contingent liabilities and the necessity of arrears handling worth US$700 million.
The other one is the creation of a new company. “Once a new company is set up, a very high level of competitiveness can be maintained because of zero risk, ships can be rented at today’s low costs, and viability can be ensured by the ships being utilized in conjunction with Hanjin Shipping’s business networks,” he remarked. “Still, some time will be taken to win back the trust of foreign shippers because the establishment of a new company does not mean their forgetting about Hanjin Shipping,” he went on to say.
The vice chairman urged the South Korean government and those in the shipping industry to work on a grand plan for the reconstruction of the industry. “What we need now is choice and concentration, that is, we are in need of an ocean-going vessel operator for liner shipping services with a transport capacity of one million TEU, which will result in 5 percent to 10 percent cost reduction and sufficient competitiveness,” he added. At present, Maersk, the largest shipping company in the world, has a capacity of 3.2 million TEU, followed by MSC (2.8 million) and CMA CGM (2.17 million). The figures stand at 600,000 TEU and 400,000 TEU for Hanjin Shipping before the receivership and Hyundai Merchant Marine, respectively.
He also emphasized the necessity of more financial support. “The annual total new shipbuilding order volume is estimated at four million tons and approximately US$5.5 billion is required for those ships to be built,” he said, adding, “If foreign shipping companies have benefited from South Korea’s ship finance so far, now is the time for co-prosperity to be ensured with the shipbuilding and steel industries, which have made investments in South Korean shipping companies.”