Sunday, June 7, 2020
HMM Joins The Alliance
Focusing on European Routes
HMM Joins The Alliance
  • By Michael Herh
  • April 7, 2020, 10:57
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HMM has started to operate as a full member of The Alliance.

HMM has joined The Alliance, one of the world's three largest shipping alliances, the Korean shipping company announced on April 6. HMM is the new name of Hyundai Merchant Marine.

Sales from the European route, which account for 15 percent of HMM's total container service sales, are expected to increase. Beginning April, HMM will significantly increase its fleet on the European route in cooperation with the three members of The Alliance -- Hapag-Lloyd of Germany, OEN of Japan, and Yangming of Taiwan.

HMM plans to put all of its 12 24,000-TEU vessels, which were ordered in 2018, on the European route. The service is scheduled to depart from Qingdao, China later this month on the Far East Europe 4 (FE4) route.

Accordingly, HMM is expected to improve its cost structure on the European route, which has thus far been inaccessible. As HMM has become a member of The Alliance, it now can share its vessels on all routes with The Alliance members. This is why HMM withdrew from its disadvantageous partnership with 2M, the world's largest shipping alliance, which has been maintained for three years since April 2017. In the partnership with 2M, HMM could not put its ships into service as they were relatively smaller than those of the two regular members Maersk and MSC.

HMM had to purchase hold spaces from these member companies to transport cargoes to Europe. The problem was that even if HMM did not secure enough cargoes to fill the purchased hold spaces, it had to pay lease fees to the member companies.

But now, HMM is a full member of The Alliance and can use all routes and port networks run by ships of the alliance members on an equal footing without any burden. In addition to the European route, HMM has decided to launch services on five new routes to the Americas and two new routes to the Middle East in April and ramp up weekly hold volume to about 43,000 TEUs. HMM’s Alliance membership will last for 10 years until March 2030.

Nevertheless, HMM is facing unfavorable external conditions and are pulling out all the stops to put an end to deficits, which have been continuing for eight consecutive years.

Global cargo volume has plummeted in the aftermaths of the COVID-19 outbreak. HMM plans to overcome the recession by sharing new routes and increasing the size of its fleet. HMM’s container ship capacity is currently 450,000 TEUs, but it will go up to about 900,000 TEUs when 20 large ships (420,000 TEUs) are delivered one by one. This means that its cargo capacity will more than double.

HMM plans to increase its shipping capacity to 1.1 million TEUs by 2022 through additional orders and charter ships. It is seeking to make a turnaround in the third quarter.