HMM to Receive 470 Bil. Won
The Ministry of Oceans and Fisheries announced on April 23 that it will provide additional liquidity support of 1.25 trillion won to Korean shipping companies that are struggling due to the worldwide spread of the novel coronavirus.
The Korean shipping industry is suffering from a decline in cargo volume. In March, the cargo volume on the U.S. and European routes dwindled 11.1 percent and 4.8 percent on year, respectively. The World Trade Organization (WTO) forecast that in 2020, world trade volume will shrink by up to 32 percent from 2019. This year, global container freight rates are expected to drop 6 percent from last year. As the shipping market outlook has been deteriorating, the Korean shipping industry has been calling for proactive liquidity support from the government.
The Ministry of Oceans and Fisheries has decided to expand vessel financing. Korea Ocean Business Corp. has set aside 100 billion won to provide additional liquidity to shipping firm by increasing loan-to-value (LTV) ratios of their existing vessels, which is normally 60 percent to 80 percent of their market prices, to 95 percent.
In addition, if a shipping company which has received vessel financing support from Korea Development Bank (KDB) and the Export-Import Bank of Korea has liquidity problems, the ministry will also provide additional policy financing through the Basic Industry Stability Fund announced at an emergency economic meeting.
The payment of principal and interest will be deferred for all ships under the Sale and Lease Back (S&LB) Program for one year. S&LB refers to the support of liquidity by purchasing a ship from a shipping company and leasing it to the shipping company. Accordingly, 19 ships will benefit from the suspension of the payment of principal and interest amounting to 23.58 billion won annually, in addition to the vessels operating on the Korea-China route operation vessel that are benefiting from a similar measure announced on Feb. 17. It is also planning to expand S&LB funding from 100 billion won to 200 billion won.
In particular, KDB and Korea Ocean Business Corp. are preparing support plans for HMM to help it overcome damage from the novel coronavirus spread. The ministry will provide support funds of up to 470 billion won to HMM in consideration of financial market conditions.