Customer trust restored, claims HMM chief – now we need to work better together

Hyundai Dream

In his traditional new year message to staff, HMM president and chief executive Chang Keun Yoo has called on employees to help “put an end to this difficult period” by improving communication between departments.

The South Korean carrier lost over $500m in the first nine months of last year, but has gambled its future on a $2.6bn order of 12 23,000 teu and eight 14,000 teu vessels stemmed for delivery from 2020, which it claimed would help achieve a “sustainable profit-generating structure”.

The newbuilds will all be equipped with exhaust gas cleaning scrubbers, allowing the ships to consume cheaper heavy fuel oil after the IMO’s 0.5% sulphur cap comes into force on 1 January 2020.

“In order to operate 12 containerships of 23,000 teu class from the second quarter of 2020 without interruption, all departments including sales, management, operations and IT need to cooperate and prepare carefully together,” said Mr Yoo.

“To this end, we will have to reform our global organisation in preparation for operating upsized vessels through reorganisation as well as the complementation and relocation of human resources.”

The arrival of the ULCVs will coincide with the expiry of HMM’s three-year slot charter deal with the 2M alliance on the Asia-North Europe trade.

It seems unlikely that the agreement will be extended and The Loadstar understands HMM is already in discussions with the Ocean and THE alliances with a view to making an application to join.

The current arrangement with the 2M’s Maersk Line and MSC, with HMM as a junior partner, has been frustrating for the carrier with several executives complaining to The Loadstar that they were “always the last to know” regarding ship operations, resulting in uncomfortable meetings with customers over container shutouts and vessel diversions.

In an endeavour to mitigate the commercial damage, HMM launched a standalone AEX “express” loop in April last year between Asia and North Europe, deploying 10 4,600 teu panamax vessels. However, in July the carrier announced that it was suspending the direct call at Southampton due to “reliability and schedule integrity” issues.

The UK call was reinstated in October to compensate for the 2M’s decision to temporarily suspend its AE2/Swan loop.

In his message, Mr Yoo boasted of HMM’s “quantum leap” of achieving carryings of 4.5m teu last year, compared with 3m teu in 2016 when the carrier was restructured after near-financial collapse, which also saw larger compatriot Hanjin Shipping go bankrupt.

Mr Yoo said the jump in liftings was evidence of the “restored trust of our customers”.

HMM’s ULCV orders, along with its losses (the carrier also racked up a trading deficit of $1.1bn in 2017), are being covered by funding of $5.4bn from the state-owned Korean Ocean Business Corporation (KOBC), which has led to a storm of protest from European and Japanese shipping associations who have accused the South Korean government of “unfair competitive distortions”.

Hapag-Lloyd’s chief executive, Rolf Habben Jansen, said: “We think it is very important that we have a level playing field and we are not in favour of government subsidies in the form that it is being done with HMM.”