News / HMM should use surplus cash to double size of its box ship fleet

HMM should use the earnings from the Covid-19-powered shipping boom to double its box ship fleet, to 1.7m teu, according to Kim In-hyeon, a maritime law professor at Korea University and a new member of South Korea’s ruling People Power Party.

HMM, the eighth-largest liner operator, currently operates more than 784,000 teu, 565,000 teu of owned tonnage and the rest chartered, and it has 25 newbuildings, of around 251,000 teu, on order.

Prof Kim noted that only 20% of South Korea’s exports to the US and Europe is carried by domestic carriers, and said HMM needed a larger fleet to compete more effectively against its peers.

He said: “The view is that South Korea cannot fully secure transport sovereignty. Evergreen and Yang Ming, two Taiwanese ocean-going shipping companies competing for north-east Asian shipping hegemony, have a total fleet of 2.3m teu, and Japan’s ONE has a fleet of 1.8m teu.”

While Yang Ming and ONE are HMM’s fellow members of THE Alliance, Prof Kim suggested: “As the EU and US strengthen competition laws, it has become difficult for shipping companies to maintain a cooperative system in which they share ship operations, making the future outlook uncertain.

“To make matters worse, Hapag-Lloyd will withdraw from THE Alliance and join hands with Maersk next year.”

He said that when ordering newbuildings or acquiring vessels, it was best to avoid taking bank loans, and liner operators were sitting on substantial cash holdings after the windfalls of 2020 to 2022.

Prof Kim added: “As HMM has secured reserves exceeding KRW10trn ($7.5bn), the company must break away from the practice of financing 70% to 90% of ship acquisitions with borrowings. This will reduce the company’s debt ratio by increasing the self-funded proportion to 50% and avoid being hit in a downturn.”

On the recent collapse of efforts to sell HMM to a Harim Group-JKL Partners consortium, Prof Kim suggested that the company’s largest shareholder, state policy lender Korea Development Bank, should reorganise the carrier’s “chaotic” corporate atmosphere; it should “seek to stabilise HMM’s management and then go through the sale process again”, he said.

An HMM spokesperson told The Loadstar that in July 2022, the company had outlined plans to bring its box ship fleet up to 1.2m teu by 2026, and added: He said: “We’re in the middle of implementing the plan. We don’t consider linking our investment plans with the sale process, as those are two different things.”