News / Rates boom and alliance shake-up strengthen objections to HMM sale

It appears that the Red Sea crisis and Hapag-Lloyd’s imminent break from THE Alliance are adding weight to calls for HMM’s sale to South Korean poultry processor Harim Group to be delayed.

Last month, HMM’s largest shareholders, state-controlled Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC), chose a consortium of Harim and PE firm JKL Partners as the preferred bidder for the carrier.

HMM came under state control in 2016 after swapping debt for equity to avert bankruptcy. In 2021, as liner operators achieved record earnings amid the Covid-19-induced logistical bottlenecks, KDB began seeking a buyer.

Over the past two weeks, unions representing HMM’s office and seafaring employees held talkss with stakeholders in South Korea’s maritime industry arguing that the Red Sea crisis will bring another rates windfall to container carriers. And opponents of the sale say there will, therefore, be less synergy between the flagship carrier and the dry bulk-focused operations of Harim.

Harim acquired Pan Ocean, South Korea’s largest dry bulk shipping company, in 2015.

Jeon Jung-geun, chairman of HMM seafarers’ union, said: “HMM plans to expand its bulk carrier fleet to 55 vessels [from 29] by 2026, so if Harim becomes HMM’s next owner, there’ll be an overlap with Pan Ocean’s fleet. It’s highly possible that investment in HMM’s dry bulk fleet will be called off to pre-empt weakened profitability.”

There have been concerns that HMM’s dry bulk operations would be consolidated with those of Pan Ocean, which has nearly 80 bulk carriers. Mr Jeon said it was of concern that HMM could be left solely reliant on the container segment.

The unions also expressed concern that Harim, which has fewer assets than HMM, had been chosen, with leading to local media describing the move as “a shrimp swallowing a whale”.

It is understood that the first round of negotiations between KDB, KOBC and Harim has been pushed to 6 February, as both sides have not agreed on delaying the exchange of convertible bonds held by the state into additional HMM shares.

Although Harim chairman Kim Hong-kuk has asserted that with JKL, it was able to raise adequate funds to acquire HMM for $4.9bn, the unions believe Harim’s financing plan is unclear, and more transparency is needed.

Jung Il-hwan, CEO of logistics consultancy Youngone NCS, said: “KDB and KOBC were attempting to sell HMM before its profitability deteriorated. Unfortunately, freight rates have risen again, so we need to reconsider the transaction. Should the sales contract be signed, we must apply for an injunction to suspend the transaction.”

And, on Hapag-Lloyd’s departure from THE Alliance in January 2025, Koo Kyo-hoon, logistics professor at Baewha Women’s University, said: “It’s likely shippers will view today’s HMM differently from the future HMM, resulting in a reduction in the market share of our national shipping companies.”