Cho Seung-hwan. Credit: President Yoon Suk-yeol’s transition committee

South Korea’s minister of  oceans and fisheries, Cho Seung-hwan, has said the government should release its holding in HMM in phases to facilitate a smooth handover of the country’s flagship carrier to the private sector.

He appears to be reversing his previous opinion that it was not the right time for the state to sell its HMM shares, and has told President Yoon Suk-yeol that the company has regained its footing and the state should not wait.

Including convertible bonds, the state’s interest in HMM, held through the Korea Development Bank (KDB), Korea Ocean Business Corporation (KOBC), Korea Credit Guarantee Fund (KODIT) and the National Pension Service, totals around 74%, implying there would be a very high price to pay, which may be discouraging potential buyers.

Mr Cho explained: “Even acquiring a 35% stake, which would bring management rights over HMM, it would mean investing close to KRW10 trn ($7.6bn).”

He said KOBC, the state-backed ship finance institution managing HMM, had established a mid- to long-term development strategy for the carrier, and would plan the sale of its management rights.

The four instutions hold a combined 52% of HMM’s shares, plus convertible bonds that mature in 2023. HMM came under state control as part of a rescue plan in 2016 that saw its main creditor, KDB, exchange the carrier’s debts for equity.

The liner shipping industry’s fortunes were reversed after Covid-related logistics bottlenecks brought record-high earnings in 2020 and 2021, a performance continuing this year, despite corrections in spot freight rates. In the first half, HMM’s net profit soared to $4.6bn, exceeding the $4.4bn net profit for the whole of last year – although the company cautioned that the usual peak season in Q3 may be turbulent, due to downward pressure on the spot market.

South Korean media has speculated that steel-making group POSCO, Hyundai Motor, CJ Group and SM Group could be potential buyers of HMM shares, although they have denied any interest.

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