South Korea's largest shipping firm Hyundai Merchant Marine (HMM) is likely to part ways with the 2M Alliance which will expire in April 2020 and join a new ocean alliance said a local media report.
According to a report in Business Korea, the 2M Alliance (consists of Maersk Line and MSC) is disadvantageous to HMM as it is not a full member of the alliance. HMM's status fell as the 2M Alliance inked a partnership deal with Israel's Zim Integrated Shipping Services, the report said.
Under an agreement signed in 2016 2M agreed that it would accept HMM as a full membership company based on an assessment of HMM’s financial structure and liquidity improvement.
The report quoting industry analysts said that given current situations into account, HMM and 2M are highly likely to part ways.
The Korean container carrier has been failing to make money over the past three years as a result of surging costs and stagnant global freight demand, according to Korea Times.
It said that despite a series of rescue loans from the state-run Korea Development Bank (KDB), the struggling shipper has been unable to get its operations back on track.
HMM's capital could be completely depleted by 2020 on soaring debts. It's debt, currently estimated at 2.54 trillion won, is likely to reach 3.32 trillion next year and eventually top 6.66 trillion won by 2022, said the report.
Regarding mounting worries, HMM stressed that "those are unnecessary concerns." It's targeting a 7% market share in the major deepsea east-west trades as it prepares to take delivery of 20 new ultra-large container vessels (ULCVs).
Another silver line is that recently Korea Development Bank (KDB) has vowed to carry out intense reform of Hyundai Merchant Marine (HMM) to normalize the ailing shipping firm's management.
KDB is HMM's largest shareholder with a 13.13 percent stake.