Joining the newly announced global container alliance, The Alliance, is a matter of survival for Hyundai Merchant Marine (HMM), Lars Jensen, owner of analyst firm Seaintelligence Consulting, tells ShippingWatch.

The South Korean carrier was expected to be among the members when the new cooperation The Alliance was announced on Friday. But when the roster was made public, HMM was nowhere to be seen.

Instead the alliance will consist of carriers Hapag-Lloyd, Hanjin, K Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming. And this is bad news for HMM, which is currently struggling to settle a towering debt.

"If they don't join this alliance, they will have no future as a major east-west carrier. So their options are to either go up for sale or to overhaul the business significantly and instead continue as a more local niche carrier," says Lars Jensen.

Immediately after The Alliance was announced, HMM issued a statement informing that it expects to join the new cooperation once the current negotiations with creditors are completed in June, and the biggest creditor, Korea Development Bank, stressed its continued support of the carrier.

"HMM's entrance into The Alliance is only being postponed as there have been several media reports since the beginning of this year about the possibility that HMM might be under court receivership. The current members of The Alliance are going to determine HMM’s participation once HMM’s business is normalized," said HMM in the statement.

However, it remains an open question whether HMM will be let into the new cooperation, notes Lars Jensen.

"They have clearly participated in the talks with the other carriers, but the company has been weighed and found too fragile under the current circumstances," says the analyst. He points to three potential scenarios for the struggling South Korean container carrier.

If HMM is able to secure a long-term deal with its creditors, the carrier can join The Alliance. If not, HMM must either let itself be acquired by one of the competitors or face a merger with Hanjin, a possibility that has previously been mentioned.

"In any cases, they will have to come up with something really good in order to be let in at the last moment," says Lars Jensen.

A forced merger with rival

HMM has been in financial dire straits for the past year, and the situation intensified at the beginning of 2016. The carrier is in the midst of negotiations with its creditors to secure a restructuring of the towering debt.

Creditors and the South Korean government have given HMM until May 20th to present the results from its negotiations with shipowners for a reduction in the carrier's rate commitments. If HMM fails to deliver, a merger with rival carrier Hanjin could come into play.

Hanjin Shipping is also struggling financially, and a possible merger between the two carriers have been mentioned as a possibility on numerous occasions. As Hanjin is part of The Alliance, a merged entity of the two would be part of the new alliance line-up.

However, a merger of the two will likely require the government to force the carriers' hands, says Lars Jensen of Seaintelligence Consulting.

"This is not just a matter of rational financial considerations. It's also a matter of political interests in South Korea. And political interests are difficult to predict, as they rarely follow a logical train of thought," he says.

What about Hamburg Süd?

HMM is not the only carrier that was floated as a possible participant in the new alliance but was ultimately left out.

Ahead of Friday's announcement, there were rumors that Hamburg Süd would also join the cooperation. But the German carrier's business is focused on the north-south trades, and as such the carrier does have as an urgent a need as the others to partake in an east-west alliance.

"Hamburg Süd only recently entered the east-west trade, and this is still somewhat of a side-business for them. They have a deal in place with United Arab Shipping Company, which could face a merger with Hapag-Lloyd in a move that would enable Hamburg Süd to offer east-west services to its customers," says Lars Jensen.

The new alliance, which goes by the name The Alliance, is scheduled to launch operations in May next year, after which the container market will be dominated by three alliances: Maersk Line and MSC's 2M alliance, the Ocean Alliance, headed by France's CMA CGM, and The Alliance, headed by Hapag-Lloyd.

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