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Drewry: Korean government may have pulled the strings in 2M talks

South Korea's government may have helped in the negotiations between HMM and the 2M alliance between Maersk Line and MSC. This is Drewry's assessment as one possible explanation for what the analyst agency calls "one of the more bizarre twists in the container shipping market."

Hyundai Merchant Marine
Photo: Hyundai Merchant Marine

On the surface, it may seem strange that Maersk Line and MSC are prepared to let struggling Hyundai Merchant Marine (HMM) into the otherwise close-knit 2M alliance.

It will, of course, increase the alliance's presence in the Pacific but not to a degree that adequately explains why these behemoths are currently negotiating membership with the South Korean carrier.

For this reason, there must be a better explanation, notes analyst agency Drewry, which calls the negotiations "one of the more bizarre twists in the container shipping market."

In its most recent newsletter, the analyst agency lists five hypotheses to explain why 2M may get a third member. At the top of the list is a scenario specualting that the South Korean government may have played a part.

"The Korean government, concerned for its ailing shipping and shipbuilding industries, has called upon the 2M carriers to ride in and rescue HMM in return for favorable shipbuilding contracts or banks loans," says Drewry about the first of five possible explanations.

Maersk Line and MSC confirm 2M talks with Hyundai

The maritime sector in South Korea has been under pressure recently as the carriers Hanjin and HMM, along with the three major shipbuilders, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries, are all being weighed down by the downturn in shipping.

According to the South Korean shipowners' association, if the two carries folded, the consequences would include the loss of 5,400 jobs and cause damage to the country's economy worth a total of USD 19.13 billion. The country's president Park Geun-Hye has also warned that it would pull down the whole economy if the shipping sector implodes.

In this light, the government has stepped in with a number of measures including a billion dollar fund to help the industry's biggest creditors, such as Korea Development Bank, withstand the losses.

However, the government has stated a requirement that HMM must find an alliance if the carrier is to be included in a rescue plan. This failed in the first attempt when HMM unlike Hanjin was not on the list of carriers in The Alliance announced in May.

Analyst: Maersk could end up buying HMM

With the exclusion from the new alliance, headed by Hapag-Lloyd, it looked for while like HMM would be left out in the cold of the container market, which will be dominated by the Ocean Alliance, The Alliance and 2M from next April.

But South Korea's government may have given a helping hand and spurred Maersk Line and MSC to consider incorporating HMM in their 2M alliance, notes Drewry.

Another possible explanation, according to the analyst agency, could be that Maersk Line intends to acquire HMM, or that the whole thing is just a show to put pressure The Alliance to include the Korean carrier.

A merger of HMM and Hanjin is still on the table

Hanjin facing severe difficulties from chartered vessels

South Korea would pay big price if Hanjin and HMM folded

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