Harim Selected as Preferred Bidder for South Korea's Largest Shipping Company HMM

In a significant development for South Korea's shipping industry, Harim Group Consortium has been chosen as the preferred bidder for acquiring HMM (formerly Hyundai Merchant Marine), the country's largest shipping company. This move paves the way for the formation of a mega national shipping line, equipped with a fleet of over 300 vessels. While the final contract negotiations are pending, the integration of HMM's container-focused fleet with Harim Group's Pan Ocean, primarily a bulk carrier, would mark the first time a Korean shipping company operates more than 300 vessels.

The Shipping Industry: A Pillar of South Korea's Economy

Shipping plays a vital role in South Korea's trade-dependent economy, handling 99% of the transportation of raw materials and import-export goods. The industry's importance is underscored by its connection to shipbuilding, finance, and port operations, each sector contributing significantly to the national economy.

However, the industry faced a setback in 2017 when Hanjin Shipping, then the largest container shipping company in Korea and seventh globally, declared bankruptcy. Despite debates on whether to save Hanjin with public funds, the decision was made to let the company fold under the principle of expelling insolvent businesses. This left HMM as the leading domestic shipping company, though it too faced similar financial challenges.

HMM's Revival and Sale Amidst Pandemic Shipping Boom

Following a period of management under state-run Korea Development Bank, HMM saw a revival during the COVID-19 pandemic, benefiting from a shipping boom. This led to the decision to sell the company, which has been accelerated by the recent plunge in shipping rates, despite HMM's significant cash assets totaling 10 trillion won.

Challenges and Opportunities Ahead

The prospective acquisition of HMM by Harim Group, however, is not without its challenges. The shipping industry views the ability to operate both container and bulk ships as advantageous, but concerns remain regarding the over 6 trillion won acquisition cost and the current downturn in shipping rates. Harim Group needs to secure funding through private equity firm JKL Partners and other means, amidst concerns about its financial capacity.

Another challenge is the decline in sea freight rates, which have dropped to about one-fifth of their level two years ago. The integration of HMM's container operations with Pan Ocean's bulk shipping also presents a unique challenge, as these are fundamentally different markets.

Global Context and Korea's Position

Globally, HMM currently ranks eighth with approximately 780,000 Twenty-foot Equivalent Unit (TEU) capacity, holding a 2.8% market share. This is far behind the leaders like Switzerland's MSC and Denmark's Maersk. Also, the last decade's restructuring in Korean shipping led to a loss of crucial infrastructure like port terminals, which needs urgent attention.

In light of these challenges, Harim Group's goal of propelling HMM into the global top five might be ambitious. The top players have already established strongholds in the market, emphasizing the need for differentiated strategies focusing on eco-friendliness and digital technology.

HMM's Role in Korea's Shipping Competitiveness

HMM, being the only large container shipping company in Korea, plays a crucial role in the national shipping industry. Its competitiveness is directly linked to the overall industry's standing. With Harim's acquisition potentially on the horizon, significant investment and proactive government support are considered essential for HMM to compete effectively on the global stage, particularly against giants who are advancing rapidly in digitalization and eco-friendly operations.

In conclusion, while Harim Group's acquisition of HMM represents a potentially transformative moment for South Korea's shipping industry, it also brings forth a set of substantial challenges and responsibilities. The task ahead is not just about expanding the fleet size but also about navigating a rapidly changing global market, investing in critical infrastructure, and adopting innovative strategies to remain competitive