“Once the normalization program for the two shipping companies is wrapped up, the government will consider various plans including the merger of the companies,” said Financial Services Commission (FSC) Chairman Yim Jong-yong at a news conference.
As the restructuring programs that the debt-riddled shippers are undergoing will install the state-run Korea Development Bank (KDB) as the controlling stakeholder of the firms, the government can lead the merger of the pair in the future.
Container ship Hanjin Green Earth - Image: Arjan Elmendorp
Of the two companies, HMM last week struck deals with its ship owners over cutting charter costs and stepped into the track for normalization. If HMM joins an alliance of its global peers, the company will fulfill all preconditions that the government has set for normalization.
Hanjin Shipping is currently in negotiations with ship owners, but its progress is relatively slow as the company is suffering from a liquidity crunch.
“HMM’s normalization effort has turned the corner, though the company still faces tasks such as joining the alliance,” Yim said. “Hanjin’s process is in its early stages and creditors are doing their utmost to assist its self-rescue efforts.”
Talk over the potential merger has been emerging since last November, when the government formed a multi-ministry consultative body for restructuring the shippers. Calls have been growing that Korea does not need two flag-carrying shippers because their businesses overlap in many aspects.
The Ministry of Oceans and Fisheries said, “The number of flag-carrying shippers is not important and what matters is cargo volume,” showing a change from its initial stance that “there must be two shippers.”
According to Singapore-headquartered shipping media, combining the pair would send them up to the fourth spot in the global liner trade and establish them as Asia’s largest container line.
For shipbuilders, Yim said the government will begin the debate over restructuring the industry in August, when negotiating finish. Also, the FSC chairman said it will continue its efforts to table six bills at the 20th National Assembly. The bills include the Korea Exchange’s transformation into a holding company and lifting the regulation separating banking from commerce.