Port Report: THE Alliance Brings In Korea's Hyundai Marine As Member

Hyundai Merchant Marine (HMM) will join THE Alliance as a full member. The move comes after an apparent rebuff of the money-losing Korean liner company's efforts to strike a similar deal with the 2M Alliance.

THE Alliance, which is also comprised of Germany's Hapag-Lloyd HLAG, Japan's Ocean Network Express, and Taiwan's Yang Ming, said it established "a new cooperation" with its now four members lasting through 2030.

The actions were agreed in Taipei on June 19, 2019. Subject to the necessary regulatory approvals, the new contract between the four lines will start on April 1, 2020.

Jae-hoon Bae, President and Chief Executive Officer of HMM said, "Being a full member of THE Alliance gives us a lot of pride. We are convinced that we will be successful and generate additional value for our customers, employees and shareholders with combined experience, strategic skills, competitive fleet and strong focus on our clients´ needs."

Bae, who has only been in the CEO role since last March, has been trying to figure out HMM's survival strategy. The Korean company has reported about $2.8 billion in losses since 2015 as it grapples with low freight rates and high debt due to new ship orders.

Last April, Bae travelled to Europe to see if he could convince 2M members Maersk (Nasdaq OMX: MAER) and MSC about some form of cooperation after the expiration of a container slot sharing agreement between the companies.

L to R：HMM's Jae-hoon Bae, Hapag-Lloyd's Rolf Habben Jansen, ONE's Jeremy Nixon, and Yang Ming's Bronson Hsieh.

Even with HMM defecting to another consortium, the agreement will hardly move the needle as far as THE Alliance's market share. HMM only has 425,550 twenty-foot equivalent units (TEUs) in capacity, amounting to 1.8 percent of the global fleet. 

THE Alliance's now four members will control about 18.6 percent of the global fleet according to Alphaliner. Maersk and MSC's 2M controls about 33 percent of the global fleet while the Ocean Alliance controls 29.8 percent. 

Rather than market share, HMM will "provide a number of new and modern vessels, which will help us to deliver better quality and be more efficient – and it will help us also to further reduce our emissions," said Hapag-Lloyd Chief Executive Rolf Habben Jansen. 

HMM has ordered twelve 23,000 TEU vessels which will be delivered in the second quarter of 2020. Additionally, eight 15,000 TEU newbuildings will join HMM´s fleet in the second quarter of 2021. 

HMM´s 23,000 TEU newbuildings will be deployed in the Far East – North Europe trade and will further strengthen THE Alliance´s service portfolio.

"We are very happy to see HMM join THE Alliance, as their membership will allow us to offer enhanced services to our customers due to a wider port coverage, expansion of our product offerings, more sailing frequencies and a better balance of our cargo flows," said Jeremy Nixon, Chief Executive Officer of Ocean Network Express.

HMM´s membership will significantly strengthen the competitiveness of THE Alliance towards the other two alliances, the company said in a statement.

"HMM joining THE Alliance is an important milestone for THE Alliance as it will help us to provide a broader service network to the customers and facilitate the advance of the development of THE Alliance starting from next year," said Bronson Hsieh, Chairman and Chief Executive of Yang Ming.

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