Hanjin-Hyundai: No Merger or Only Restructuring?
South Korea’s government is discussing whether to merge or sell Hanjin Shipping and Hyundai Merchant Marine in an attempt at state-led industrial restructuring.
But the two lines in question belong to different container alliances, are fierce rivals and have both denied that Seoul is trying to coerce them to merge.
“There is a need to maintain the existence of the two companies when considering the impact a merger could have on South Korea’s import- and export-oriented economy and global shipping alliances, as well as the transhipment competiveness of Busan port,” the Ministry of Oceans and Fisheries said in its rebuttal of the argument.
But Yonhap said that the government has decided to put the issue of a merger between Hanjin Shipping and Hyundai Merchant Marine on the table if they don’t accept its recommendation to merge.
“We need to analyze if Korea has to keep its current system, in which two large companies exist as the national shipping companies,” said an unidentified representative from the Ministry of Oceans and Fisheries, which is in charge of the shipping industry. “If needed, we need to consider more fundamental solutions like sell-offs.”
If both refuses the suggestion, a vice ministerial-level meeting aimed at enhancing our industrial competitiveness under the leadership of the chairman of the Financial Services Commission will start to draw up a blueprint for restructuring those struggling companies.
The government’s action translates into full engagement in the restructuring of insolvent companies. The shipping industry is protesting the government’s move, saying a forced merger is not the way forward.
The two companies have seen operating losses for a couple of years due to a slowdown in global trade after the global financial meltdown in 2008 and shrinkage of China’s imports and exports.
The shipping industry has been reeling under heavy losses since the global economic crisis, with a decline in demand resulting in a substantial capacity glut.
Steeper competition from global rivals, especially Chinese firms, that have started to step up merger and acquisition efforts from the late 2000s is another threat to Korea’s shipping firms.
