HMM Mulls 10 Newbuild Orders for Next Year

HMM says it will order as many as 10 new vessels next year.

In anticipation of improved profitability, Hyundai Merchant Marine Co., Ltd. (HMM) says it will order as many as 10 new vessels next year, according to local media reports.

Yoo Chang-keun, HMM's CEO, says the move will see the replacement of outdated vessels.

"We are planning to place orders for five containerships and three or five oil tankers," he said.

"I can't say when we will swing to the black, but we are working hard on it by cutting costs and improving shipping rates."

While third quarter results show the company is still operating at a loss, HMM did manage to post a net profit of KRW 297 billion ($253 million) during the quarter.

As Ship & Bunker reported last week, HMM reached an agreement for strategic cooperation with the 2M alliance members, Maersk Line and Mediterranean Shipping Company S.A. (MSC), which will see the three parties cooperate on slot exchanges and slot purchases.

However, Alphaliner, writing in its latest weekly report, said HMM will "pay a heavy price" for the deal, explaining that Maersk and MSC is set to take control of a number of vessels operated by HMM on the Asia - Europe and Asia - U.S. East Coast routes.

"These ships will be operated and marketed by Maersk and MSC, with HMM relegated to the role of slot buyer."

"HMM's overall slot allocation could thus not be as high as initially expected, limiting the carrier's ability to grow in the future. The HMM slots on the relevant routes are expected to be capped for the entire duration of the agreement."

While the deal seems to be unfavourable to HMM, Alphaliner notes that the company had little else in the way of alternatives after HMM was left out of the two other major carrier groups, the OCEAN Alliance and THE Alliance.

"Failure to reach an agreement with the 2M partners would have left HMM with limited options to continue service on the East-West trades," said Alphaliner.

Despite this, Alphaliner suggests that HMM could still find a solution through a new partnership with Korea Line, which is slated to join the Far East - U.S. West Coast trades by April 2017.