HMM's 2M Talks a "Bizarre Twist" That Suggests More to the Story, Says Drewry

Drewry says that HMM's talk of joining the 2M Alliance could be strategic posturing or a lead up to a takeover by Maersk.

In its latest edition of Container Insight, Drewry Shipping Consultants Limited (Drewry) called news that financially troubled Hyundai Merchant Marine (HMM) is in negotiations with Maersk Line and Mediterranean Shipping Company S.A. (MSC) to join the 2M alliance a "bizarre" twist that suggests that there is more to the story.

"This is a significant shift in mood music from HMM, which until recently was in danger of being a container pariah, locked out of the new alliance structures for next year after years of heavy losses," said Drewry, suggesting that the move could either be strategic posturing or a lead up to a takeover of HMM by Maersk Line.

As Ship & Bunker reported Monday, rumours of a possible acquisition of HMM by Maersk Line began to swirl following the news of HMM's 2M talks.

"It’s very difficult to judge how much credence to give this story," said Drewry, adding that it believes that there are a number of possibilities that could explain why HMM is currently in discussions to join 2M.

"It could simply be posturing designed to rebuild its reputation, or to convince THE Alliance members to agree to it becoming a member as reports suggested that some member carriers were unconvinced. But then why would savvy carriers such as Maersk and MSC allow themselves to be used in such a way and what is in it for them if the talks are genuine?"

Drewry says that it is possible that Maersk Line is actually using the discussions as a precursor to either the acquisition of, or joint venture with, HMM.

The shipping consultant says that it is also possible that HMM’s banks have pushed the company to find an industry partner that can assist the carrier in securing lower costs without large investment - a goal that would be achieved through a partnership with the 2M partners.

Drewry further hypothesises that the South Korean government, in an effort to save its shipping sector, has requested that the 2M carriers come to the aid of struggling HMM, offering favourable shipbuilding contracts or banks loans in return.

Finally, Drewry says it is possible that the discussions with 2M are so preliminary that they do not really mean anything, and "the lack of big shared benefits on both sides will kill any future deal."

For its part, Drewry does not see much benefit for Maersk Line and MSC from bringing HMM into 2M, noting that HMM does not offer much of anything to the two shipping giants, except an estimated 2 percent increase in nominal capacity share on the Asia-Europe and Asia-North America trades.

"What is clear is that the 2M carriers would not enter into something they didn’t think would benefit them in some way," concluded Drewry.

As Ship & Bunker previously reported, the South Korean government said that it would consider a merger of two of the countries' largest shipping companies, Hanjin Shipping Co Ltd (Hanjin) and HMM, as soon as the two companies' management has been normalised