Hanjin Shipping is planning to invite Evergreen Line to join the CKYH Alliance to improve that network’s competitive posture, South Korean news agency Yonhap reports.
The announcement comes as the South Korean carrier, the eighth largest in the world by fleet size according to Alphaliner, has outlined a plan to shed underperforming assets and non-core businesses to bolster its bottom line.
Earlier this year, Drewry Maritime Research characterized Hanjin, as well as fellow Korean container line Hyundai Merchant Marine, as having “their backs against the wall with mounting debt and piling losses.” The analyst said at that time that it expected Hanjin to continue to post losses because of weak fundamentals and high interest costs.
Indeed, Hanjin’s loss widened in the third quarter of 2013, as the company posted a net loss of 317.6 billion won (about US$299.3 million), compared with a net loss of 47.3 billion won in the same period last year.
The ocean carrier’s president and CEO, YM Kim, resigned in November; saying he was taking responsibility for the company’s continuing losses.
Among the actions Hanjin is planning are disposal of older container ships, cutting or restructuring unprofitable routes and other cost-cutting in its container business. It also intends to cut back on its bulk business or exit the business entirely. Altogether, the company anticipates a positive financial impact of 372.9 billion won through these measures.
Moreover, shareholder Korean Air has announced plans to sell off assets worth 3.5 trillion won and other steps not only to improve its own finances, but also to make it possible for it to help the affiliated ocean carrier. The airline has indicated it could lend Hanjin an additional 150 billion won, to supplement the 150 billion won loan it provided earlier this year, if it can secure additional lending from banks. It also wants to take part in Hanjin Shipping’s paid-in capital increase plan, Yonhap reports.
An expansion of the CKYH Alliance — whose members are COSCO, “K” Line, Yang Ming, and Hanjin — to include Evergreen had been suggested as one potential response to the competitive threat posed by the new P3 Network among CMA CGM, Maersk Line and Mediterranean Shipping Co., and the subsequently announced expansion of the G6 Alliance on the east-west trades.
Adding Evergreen would boost capacity for the CKYH Alliance, which is lagging both the P3 and G6 in the new mega-ship arms race, according to SeaIntel. Evergreen is the fourth-largest container line by fleet size, according to Alphaliner, and it has already taken delivery of the first of 10 13,000-TEU ships. The carrier, which already cooperates closely with the CKYH Alliance but is currently unaffiliated, has not yet commented regarding the invitation.
