Heung-A the latest Korean carrier to tell worried shippers: 'We're not sinking'
Another South Korean shipping line under financial pressure has had to write to customers to dispel ...
South Korean conglomerate Samra Midas Group (SMG) has applied to the US Federal Maritime Commission (FMC) to start a new transpacific container service.
Branded SM Line, it would begin operating in April, deploying a fleet of five 6,500 teu vessels.
Addressing a meeting of the National Retail Federation (NRF) in New York on Monday, commissioner William Doyle said executives from SMG had visited the FMC to discuss its application.
Mr Doyle told delegates SM Line was proposing to operate a liner service between Shanghai and Ningbo in China, Busan in South Korea and Long Beach on the US west coast “from the ashes of Hanjin”.
“In addition,” said Mr Doyle, “SM Line intends to operate eight intra-Asia services between China, Japan, Thailand, Vietnam, India, Pakistan, Indonesia and other countries.”
For these services SM Line intended to deploy 11 vessels in the 1,000-2,500 teu range.
SMG bid against compatriot Hyundai Merchant Marine (HMM) for the Asia-US tradelane assets of the bankrupt Hanjin Shipping. According to stock exchange filing by Hanjin on 2 January, the final price of the assets had been reduced from $31m to $23m.
The SMG board refused to approve a plan for the assets to be taken over by bulk-carrying subsidiary Korea Line Corp, citing its lack of experience in container shipping and that the necessary investment would stretch its cashflow. Instead, the board rubber-stamped a proposal to form standalone ocean carrier SM Line.
SM Line was officially launched on 6 January, after the completion of its organisational structure at its headquarters in Yoido, Seoul, by new director Kim Chil-bong (also president of Korea Line Corp) with a ceremony attended by around 200 employees, many formerly employed by Hanjin.
SMG board was no doubt influenced by current healthy load factors and freight rates on the transpacific route.
Container spot rates between Asia and the US west and east coasts have soared, ironically since the crash of Hanjin, and now stand at around $2,200 per 40ft for the west coast ports and $3,600 per 40ft for the east coast. This compares with spot rates a year ago of $1,400 and $2,500 respectively.
And analysts are predicting significant increases in transpacific contract rates, which are generally negotiated in March and April – assuming that carriers are able to manage their capacity and sales responsibly.
Meanwhile, there have been reports in the media that SM Line is struggling to assemble its container fleet in time for the launch. This will not help the confidence of shippers wary of supporting start-up container lines.
Shippers will be reminded of a previous entrant to the transpacific market, The Containership Company (TCC), which launched a “no frills” service in April 2010 using smaller ships to fewer ports, only to fail eight months later after a brutal rate war and accusations that shippers had not honoured their volume commitments.