Fearing threats to their job security from a potential sale of HMM, carrier employees demonstrated outside the Korea Development Bank building in Seoul today.
The liner’s main shareholders, KDB and Korea Ocean Business Corp, representing the state’s interest, plan to sell a majority stake in HMM, as they feel it is time it was released from government support.
Forty unionised shore-based and seafaring staff denounced attempts by KDB and KOBC to sell HMM to what they deem “mid-sized concerns” a day after due diligence into HMM’s three suitors, Harim Group (working with JKL Partners), LX International and Dongwon Group, was completed.
Jeon Jung-geun, head of HMM’s seafarers’ union, said: “With the acquisition candidates’ questionable ability to raise equity capital, the question is whether the sale will really help national development. There are serious concerns.
“If the bidder focuses only on recovering capital returns, it may lead to poor management that misappropriates HMM’s reserves, so the hasty sale must be stopped immediately. We need an owner that can nurture HMM to prevent the [domestic] shipping industry from being ruined.”
The state took control of HMM after swapping debt for equity in 2016.
KDB and KOBC expect to name a preferred bidder this month and conclude the sale by year-end. They plan to sell a 40.65% stake, which could increase to 57.87%, if KRW1trn ($742m) of bonds are converted to stocks. The sale price is estimated between KRW5 trillion ($3.5bn) and KRW10 trillion ($7.4bn).
Lee Ki-ho, head of HMM’s office finance workers union, said: “The shipping industry has a great impact on the nation. We need to form a consensus so that a hasty sale will not bring shame.”
Reportedly, HMM’s staff have been spooked by Maersk Line’s 10,000 headcount loss as huge Covid-fuelled profits evaporate.
All three of HMM’s suitors have equities that are below the shipping company, resulting in them having to sell assets to raise funds. This has given rise to talk of a “winner’s curse”, as speculation mounts that any new owner will struggle to take HMM forward.
Interesting
The Executive and Supervisory boards of HHLA Hamburg have greenlit MSC’s offer to buy 49,9 per cent of the company’s stakes. Negotiations, including the two parties and the City of Hamburg, deemed the offering adequate. The HHLA boards now recommend that the company’s shareholders accept the offer, which, according to official and binding agreements, will not disrupt HHLA’s business model and will secure several aspects of the business concerning investments, subsidiaries and employees.
The Executive and Supervisory boards of HLA Hamburg were obliged by the German Securities Acquisition and Takeover Act (WpÜG) to “examine the offer carefully, impartially and in the best interests of all the company’s stakeholders” and subsequently proceed to a joined ‘Reasoned Statement’ explaining why the takeover should take place or not.
The offer’s assessment was mainly based on the financial aspect of the transaction, which the HHLA Hamburg boards considered financially adequate and competitive. Specifically, HHLA explained that they are content with MSC’s offer to pay 16,75 euros per Class A share. However, what could be even more critical in accepting this offer is the Business Combination Agreement (BCA) signed by HHLA, MSC and the City of Hamburg, which safeguards HHLA’s future business in different ways.
The Business Combination Agreement
Just days after the announcement of MSC’s intention to acquire 49,9 per cent of HHLA’s shares, protests broke out in Hamburg, with labour unions claiming that the port of Hamburg is not for sale and should remain in public hands. The regime in which the port of Hamburg is subjected, considering that it is a public entity, makes share acquisition a more complex process, igniting fears over operational and business changes that could harm both the city of Hamburg and the port employees.
In this regard, the BCA agreement reached by the three parties involved in the acquisition process could provide some security and assurance for the following steps. First and foremost, one of the BCA’s commitments concerns the HHLA’s workforce. According to the company, the employees should not be alerted of possible redundancies since the BCA excludes reducing personnel due to operational reasons for at least five years. However, it is not binding that this commitment will continue to be applied after this timeframe passes.
discuss the rising risks of droughts on the global shipping industry. Climate crisis may cost shipping billions by 2025
Maersk, the world’s biggest shipping company, said Friday that it plans to eliminate 10,000 jobs due to what it described as a challenging environment for container trade and logistics services.
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Sea shipping rates reached a new low last week, according to Drewery’s World Container Index, which saw a 2 per cent decrease to 1,342 US dollars per 40ft container. The rate was 57 per cent lower than the same week last year. Overall, in 2023, sea shipping rates have decreased by 60 per cent, increasing competition with intercontinental rail significantly. The situation could intensify even more in the coming years
According to CMA CGM, westbound transatlantic ocean rates have now hit “unsustainable levels”.
The French carrier announced a raft of FAK (freight all kinds) increases on Friday, an endeavour to drive rates back up on a route that has become, what one liner executive described to The Loadstar as, “a total disaster”.
Indeed, Xeneta’s XSI North Europe to US east coast average rate per 40ft slumped from $7,700 a year ago to just $1,327 last week.
Moreover, The Loadstar recently saw a rate offer to a UK-based forwarder at below $1,000 per 40ft for relatively small-volume shipments from Liverpool to New York.
From 23 November, the French carrier will raise its FAK rates from North Europe and the Mediterranean to the US and Canadian east coast, with, for example, its base rate for a 40ft from Rotterdam to New York being $1,600.
This is still well short of average rates achieved by transatlantic carriers in 2019. Prior to the pandemic, the tradelane was considered to be one of the most resilient, compared with the extremes of volatility seen on Asian export routes.
Pre-Covid, headhaul rates for a 40ft from North Europe to the US east coast had hovered at around $2,000, and the market was known by carriers specialising in the tradelane as “robust but unexciting”.
“We never expected to make much money out of the transatlantic, but we certainly didn’t expect to lose our shirts on it,” a carrier contact told The Loadstar recently. “At the moment, it’s a total disaster,” he added.
The transatlantic was one of the last trades to experience the liner rate explosion contagion of the pandemic era. In fact, the surge in transatlantic rates was indirectly triggered by a boom on the transpacific, when carriers redeployed ships to the more lucrative tradelane.
Shippers also complained about shortages of equipment as carriers chose to redistribute boxes to the Far East. That, and the difficulty of getting space on the depleted transatlantic fleet, inevitably resulted in huge rate spikes.
But when demand on the transpacific and Asia-Europe trades hit the wall last September, carriers looked at the high rates still achievable on the transatlantic and piled in more capacity and upgrades.
The higher rates on the transatlantic also encouraged new entrants to the route, including Ellerman City Liners, which closed its Asia-North Europe loops and redeployed the tonnage to the North Atlantic.
However, the big increase in supply on the transatlantic, from capacity upgrades by CMA CGM and its peers, inevitably resulted in a collapse in freight rates to levels well below their historical average.
