On 22 November, Korea Line signed a deal to acquire the Asia-US business of Hanjin Shipping. The deal worth 37 billion won (USD 31.5 mln) involves the business network and client information of Hanjin’s Asia-US route, subsidiaries in 7 countries including the US, China and Vietnam, and 574 workers based in Korea and overseas, writes The Wall Street Journal.
This news follows last week’s announcement of Seoul Central District Court that Korea Line was awarded the first right to purchase Hanjin’s shipping assets on Asia-US route.
The court’s decision also includes the right for Korea Line to acquire 5 container ships owned by Hanjin, with capacities of 6,500 TEUs each, and Hanjin’s 54% stake in Total Terminals International LLC, an operator of Long Beach Terminal, California. But a Korea Line spokesman said yesterday that currently the deal does not involve the vessels or the stake in the terminal operator, and the company will have further talks with Hanjin over these until 5 January 2017, when its first right to those assets expires.
MSC, who owns the remaining stake in TTI, has the right of pre-emption to Hanjin’s stake in the terminal.
The entry into container shipping of South Korea’s second-largest bulk carrier, which emerged from bankruptcy in 2013 after being acquired by construction firm Samra Midas Group, can be a tough one, due to a fierce competition on the trans-Pacific route. According to Alphaliner’s latest report, over the last 6 years at least 6 container lines — including Hainan POS, Grand China Shipping, and T.S. Lines —have entered the trans-Pacific trade lane only to pull out in 2011 and 2012. The freight rates in 2015 and 2016 contracts are twice lower than the historical normal and the market is highly fragmented. Thus, Hanjin Shipping had just 7.4% of Asia imports to the US in August, 2016. It’s also unclear how Korea Line will survive if it doesn’t enter one of the three major shipping alliances: Ocean Alliance, THE Alliance and 2M Alliance, that will be on effective in April, 2017.