South Korea: Five shipping companies form alliance for competitiveness

Five South Korean container shipping companies are establishing the Korean Maritime Movement Alliance (K-Alliance) in an effort to strengthen competitiveness in Southeast Asia and achieve cost synergies.

The country’s Ministry of Oceans and Fisheries (MOF), Korea Maritime Promotion Corporation, and five carriers including SM Line, HMM, Sinokor Merchant Marine (known as Janggeum Merchant Marine), Pan Ocean and Heung-A Shipping have reached a basic agreement to create the first national shipping alliance.

Due to COVID-19 related restrictions, the signing ceremony was held virtually on 23 December 2020.

As informed, the agreement aims to reinforce cooperation between national liner companies within the alliance scheme proposed by MOF and Korea Ocean Business Corporation (KOBC) and strengthen the competitiveness of national carriers in Southeast Asia where growth potential is said to be high.

It is one of several initiatives of the Korean government aimed at supporting and rebuilding the shipping industry following the bankruptcy of Hanjin Shipping.

According to MOF, domestic container shipping companies have a combined market share of 40 per cent or about 190,000 TEUs on the South Korea – Southeast Asia route out of a total capacity of 480,000 TEU. However, their market share has been declining due to ‘aggressive expansion’ of global shipping companies.

Specifically, the cooperation of the five companies will be based on fleet sharing arrangements, the reduction of the number of redundant vessels and vessel calls as well as the opening of new routes.

This is expected to result in cost savings and improved quality of service. Moreover, the alliance partners will be able to jointly order and deploy eco-friendly ships and to jointly use port facilities and containers.

The remaining six Korean carriers may join the K-Alliance in the mid to long term, MOF added.

In the future, the alliance will also seek to cooperate with other shipping companies in Asia as well as global container shipping alliances such as THE Alliance.

The K-Alliance is scheduled to officially start operation in the second quarter of 2021.

Credit: World Maritime News.