Maersk Line and MSC expand aggressively in the Pacific


Since South Korea''s Hanjin Shipping collapsed almost four months ago, the
container routes on the Pacific between the Far East and North America''s west
coast have become a battleground for carriers, where several analysts have
named the 2M alliance between Maersk Line and MSC as the winners of the
greatest freight volumes. Analyst agency Alphaliner writes that the Pacific
will remain a battleground in 2017. Maersk and MSC will continue to expand
their network with two new services to the US West Coast with an expansion of
the Maple service with a total of six vessels of 5,900-7,200 teu, which was
launched on Dec. 9. The other service with the name Sequoia began sailings on
Dec. 26 with five vessels of 5,000-8,400 teu.

Maersk Line and MSC''s aggressive expansion of the two carriers'' capacity on
the Pacific, where Maersk Line has historically played a much smaller part
compared to the routes from Asia to Europe, seems to emphasize the problems,
according to Alphaliner, faced by economically struggling Hyundai Merchant
Marine (HMM), which is the 2M alliance''s new strategic partner.

The South Korean carrier did not successfully achieve inclusion in Maersk and
MSC''s 2M alliance, but had to settle for a looser strategic partnership, which
goes against the carrier''s and the South Korean government''s goal for HMM to
take part in one of the four major container alliances in 2017. An alliance
partnership, where carriers share vessels (Vessel Sharing Agreement, VSA) was
also one of the two most important parameters for majority shareholder and
state-owned bank Korea Development Bank in ensuring the survival of HMM, while
Hanjin Shipping is currently headed towards bankruptcy.

Senior management of HMM instead announced an ambitious growth plan on Dec.
12 with more than a doubling of the carrier''s capacity in the global container
market, which is the equivalent of a market share of five percent in 2021 up
from 2.2 percent today. But the plan, according to Alphaliner, seems highly
unrealistic and corresponds to an increase in fleet capacity of 140 percent
over the next four years.

"In order to achieve its targeted market share, HMM would need to add over
650,000 teu of additional capacity by 2021 – a tall order, given that the
carrier is currently not engaged in any newbuilding program," assesses
Alphaliner:
"To put HMM''s target in perspective, the additional capacity required to
reach a 5 percent market share is equivalent to acquiring the entire operated
fleet of Hanjin Shipping prior to the carrier''s collapse in late August.
Hanjin''s fleet has meanwhile dwindled from over 620,000 teu at the beginning
of 2016 to only 44,000 teu of idled capacity currently, with HMM failing to
pick up even a single Hanjin ship during the period. HMM also lost the bid to
acquire Hanjin''s transpacific network to Korea Line."

Korea Development Bank (KDB) had the option of merging HMM and Hanjin
Shipping as a pan-Korean brand, but instead the national bank now looks poised
to inject more money into HMM in order to reclaim lost market shares, writes
Alphaliner.

Senior management at HMM stated at a press conference recently in Seoul, that
despite of not being part of the 2M alliance, the customers'' focus was on
efficient service and not on whether a carrier is an alliance member or not.
"Our market share in the west coast of America rose to fifth place this year
from 11th place last year. Hyundai Merchant Marine is eight and nine times
smaller than 2M member companies, but we ranked fifth place on the west coast
route, and Maersk sixth. This proves that Hyundai Merchant Marine has been
trusted," said CEO Yoo Chang-keun, emphasizing that the carrier is planning to
increase capacity from a current 450,000 teu to somewhere in the range of
800,000 to one million teu in the coming years, which corresponds to a total
market share of five percent in 2021. HMM''s senior management took the
opportunity to criticize Maersk Line and MSC for using the media to create a
negative image of Hyundai Merchant Marine during negotiations concerning the
South Korean carrier''s relationship with the alliance, just a few days after
the parties'' announced a strategic partnership. "Until some time ago, 2M has
said to us, ''You are on your own as the alliance is a matter of
interpretation.'' 2M does not allow us to use the name of the alliance to
weaken HMM''s position after finding out that conditions for the self-rescue
plan include becoming a member of a shipping alliance," said Lee Sang-shik,
head of the Container Planning Division.