The Korea Shipowners’ Association, a group of shipping companies, has expressed unprecedented serious concerns regarding POSCO Group’s plan to acquire HMM. This stems from worries that HMM, which should compete with global shipping companies after being rebuilt with taxpayers’ money, could degenerate into a subsidiary for POSCO Group’s in-house cargo transport, and potentially be sacrificed again if the steel industry underperforms.

On Sept. 11, the association issued a statement strongly opposing POSCO Group’s acquisition of HMM, stating, “If POSCO Group’s acquisition of HMM is successful, professional management in the container ship sector will become impossible, and existing shipping companies may be forced out of the market, potentially damaging the foundation of the shipping industry.”

The association has three main concerns about POSCO Group’s acquisition of HMM. First, they argue that HMM could degenerate from a shipping specialist to an auxiliary company for POSCO Group’s main steel industry. The association pointed out, “If the steel industry faces difficulties, HMM, which the government and industry have painstakingly revived through the five-year shipping reconstruction plan, could be sacrificed.”

Furthermore, regarding the claim that logistics costs could be reduced through the acquisition of HMM, the association emphasized, “Container ship operation is an unfamiliar field unrelated to steel logistics costs” and “professional shipping management in the container ship sector, which must survive fierce international competition, may become impossible.”

Concerns about the destruction of the shipping ecosystem were also raised. If POSCO Group acquires HMM, they are likely to expand from iron ore to steel product transportation in the container ship specialist HMM, which could force existing domestic shipping companies out of the market. The Shipowners’ Association asserted, “This could lead to the collapse of the foundation of Korea’s shipping industry and simultaneously cause serious damage to the entire import-export industry in Korea.”

The association particularly pressured POSCO Group by mentioning its past failure in directly operating a shipping company. The association criticized, “When POSCO operated Geoyang Shipping to transport raw materials and products, it ultimately failed to overcome the limitations as an industrial carrier and lost competitiveness, leading to its sale to Hanjin Shipping. In this process, existing bulk carriers were forced out of the market, and POSCO also suffered massive losses.”

Moreover, the association directly stated that there are no successful cases of large corporations incorporating shipping as a subsidiary, citing the example of Brazil’s Vale. They also pointed out that the government effectively restricts large-volume shippers from entering the shipping industry through the Maritime Transport Act, and that this move is completely at odds with the government’s policy to foster third-party logistics.

Yang Chang-ho, the standing vice chairman of the shipowners’ association, said, “In April last year, our association and POSCO Flow signed a mutual cooperation agreement that essentially promised not to enter the shipping industry, including efforts to expand national flag carrier transportation, compliance with the Maritime Transport Act and Fair Trade Act, and reasonable bidding contracts. Seeking to enter the shipping industry through HMM just three years later means they are not fulfilling their promise to the shipping industry.” He urged, “We call for the complete withdrawal of this decision, which will cause significant damage to the national economy.”

Source:Business Korea