Why is Korea Line buying Hanjin Shipping's Asia - US container business?Why is Korea Line buying Hanjin Shipping's Asia - US container business?

Korea Line is paying $31.4m for the business, which includes the routes, customer information and operations in seven countries, including US, China and Vietnam, as well as some 574 employees from Hanjin. It does not, however, include five 6,500 containerships from Hanjin or its stake in a Long Beach container terminal in the US, which Korea Line has an option to buy.

Korea Line apparently outbid Hyundai Merchant Marine (HMM) for the business, which was put up for sale by the Seoul bankruptcy court last month. While Hanjin clearly needs as much money it can get to pay off its debts, HMM, despite its own travails, would have been a more logical choice in terms of guaranteeing the future of Hanjin’s Asia – US business as it is a space it is already operating in.

Korea Line by contrast operates in the dry bulk, tanker and LNG segments, with no presence in container shipping.

With scale being of supreme in importance in mainline container shipping trades – as the problems of mid-sized players such as Hanjin clearly exposed – Korea Line will be in a difficult situation as a small, effectively new entrant onto the trade.

While Korea Line is buying an existing book of business it is not taking over a going concern, with Hanjin’s Asia to US business having effectively stopped when the company filed for receivership on 31 August.

In the meantime other lines, in particular the 2M partnership of Maersk Line and MSC, have moved quickly to fill the void left by Hanjin. According to Alphaliner 2M will be phasing in two new Asia – US West Coast loops in December and upsizing vessels on another string to 16,000 teu. All told it adds 30% or 12,000 teu to 2M’s capacity on the trade since September, and the bad news for Korea Line is all of this will be in place before it completes its acquisition of Hanjin’s Asia – US business in January next year.

Not only will many customers have been lured away before Korea Line gets the business up and running again, many shippers are likely to be wary of the Hanjin brand which has been badly damaged by $14bn worth of cargo left stranded for weeks, if not months when the company filed. It may attract some national loyalty from Korean customers but Korea Line is going to face an uphill struggle with its first foray into container shipping.

Read all the background to the Hanjin Shipping bankruptcy on our timeline