Subscribe
E-Paper
By Choi Sung-jin
As Korea's large shipping companies have come under pressure to sink or sail, industry executives are calling for the government to learn from their foreign counterparts, who bailed out their industries with government money.
If left unattended, the shipping industry crisis could spread to the shipbuilding sector and harbor logistics, they say, stressing that what is needed now is not debt rescheduling but industrial restructuring.
As Hanjin Shipping and Hyundai Merchant Marine have fallen into financial crises, some industry officials are complaining that the government has poorly coped with the industrial slump that began in 2009.
"The government was bent on only pressurizing the domestic companies to ‘reduce debts,' while failing to catch up with the global trends toward large vessels," an industry executive said.
As major shipping firms, including Pan Ocean and SM KLC, went into court receivership, other shipping lines had to sell their assets to reduce debt, instead of placing new orders.
To help struggling domestic shipyards, the government provided financial support for foreign shipping companies. Global shipping companies could pull down transport fees through large vessels with 16,000 20-ton equivalent units (TEU) they built with the Korean government's help.
The gap in the operating profit ratio between Maersk Line and Hanjin widened from 0.8 of a percentage point in 2008 to 9.6 percentage points in 2013, industry officials say. "If the government had extended credit to domestic shipping lines to help them place new orders with Korean shipyards, it could have saved both the shipping and shipbuilding sectors," another official said.
Maersk and other global shipping companies were not without crises, but they had timely government help to tide them over, industry experts said. Maersk managed to secure vessels with financial support of $6.72 billion from the Danish government. Hapag-Lloyd of Germany also received a debt-payment guarantee of $1.8 billion from its government.
The Chinese government made payment guarantees of $15.7 billion for its COSCO Shipping and the Japanese government has established a system in which Japanese shipping firms can issue corporate bonds with 10-year maturity with an interest rate of 1 percent. The French government encouraged ship owners and creditors to meet halfway for a major debt rescheduling, the experts said.
But in Korea, the argument remains unsolved between shipping companies seeking government help and officials who force the former to curtail debt even "by selling vessels."
The global shipping industry is now being led by four major alliance groups but may soon be reorganized into a three-alliance system.
"If difficulties at Hanjin and Hyundai continue, Korean shipping lines could be excluded from the realignment process," an expert said. "When that happens, the global networks established by the two companies over the past three to four decades could go up in smoke, with China and Japan competing to take the initiative in the logistics of Northeast Asia."
