In International Shipping News 28/10/2016
The Korean government is considering plans to sell Hyundai Merchant Marine’s ships to the Tonnage Bank and then re-charter them to improve the vessel operational efficiency.
In a bid to improve the vessel operational efficiency of Hyundai Merchant Marine (HMM), the South Korean government is reportedly considering plans to sell HMM’s ships to the Tonnage Bank, which is run by the Korea Asset Management Corporation (KAMCO), and then re-charter them to HMM. It is also planning to double the shipping funds, which was initially to raise US$1.2 billion (1.36 trillion won), and help HMM to win new orders and secure terminals at ports through the global marine funds, which are managed by the Export-Import Bank of Korea (Korea Eximbank).
According to a local news outlet quoting the information from the government and shipping industry sources on October 26, the relevant authorities, including the Ministry of Strategy and Finance, the Financial Services Commission and the Ministry of Oceans and Fisheries, held a task force meeting on the previous day to discuss ways to strengthen the competitiveness of the shipping industry. Accordingly, the government will release the plans based on it on the 31st.
The Tonnage Bank is a program that has been operated by the KAMCO from last year. The program helps shipping companies to secure the liquidity and minimize the costs to operate ships by selling their ships to the Tonnage Bank and chartering them for the long term. The KAMCO injected 110.9 billion won (US$97.67 million) to buy seven ships last year. This year, it allocated 150 billion won (US$132.1 million) in the management of the Tonnage Bank, and spent 68.4 billion won (US$60.24 million) on acquiring vessels so far. Making use of the Tonnage Bank, small and mid-size shipping firms, such as Joongang Shipping, Wooyang Shipping and Samsun Logix, are securing the liquidity and improving the efficiency to operate the fleet of ships.
However, the KAMCO doesn’t have enough money to support HMM since the company has 23 container ships alone. Accordingly, additional funds need to be secured. A high ranking official from the government said, “We are considering the Tonnage Bank as part of plans to support HMM but we are having difficulties to secure funds. We need to discuss more whether or not to actually use the program.”
Meanwhile, both shipping funds and global marine funds are expected to be used to help HMM to expand in size. Support from the shipping funds will be expanded from the current container ships to bulk carriers and port terminals and its size will also increase to US$2 billion (2.27 trillion won) from US$1.2 billion (US$1.36 trillion won). In addition, the global marine funds, which came up the establishment plans last year but haven’t carried out them yet, will operate in earnest. First, the Korea Eximbank and the Korea Investment Corporation (KIC) plan to raise a total of 200 billion won (US$176.13 million), 100 billion won (US$88.07 million) each, and invest in global major ports.
Source: Business Korea
