Owners enter calmer waters

The second register, the Asian crisis, and domestic shipping reforms have provided benefits and challenges for Korean owners.

At the end of last year, the Korean Shipowners Association’s members owned and operated a total of 377 vessels, with the aggregate tonnage of 16,682,135 dwt. The three largest fleets are Hyundai Merchant Marine (51 ships, 4,113,062 dwt), Hanjin Shipping (41 vessels, 3,273,017 dwt), and Pan Ocean Shipping (60 ships, 2,888,076 dwt). Container ships represent the largest ship type, followed by bulk carriers.

The last 18 months has been a reforming period for Korea’s shipping industry. The country’s international register entered into force in April last year, since when 305 Korean-owned vessels have transferred from the first register. Advantages of the second register include a 50 per cent reduction in labour costs, and flexibility in the hiring of crew, and a tax level 50 times less than that applying to the first register.

At the start of this year, the restriction on foreigners having more than a 50 per cent share in a Korean ocean-going shipping business was scrapped.

Other reforms, which came into force this July, include the abolition of the designated cargo system whereby only Korean national flag vessels could transport bulk cargo. The last three (liquified gas, iron ore, and coal) of an original seven items on the designated list will be eliminated from July 16. On the same day, The Shipping Industry Promotion Act, which promoted development of the national fleet in order to secure stable transport capacity for Korea’s bulk cargo trade, was repealed.

Hyundai Merchant Marine

Overall last year, HMM achieved total sales of $3.3 billion, and this year’s target has been set at $4 billion. The company’s container fleet is its largest earner, with last year’s revenue from that sector topping $1.7 billion, an increase of $200 million on 1997’s figure. Last year HMM, APL and Mitsui OSK Lines set up the New World Alliance, which operates 85 container ships ranging from 2,000 to 6,000 TEU, on 13 routes worldwide. This service is expected to carry 1.5 million TEU this year.

HMM’s car carrier division brought in revenue of $583 million, compared with $495 million last year. It has contracts to carry cars from manufacturers in Europe, USA, and Japan as well as Korea.

Hanjin Shipping

Last year Hanjin Shipping turned a Won38 billion loss, posted for 1997, into a Won22 billion ($18.8 million) profit. This was brought about by a number of factors, not least of which was the $500 million raised from the sale and subsequent charter back on short-term of 27 of its container ships, and two bulk carriers. The revenue went straight to the bottom line, the company says. The reason for the sale was to bring refinance to loans and investments. The move also reduced operational costs.

However, the company still wholly owns 21 container ships. Seven are of 5,300 TEU, 13 of 4,300 TEU, and one of 1,000 TEU capacity. Last year it took delivery of two 4,300 TEU vessels, and two 5,300 TEU ships from Hanjin Heavy Industries.

While Hanjin has no further newbuildings on order to its own account at present, it will be short-term chartering five new 5,600 TEU container ships from owner Conti Reederai. Two are expected to be delivered late this year. Hand over dates for the rest are still to be determined.