Consecutive Full Ships... Will HMM's Large-Scale Election Strategy Shine?

According to the Government's 5-Year Maritime Reconstruction Plan, 12 Ships of 24,000 TEU and 8 Ships of 15,000 TEU Ordered
Cost Competitiveness Up... All Ships 1 to 4 Fully Loaded

[Asia Economy Reporter Yoo Je-hoon] HMM's mega-ship strategy is gaining momentum. This comes as the 24,000 TEU (twenty-foot equivalent unit) class ultra-large vessels ordered as part of the government's 'Five-Year Plan for Shipping Reconstruction' are being delivered sequentially. Despite the challenging market conditions caused by the COVID-19 pandemic, the first to fourth vessels have all recorded full loads, drawing attention to whether the ultra-large ship strategy can continue to sail smoothly.

According to industry sources on the 2nd, the first to fourth ultra-large container ships deployed by HMM on the Asia-Europe route since late April all achieved full loads. The industry standard for a full load is 19,300 TEU, and all four vessels exceeded this benchmark at Singapore, the last port of call in Asia, resulting in a stowage factor (cargo loading rate relative to vessel capacity) exceeding 100%. Notably, the first vessel, Algeciras, recorded 19,499 TEU on the backhaul route returning from London, UK to Asia, setting another full load record. Typically, this route is considered successful even with a stowage factor of 60-70%.

It is unusual for such ultra-large vessels to achieve full loads from their maiden voyages. While some attribute this to the 'newcomer' effect following HMM's joining of THE Alliance, many interpret it as a result of improved cost competitiveness compared to existing ultra-large vessels. An industry insider said, "From THE Alliance's perspective, these vessels are among the most competitive," adding, "Although it is still early to judge the success of the ultra-large vessels, other shipping companies sharing the vessel capacity also benefit from utilizing these ships."

The 24,000 TEU class ultra-large vessels being delivered sequentially by HMM were ordered under the government's Five-Year Plan for Shipping Reconstruction in 2018. So far, seven vessels have been delivered, and all 12 vessels are scheduled to be delivered by September this year and deployed on the Asia-Europe route. Next year, eight 15,000 TEU vessels ordered from Hyundai Heavy Industries will also be delivered sequentially, continuing the expansion of vessel capacity.

This strategy aligns with the 'economies of scale' trend that has emerged in the global shipping market since the 2010s. Recently, global shipping companies have been retiring 7,000-8,000 TEU mid-sized vessels early while increasing the number of ultra-large vessels around 20,000 TEU. This is an attempt to enhance cost competitiveness through ultra-large vessels amid persistently low freight rates. According to a research report by the Korea Maritime Institute (KMI), the cargo handling cost per FEU (forty-foot equivalent unit) for a 23,000 TEU vessel is $12.20, about 17.5% lower than that of a 10,800 TEU vessel ($14.80). Considering that vessels around 15,000 TEU are the main type on European routes, this represents significant economic efficiency.

Kim Jong-min, head of the Shipping Industry Information Center at the Korea Shipowners' Mutual Protection & Indemnity Association, said, "Since other shipping alliances like 2M and Ocean Alliance also operate ultra-large vessels of similar size, this is inevitable," adding, "It is certain that cost competitiveness improves with ultra-large vessels, so it can be evaluated that the foundation for HMM's business normalization has been established."

For this reason, it has been reported that some European shipping companies have recently raised concerns about HMM. They are worried about the emergence of ultra-large vessels with cost competitiveness in the global shipping market, where a chicken game is unfolding.

Experts advise that as vessel capacity expansion and cost competitiveness improvement continue, HMM should further expand its sales capabilities and secure cargo. Professor Han Jong-gil of the East Asian Logistics Department at Sungkyul University said, "The remaining challenge is how to fill the increased vessel capacity," adding, "It is necessary to overcome the legacy of the old Hyundai Merchant Marine and Hanjin Shipping, restore various networks in the shipping market, and increase contact points with shippers."

This content was produced with the assistance of AI translation services.