First Korean-Style Maritime Alliance 'K-Alliance' Formation Begins... Official Operation Expected as Early as Q2 Next Year

Signing Ceremony of the Basic Agreement Held on the 23rd

Participation of 5 Korean Shipping Companies Including HMM and SM Shipping
Expansion of Shipping Routes Possible Through Adjustment of Overlapping Schedules and Opening of New Routes
Promotion of Cooperative Relationships with Global Alliances Such as 'THE Alliance'

Ministry of Oceans and Fisheries and Korea Shipowners' Association Support with Preferential Interest Rates for Ship Acquisition and Container Box Procurement

Moon Sung-hyuk, Minister of Oceans and Fisheries. (File photo)

[Sejong=Asia Economy Reporter Joo Sang-don] The first attempt to form a shipping alliance exclusively among Korean shipping companies has taken its first step.

The Ministry of Oceans and Fisheries and the Korea Shipowners' Association announced on the 23rd that they signed a basic agreement among shipping companies to form the Korean-style shipping alliance called 'K-Alliance,' which includes five Korean liner shipping companies operating Southeast Asia routes: SM Shipping, HMM, Janggeum Shipping, Pan Ocean, and Heung-A Line.

This signing ceremony was realized as Korean shipping companies belonging to the Korea Shipping Partnership (KSP), which was formed to strengthen cooperation among national liner shipping companies, voluntarily participated in the alliance formation plan proposed by the Ministry of Oceans and Fisheries and the Korea Shipowners' Association to enhance competitiveness of Korean shipping companies in the Southeast Asia region, a rising global production base with high growth potential.

An official from the Ministry of Oceans and Fisheries explained, "Among the 11 Korean shipping companies operating Southeast Asia routes, five companies, which account for about 50% of the Korea-to-Southeast Asia route capacity, participated first, taking the first step toward the official launch of K-Alliance. This is the first attempt to form a shipping alliance composed solely of Korean shipping companies to create synergy effects through economies of scale."

The remaining six companies that did not participate this time can establish strategic cooperative relationships after the launch of K-Alliance and partially participate in joint operations. If they wish to join as full members at any time, they can do so after consultation with existing members.

Currently, the total capacity held by domestic and foreign shipping companies in the Korea-to-Southeast Asia liner market is about 480,000 TEU, of which Korean companies hold about 190,000 TEU, accounting for 40%. However, their market share is gradually decreasing due to aggressive investments by global shipping companies.

In this situation, the formation of K-Alliance is expected by the Ministry of Oceans and Fisheries to promote cooperation among shipping companies that can achieve more substantial cost reduction effects than previous efforts such as reducing overlapping vessels on specific routes and mergers of two companies since the establishment of the Korea Shipping Partnership.

In particular, adjustment of overlapping sailing schedules will resolve excessive competition, and the opening of new routes will expand shipping lanes. Furthermore, sharing capacity will increase the number of shipments, which is an important requirement for Southeast Asia routes, thereby improving the quality of transportation services and strengthening sales competitiveness. Additionally, cost reductions are possible through joint orders of high-efficiency, low-cost new ships, joint contracts for shipping port facilities such as terminals and yards, and shared use of container equipment. Asset management efficiency can also be enhanced.

K-Alliance aims to lead the Asian market by establishing strategic cooperative relationships with foreign shipping companies within Asia when necessary and by building cooperative relationships with global alliances such as 'THE Alliance,' which HMM is a member of. This will enable K-Alliance to have competitive parity with global shipping companies operating within Asia based on a scaled cooperative system.

The Ministry of Oceans and Fisheries and the Korea Shipowners' Association plan to support the early stabilization and competitiveness enhancement of 'K-Alliance' by applying preferential interest rates for new ship acquisition and container box procurement, unlike existing general support projects for Korean shipping companies, and by supporting ship orders with minimal or no self-financing by the shipping companies. Shipping companies are also expected to benefit from price reductions through joint orders. In addition, various financial supports to improve cost competitiveness, such as purchase and re-leasing (S&LB) of existing ships, and other direct and indirect operational expense supports will be pursued.

The five Korean shipping companies participating in this agreement will prepare detailed regulations for the smooth operation of K-Alliance, discuss optimal operating fleets by route, and plans for fleet expansion. K-Alliance is expected to officially start operating as early as the second quarter of 2021.

Minister Moon Sung-hyuk of the Ministry of Oceans and Fisheries said in his congratulatory speech, "Since the announcement of the 'Five-Year Plan for Shipping Reconstruction' in 2018, the government has made strenuous efforts to rebuild the shipping industry that collapsed due to the bankruptcy of Hanjin Shipping, and fortunately, visible results such as the turnaround to profitability of deep-sea Korean shipping companies have been confirmed. Going forward, we will mobilize all available means to support coastal Korean shipping companies, the other pillar of our shipping industry, so that through K-Alliance, they can not only stabilize management but also gain competitiveness to lead the market with united strength."

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