HMM Orders 12 Neo Panamax-Class Ships... Domestic Shipping Industry Making a Comeback

[Asia Economy Reporter Dongwoo Lee] The domestic shipping industry is stepping up to lay the groundwork for a rebound after a prolonged slump. Efforts are being made not only to enhance global price competitiveness through increased shipping capacity but also to strengthen the acquisition of new clients by diversifying business operations.

According to the shipping industry on the 11th, HMM, the largest deep-sea container shipping company in Korea, officially signed a Letter of Intent (LOI) earlier this month to order newbuilds of 13,000 TEU-class (1 TEU equals one 20-foot container) Neo-Panamax container ships.

The order size is about 12 vessels, with a total contract amount of approximately $1.5 billion (1.7 trillion KRW). It is reported that detailed negotiations for shipbuilding are underway with Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering, the domestic 'Big 3' shipbuilders.

The final contract signing is scheduled for the end of this month, with expected delivery in 2024. However, if HMM distributes the newbuild orders evenly among the Big 3 shipbuilders, the delivery schedule could be accelerated. Previously, HMM ordered 12 ultra-large vessels of 24,000 TEU, with 7 ships from Daewoo Shipbuilding & Marine Engineering and 5 from Samsung Heavy Industries.

This Panamax-class newbuild order by HMM is particularly aimed at strengthening the fleet competitiveness on the trans-Pacific route, where domestic exporters have been struggling due to a shortage of shipping capacity. The 13,000 TEU-class Neo-Panamax vessels can pass through the expanded Panama Canal (width 49m, length 366m) since 2016, allowing them to freely operate with large container volumes not only on the U.S. West Coast but also to South America.

Through this newbuild order, the total shipping capacity is expected to approach the target of 1 million TEU by 2022. As of this month, HMM's total shipping capacity stands at about 800,000 TEU (based on long-term charters over one year), and this order will increase it by approximately 156,000 TEU to around 986,000 TEU. The government and HMM plan to double fleet investment compared to the market average following this order, aiming to expand their global market share by 1 percentage point in the mid to long term.

HMM Shanghaiho

Pan Ocean, a leading domestic bulk carrier, also expanded its business portfolio by starting an LNG carrier business with global energy client Shell last year and has now entered the LNG bunkering vessel business this year. LNG bunkering vessels are small tankers capable of refueling at sea.

Pan Ocean signed a six-year long-term charter contract worth about 62 billion KRW for one 18,000 CBM LNG bunkering vessel with Shell. Notably, this vessel is expected to offer higher safety and fuel efficiency compared to existing LNG bunkering vessels. It is scheduled to be built by Hyundai Mipo Dockyard, with delivery expected in May 2023.

Pan Ocean plans to diversify its business, which has been focused on bulk carriers, by entering the LNG bunkering market to strengthen proactive risk management capabilities. Additionally, the company is aggressively participating in the upcoming Qatar LNG bid to expand its influence in the eco-friendly energy sector. It is reported that Pan Ocean has passed the first round of document screening for the bid.

SM Line, which is planning an IPO within the year, decided last month to purchase a used 4,228 TEU vessel, which is expected to be delivered in the second half of this year. The company aims to expedite the review process to complete the IPO before the Chuseok holiday in September. Using the IPO as a stepping stone, SM Line is preparing to grow into a global shipping company by expanding routes, strengthening used vessel acquisitions, considering newbuild orders, and establishing a digital logistics system.

A shipping industry official said, "The domestic shipping industry’s capacity plummeted from 1.05 million TEU in early 2016 to 460,000 TEU," adding, "With the recent global market boom, the industry is overcoming the slump and preparing for a leap forward."

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