By Woo Je-yoon and Lee Eun-joo
South Korea’s leading container carrier Hyundai Merchant Marine Co. (HMM) will spend total 3.15 trillion won ($2.8 billion) to buy 20 very-large container vessels from local shipbuilders, a move that is expected to help reinvigorate the sluggish local shipbuilding industries.
The company said in a regulatory filing on Friday that its board approved a plan to invest total 3.15 trillion won on 20 very-large container vessel orders placed with the country’s top three shipbuilders - seven units of 23,000 twenty-foot equivalent unit (TEU) carriers from Daewoo Shipbuilding & Marine Engineering Co. (DSME), five 23,000 TEU carriers from Samsung Heavy Industries Co. and eight 15,000 TEU ships from Hyundai Heavy Industries Co.
Total investment of 3.15 trillion won is equivalent to 351.56 percent of HMM’s equity capital as of end of December last year on a consolidated basis, and it will be injected until the end of June, 2021, according to the company.
The latest investment announcement has finalized the terms of the orders the company in June placed with the country’s top three shipbuilders to build the 20 ships. Earlier this year, the company unveiled a plan to secure the 20 large container ships - 12 units of 23,000 TEU container ships by 2020 for the Asia-North Europe route and eight 14,000 TEU vessels for the U.S. east coast route - to improve its mid- to long-term global competitiveness.
Those new vessels also will be fitted with green technology to meet stricter environmental regulations for vessels that will take effect in 2020. The International Maritime Organization requires ships to carry bunker fuel oil with a maximum sulfur content of 0.5 percent in January 1, 2020. Currently, the maximum sulfur content level is set at 3.5 percent.
The company’s investment on the 20 vessels is expected to help restore the country’s ailing shipbuilding industry that was hit hard by the global, industry-wide slump.
Since the slump in the global shipbuilding industry began a few years back, Korean shipbuilders have been under massive restructuring to cope with dwindling orders. Earlier this year, the government announced that it would subsidize shippers to create work for troubled shipbuilders to revive the industry as well as accelerate transition to clean fuel.
Hyundai Merchant Marine has been groomed to be the country’s No. 1 container shipper by the government after Hanjin Shipping bankrupted in 2016. Hyundai Merchant Marine was saved through the government’s bailout program, and its main creditor is state-owned Korea Development Bank with a 13.2 percent stake.