S. Korean shippers expand into global terminal business
South Korea's container shipping firms are shifting their attention to new growth industries as they seek a way out of the worst market conditions ever experienced by the sector.
Falling shipping rates as of late are causing shippers to accumulate a steady pile of debt in their marine shipping operations. As a result, these firms are now eyeing the storage terminal business (distribution bases used to store container shipments), third-party logistics (3PL) operations, and other new growth drivers that can generate a steady stream of revenue.
Korea's Hyundai Merchant Marine (HMM) - which currently owns four container terminals worldwide in Tacoma and Los Angeles, the US, Kaohsiung Taiwan, and Busan Korea - will be expanding its terminal business in efforts to nurture its port and logistics operations as new growth engines, said industry sources familiar with the matter Sunday.
HMM has recently inked major deals with key shippers for its terminal operations. Notably, HMM's Washington United Terminal (WUT) sited at the Port of Tacoma will be the port of call for the Grand Alliance, a major shipping consortium consisting of key shippers including Germany-based Hapag-Lloyd. The terminal will handle 0.56 million TEU worth of shipments from the consortium, and HMM plans to invest $30 million to the Tacoma facilities accordingly. The company is also mulling over setting up a new terminal in Brazil, where marine traffic has been growing rapidly as of late.
Similarly, Hanjin Shipping will be nurturing its terminal business to generate more than 10 percent of its revenue from the sector. The Korean shipping company has recently opened new terminals in Spain and Vietnam in hopes of profiting from recent expansions to the Panama Canal and high-growth in emerging markets.
STX Pan Ocean is mulling over constructing a grain terminal in Brazil's breadbasket Mato Grosso located in central Brazil in cooperation with other companies. The grain terminal in Mato Grosso will be handling Brazil's major export grains such as soybeans, corns, and sugar canes.
"With shipping rates falling steeply, many container shipping companies have been running considerable deficits in the shipping business," an official at Korea Shipowners' Association (KSA) said. "In contrast, the terminal operating business is more reliable in terms of profitability than the shipping business and shippers can generate relatively steady profits through terminal operation." The 3PL business has also become a new growth engine for shipping companies.
Hanjin Shipping established its own 3PL company Hanjin Logistics Inc. in the US in 2001 and extended its global networks to 25 countries as of last year including its corporations set up in China, Singapore, Korea, Europe, and Spain. Hanjin's 3PL business accounts for only seven percent of Hanjin's combined sales but the company plans to raise the percentage to over 10 percent by 2014.
HMM entered China's comprehensive distribution market by establishing a joint venture with China's state-run Shandong Province Communication and Transport Group in February this year. Each company injected 12 billion won ($10.55 million) in the joint venture. The two are constructing an off-dock container yard (ODCY) in Qingdao and plan to open the yard by upcoming October.
[Written by Jae-man Koh - Samji Chung, Ha'eun Bang / edited by Soyoung Chung]
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