Korea's sea flag carrier HMM should be gradually privatized: Oceans Min

Cho Seung-hwan. [Photo by Kim Ho-young]

South Korea should incrementally shed government stake of 70 percent in sea flag carrier HMM Co. while it is riding on a global shipping boon, according to top government official on maritime affairs.

“It does not help the public sector or the industry for the state to command over HMM when it is on a surplus streak “said Cho Seung-hwan, Minister of Oceans and Fisheries, in a recent interview with Maeil Business Newspaper.

State entities Korea Development Bank (KDB) and Korea Ocean Business Corporation (KOBC) each own 20.69 percent and 19.95 percent, respectively, in the shipper. When their holdings in bonds with warrant and perpetual bonds that can be converted into equity are counted, their combined stake in the container shipping major amounts to 70 percent.

HMM, formerly Hyundai Merchant Marine, was nationalized through government rescue funds to revive the shipping segment after longtime industry No. 1 Hanjin Shipping went under.

“Privatization will be extremely difficult and it will be challenging to find a strategic investor when public sector owns too much stake,” the minister said. “It would be right to lower stake to a fair level.”

“It will be ideal to liquidate some of the state stake before shipping industry enters down or slump cycle,” he said.

He declined to specify the timing.

Shares of HMM were 2.6 percent lower at 24,560 won Friday morning.

[Photo by MK DB]

The idea also requires to be coordinated with related offices.

State lender KDB would be willing to proceed with stake sale upon a go-ahead from the ministry.

“The maturity of the CBs still remains, but it would be better to convert the bonds into equity as the stock prices have risen sharply. Even without counting CBs, the public-sector holdings in the shipper is too high,” an unnamed KDB official said.

HMM raised 2.9 trillion won ($2.2 billion) in operating income in the April-June period, up 111 percent from a year ago, on sales of 5.03 trillion won, up 73 percent. Net profit surged 1,290 percent to 2.9 trillion won. The container carrier has been on hot earnings streak due to jump in freight charges in the wake of pandemic.

“HMM owns efficient vessels,” he said. “Strengthening efficiency in terminal management by securing overseas bases and promoting port automation will help the country’s shipping industry move forward.”

[ㄏ Maeil Business Newspaper & mk.co.kr, All rights reserved]