The Korea Shipowners' Association (KSA) on the 11th voiced strong opposition to POSCO Group (POSCO Holdings) considering an acquisition of the shipping company HMM, saying it is concerned that conglomerates entering the shipping industry will lead to the elimination of shipping-specialized corporations.
In a statement released that day, the association said, "POSCO's entry into the shipping industry is an act that destroys the shipping ecosystem and must be withdrawn."
The association said, "As the global container shipping market has become oligopolized by a few ultra-large carriers, major countries such as the United States, China, Japan, and Europe are fostering their flagship shipping corporations as national strategic industries," adding that HMM lacks transport capacity compared with these ultra-large carriers and requires massive investment.
It continued, "If HMM is incorporated into POSCO, whose core business is steel, there is a risk it could be relegated to an auxiliary corporation of the core industry rather than receiving investment as a shipping specialist," and "If the steel industry faces difficulties, HMM -- revived by the government and the industry under the five-year shipping reconstruction plan -- could be sacrificed."
The association also said, "POSCO's entry into the shipping industry would likely start with transporting bulk cargo such as iron ore for the parent company and expand to transporting steel products," adding, "The shipping ecosystem will be destroyed as existing domestic carriers are pushed out of the market, causing serious damage to the entire shipping industry and the import-export sector."
The association also argued that POSCO's review of ways to generate group synergies such as cutting logistics costs through acquiring HMM is not feasible in terms of logistics cost reductions. Moreover, it said acquiring HMM, which is centered on container ships, is unrelated to steel logistics costs.
The association said, "As seen in more than 10 failed cases of conglomerate shipping subsidiaries since the 1980s in Korea, including Geoyang Shipping, Hoyu Shipping, Sungwoon Trading, and Dongyang Line, it is virtually impossible for bulk shippers to reduce transportation costs when they enter the shipping business."
It continued, "POSCO operated Geoyang Shipping to transport raw materials and products, but ultimately, unable to overcome the limits of being an in-house cargo carrier, it was sold to Hanjin Shipping," adding, "In this process, existing bulk carriers were forced out and POSCO suffered enormous losses."
The association also said, "Overseas, Brazil's Vale, a major iron ore exporting conglomerate, entered the shipping business by building a fleet of more than 30 ultra-large bulk carriers on the back of strong iron ore exports, but it has recently sold these vessels and effectively withdrawn."
The association also pointed to legal issues with POSCO's entry into the shipping industry. The association said, "The Shipping Act requires the decision on whether to register bulk shippers in the shipping business to be made after hearing the views of the Policy Advisory Committee," adding, "It effectively restricts bulk shippers from entering the shipping industry."
It added, "The Framework Act on Logistics Policies also requires the government to establish, implement, and support measures to promote third-party logistics for shipper corporations and logistics corporations," saying, "POSCO's entry into the shipping industry is entirely at odds with the national policy to foster third-party logistics."
Yang Chang-ho, executive vice chairman of the Korea Shipowners' Association, said, "In 2022, the association and POSCO FLOW (a POSCO Group logistics affiliate) signed a win-win cooperation agreement that effectively committed not to enter the shipping industry," adding, "Seeking to enter the shipping industry through HMM in just three years means they do not intend to honor the promise made with the shipping industry."
Source: CHOSUNBIZ