The container shipping line likely will pull out of the 2M shipping alliance when a tie-up deal expires in early 2020, people with direct knowledge of the matter said. The 2M alliance is run by A.P. Moeller-Maersk A/S and Mediterranean Shipping Co., the world’s two biggest operators, and moves around a third of all containers. “A divorce is quite likely after the cooperation deal ends in April 2020,“ one of the people said. “HMM is looking to join the rival Ocean Alliance, but there is no guarantee it will happen and its problems will multiply.” The new challenge for HMM, which has accumulated around $1.6 billion in losses over 14 quarters, comes a month after its top creditor and main shareholder Korea Development Bank warned of management changes unless the carrier moved toward profitability in the coming months. “HMM tends to resort to the government aid, while a moral hazard is seen among its employees,” KDB Chairman Lee Dong-gull told Korean journalists last month. A second person involved in the matter said the company was given until March to come up with a new strategy. “If things don’t get better, (Chief Executive) Yoo Chang-keun and his team of senior associates could be replaced,” he said. “HMM has to provide a report on its performance every week, and we will issue a warning if we don’t see improvement after a month. Three more months will be given to show improvement. If things don’t get better, the staff concerned will have to leave,” Mr. Lee said. New options include joining the Ocean Alliance, a group consisting of China’s Cosco Shipping Holdings Co., France’s CMA CGM SA and Taiwan’s Evergreen Marine Corp. A second person involved with HMM said the government also is looking at merging HMM with smaller Korean operator SM Line Corp. The Korean government put its full weight behind HMM following the collapse in 2016 of Hanjin Shipping Co., then the world’s seventh-largest container line and a pillar of the shipping sector that is a key component of the country’s economy. HMM since 2015 has received about $2.5 billion in state aid arranged by KDB. HMM’s liabilities will stand at around 2.5 trillion won ($2.25 billion) this year, according to the Korea Times citing a report by Samil PricewaterhouseCoopers, and will grow to KRW3.3 billion next year and KRW5.2 trillion in 2020. HMM’s assets are now worth around KRW3 trillion, leaving its debt higher than its assets by 2019. The shipping line has foundered as it has sought to catch up to bigger rivals. HMM holds just 1.8% of the global shipping market, according to research group Alphaliner Sarl, on par with several regional carriers, but far outside the share of business held by the operators that control the world’s big trading lanes. “At this point, HMM is unsustainable because its ships are too big to enter niche intra-Asia trades, and its capacity is too small to be a global operator outside an alliance,” said Lars Jensen, chief executive of Copenhagen-based SeaIntelligence Consulting. HMM is trying to catch up with a $2.8 billion order placed in October for 20 ultralarge vessels, but industry analysts say the vessels will far outweigh the company’s role in container shipping markets and add to the already widespread overcapacity in the Europe-to-Asia trade loop. A 2M senior executive described the order as “nothing less than crazy.” Shipping executives said that HMM is being gradually marginalized in the Maersk-MSC alliance. The Korean line is an associate member, without the weight of the other two in decisions on capacity and routes because some of 2M’s biggest customers have insisted they didn’t want their cargo on Korean ships after the Hanjin bankruptcy. Container ships move $4 trillion worth of manufactured good a year, according to shipping executives. However, industry operators have been weighed down by a glut of ships in the water and below-cost freight rates, pushing most companies into deep losses and some, like Hanjin, out of business. Write to Costas Paris at costas.paris@wsj.com Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
South Korean container operator Hyundai Merchant Marine (HMM) is reportedly set to exit the 2M shipping alliance, run by the world's two biggest operators, AP Moeller-Maersk and Mediterranean Shipping. HMM has run up losses of $1.6bn over the past 14 quarters, while its 2018 liabilities stand at KRW2.5tn ($2.25bn). Insiders said the firm is pondering either joining the Ocean Alliance or merging with smaller South Korean operator SM Line. HMM's main shareholder, the Korea Development Bank, warned if the company does not improve its fortunes, top executives, including CEO Yoo Chang-keun, will be replaced.