THE Alliance installs contingency fund
THE Alliance members have filed an amended version of their vessel-sharing agreement (VSA), to incorporate new member HMM, with the US Federal Maritime Commission (FMC), according to Alphaliner.
It will also include provision for an increase in its $50m contingency fund from a significant financial commitment from the South Korean carrier.
HMM will join THE Alliance on 1 April next year, after its slot charter agreement with the 2M Alliance comes to an end.
Until then it is purchasing Asia to North Europe slots from current partners Hapag-Lloyd, Yang Ming and ONE to cover VIP customers using its standalone loop which was terminated in August.
Apart from its ‘strategic cooperation’ space agreement with the 2M for both Asia to North Europe, the transpacific and the transatlantic, HMM also operates three transpacific services of its own.
According to the consultant, the amended agreement submitted to the FMC last week only mentions 168 vessels of 3,000-15,000 teu, compared with the existing agreement without HMM, which is for 180 ships of up to 21,000 teu.
However, the new VSA submission allows the four carriers to adjust the number to 200 ships with a maximum capacity of 24,000 teu to include the 12 23,000 teu ULCVs HMM will receive next year.
In addition, HMM will receive eight 15,000 teu newbuilds in 2020 and 2021, plus nine 10,000-13,000 teu vessels redelivered by Maersk and MSC when the 2M agreement ends, and notwithstanding that it might decide to redeliver some of its chartered in tonnage, this will take HMM’s teu capacity to more than 700,000 teu by June.
This means the carrier will leapfrog new alliance partner Yang Ming into eighth place in the global carrier league table – albeit that the Taiwanese line has a orderbook of some 200,000 teu that should see it regain its ranking.
With the exception of the profitable leading line, Hapag-Lloyd, THE Alliance has struggled financially, compared with the better returns earned by members of the rival Ocean and 2M alliances.
The third quarter saw Japan’s ONE return to the black after thumping losses in its first year, but Yang Ming still posted a net loss for Q3 of $30m.
However, HMM’s continuing losses dwarf its peers: in Q3 the carrier posted a net loss of $147m, its 18th consecutive quarter in red ink.
THE Alliance was the first VSA grouping to include a ‘contingency fund’ in its FMC filing in 2017 which was lauded by the–then FMC commissioner, William Doyle, who said that it was “important that another Hanjin debacle does not happen”.
Hanjin Shipping went into receivership on 31 August 2016 with some 500,000 teu of Hanjin and CKYHE alliance cargo stranded onboard its 100 vessels around the world.
In the case of an insolvency of one of THE Alliance members the contingency fund would be drawn on to ensure that members’ ships could continue to operate and make port calls by way of the trustees of the fund paying vessel disbursements.
The original $50m fund was based on a $10m contribution of the–then five member lines of THE Alliance. However after the merger of K Line, MOL and NYK into ONE this was amended to $23.7m from ONE, $15.9m from Hapag-Lloyd and $10.4m from Yang Ming.
It is understood that during THE Alliance’s negotiations with HMM, the carrier’s backers, the state-owned Korea Development Bank, Korea Ocean Business Corporation and the Korean Ministry of Oceans and Fisheries were asked to make an “above parity” commitment to the contingency fund as part of the terms of its acceptance into the grouping.