Discovering New Business Opportunities… “A Winning Move” for Transportation Efficiency
Inevitably, the Ownership Conflict of Shipping Companies…
Bidding Competition & Government Approval Key to ‘Privatization’
As the POSCO Group considers acquiring the national shipping company HMM, there is buzz within the steel and shipping industries. If POSCO acquires HMM, it could integrate the transportation of raw materials like iron ore and coal, as well as the export of steel products, enabling logistics efficiency. However, significant challenges, including conflicts of interest and pushback from the shipping industry, must be addressed when a “major client” owns a shipping company.
According to industry insiders on the 5th, POSCO Group has recently formed a consulting team by signing contracts with Samil PwC and Boston Consulting Group to review the acquisition of HMM. Although POSCO has been considered a strong candidate for acquisition whenever HMM privatization discussions arise, it has previously stated no intent to acquire.
This acquisition move is interpreted as POSCO’s strategic gamble to secure new growth momentum amid the downturn in the steel and secondary battery sectors. Strategic goals include enhancing group competitiveness through logistics cost reduction and integrating global value chain management.
As a major client that imports iron ore and raw coal, POSCO spends around 3 trillion KRW annually on logistics. Acquiring HMM could enable vertical integration from raw material procurement to product export, significantly benefiting logistics cost savings and transport stability. Amid the simultaneous sluggishness of its main businesses—steel and secondary batteries—logistics is seen as a new growth driver at the group level.
However, hurdles such as resistance from the shipping industry, government approval, and competitive bidding suggest that significant challenges are inevitable before any actual acquisition occurs.
The most cited obstacle is the competition limitation controversy under fair trade laws should POSCO own HMM. Concerns arise that providing lower freight rates for its shipments through HMM while offering less favorable conditions to competitors could disrupt fair competition in the shipping market.
If HMM directly secures POSCO’s vast shipment volume, the profitability of other shipping companies that previously handled POSCO’s cargo may diminish, potentially leading to robust opposition from the shipping industry. Moreover, if adjustments to vessel capacity at major hubs like Busan Port and Gwangyang Port become necessary, local economies could be affected, involving political interests.
For POSCO to purchase HMM, it must go through acquisition processes involving stakes held by Korea Development Bank (KDB) and Korea Ocean Business Corporation (KOBC), currently holding 36.02% and 35.67% stakes, respectively. The acquisition process will likely involve an open bidding procedure as KDB pushes for HMM’s privatization. Thus, it is deemed nearly impossible for POSCO to acquire HMM through a negotiated contract. Under shipping laws, specific large-scale cargo owners entering the shipping business require approval from the Ministry of Oceans and Fisheries Policy Advisory Committee.
A shipping industry representative stated, “The key to whether this big deal will succeed will be if POSCO formalizes its intent to acquire and successfully persuades the government and shipping industry.”