POSCO Group has begun reviewing the acquisition of HMM, the largest shipping company in Korea, but industry analysts predict fierce opposition from both the shipping industry and labor unions, making it unlikely that the company will participate in the actual acquisition. Even if they participate in the bidding for HMM, the analysis suggests that the company's limited bulk fleet size will make it difficult to generate immediate synergies.
According to the shipping industry on the 5th, POSCO needs the approval of the policy advisory committee mandated by shipping law to transport bulk goods, including iron ore and coking coal, on its own after acquiring HMM. If POSCO applies for registration in the shipping industry after acquiring HMM, the decision on the registration will be made by the Minister of Oceans and Fisheries, who is required to consider the impact on the domestic shipping industry based on opinions gathered from the policy advisory committee.
The shipping industry believes that there is a high likelihood that the policy advisory committee will not agree to POSCO's registration in the shipping industry. The committee is composed of industry and academic experts, and significant opposition from the industry is anticipated.
POSCO consumes more than 60 million tons of iron ore annually. It imports all of this from Australia and Brazil. Additionally, the company incurs nearly 3 trillion won in logistics costs each year while importing various raw materials, including scrap metal, coking coal, and battery materials used in secondary battery businesses.
POSCO is a major customer of most national shipping companies, including HMM, Pan Ocean, and Polaris Shipping. From the shipping industry's perspective, if POSCO acquires HMM, it would lose an important customer, making POSCO's acquisition of HMM unwelcome.
With the Yellow Envelope Law set to take effect in early March next year, there is a possibility that POSCO's labor union will engage in disputes over the acquisition of HMM and the decision to operate in the shipping industry. This is due to concerns that the expansion of business may slow down investments in existing operations.
Despite these concerns, analysis suggests that even if POSCO enters the bidding for HMM, it will be difficult to realize synergies immediately. HMM primarily focuses on container shipping, and its dry bulk fleet, which transports iron ore and coking coal, consists of only about 26 vessels. Therefore, even if POSCO acquires HMM, there are currently not many ships available to handle its own cargo. HMM aims to expand its bulk fleet to 110 vessels by 2030.
HMM's valuation has greatly increased in recent years. When the Harim Group formed a consortium for its acquisition in 2023, HMM's market capitalization was around 11 trillion won, but it has now risen to approximately 23.5 trillion won.
An industry insider noted, 'Since POSCO Group accounts for more than 10% of the domestic shipping volume, it is unlikely that it will easily obtain the policy advisory committee's approval,' adding that 'the lack of precedent for committee meetings may hinder the preparation of operational guidelines and present various challenges.'