South Korean shipowners will make a last-ditch effort to thwart attempts by steel-making giant Posco — a key customer — to establish its own logistics company.
The Korean Shipowners’ Association is planning a press conference next week to outline its objections.
Domestic shipping companies fear that if the move goes ahead, they will be cut out of high-value, long-term freight contracts amounting to around 80m tonnes annually.
One local shipping player aired owners’ worries: “Posco’s shipping demand gives a decent profit to national shipping companies. But we are expecting the margin will be hugely reduced when the logistic company takes over.”
The other concern is that some of the country’s other leading manufacturers will seek to copy Posco’s move if the government allows it to go ahead.
Polaris Shipping, Pan Ocean, Korea Line and Wooyang Shipping are Posco’s main carriers.
Third time lucky?
So far, the shipping companies have had the support of the government, which does not want to see foreign carriers getting more of Posco’s business.
But Posco is now understood to be committed to going ahead, despite two previous attempts in the past 20 years having failed to win government approval.
Its board reportedly approved the establishment of a logistics company to be named Posco Global Smart Platform.
The steel-maker has said the move is aimed at integrating its diverse transportation needs into one company. It wants to use smart digital technology to improve its transportation efficiency.
Posco has tried to calm the concerns of local firms, saying it is not establishing a shipping company and its current long-term freight arrangements will not be affected.
'Feathering its own nest'
But the worries persist. According to local reports, the Federation of Korea Marine Industries has written to the government describing Posco’s plans as “a destructive idea to feather its own nest, at the sacrifice of third-party logistics firms”.
National law prevents domestic manufacturers from establishing their own logistics firms, although exceptions have been made for Hyundai Glovis, the shipping logistics arm of Hyundai Motors and Hyundai Steel, and LG Group's Pantos Logistics.
Posco believes it has been unfairly treated and is determined to have its own company that can arrange its iron ore and coking coal import and domestic land and sea transport requirements.
It is concerned that it is losing out by paying a premium for domestic firms to carry out its transport needs when it could arrange things more cheaply through an internal company.
Japan’s Nippon Steel, like other overseas competitors, has a more cost-competitive domestic and international shipping network arranged through its subsidiary shipping company, NS United.
There are reports that as a compromise, the South Korean government asked Posco to buy domestic shipping company Hyundai Merchant Marine several months ago.
However, Posco declined because it did not want to take over the container business, which has no relation to its main business lines.
