Busan, one of the biggest port cities in South Korea, is facing new challenges due to alliances formed by major shipping companies that are clients of its ports.
Last year, from January to June, Denmark’s Maersk (AP Moller-Maersk), the world’s second-largest container shipping company, and Germany’s Hapag-Lloyd, the fifth-largest, formed a new shipping alliance called Gemini Cooperation. As a result, this is expected to increase competition for cargo volume among container terminal operators at Busan’s new port.
Busan’s new port terminals 1, 3, and 4 at Busan Port are currently under a terminal service contract with ‘THE Alliance’ according to the shipping industry on Jan. 23. THE Alliance comprises HMM, Hapag-Lloyd, Japan’s Ocean Network Express (ONE), ranked sixth globally, and Taiwan’s Yang Ming, ranked ninth globally. Therefore, it is known that THE Alliance handles over 6.2 million TEU of cargo annually at Busan Port.
Terminal 2 of the new port, operated by Pusan Newport Company (PNC) - whose largest shareholder is Dubai-based DP World - has secured the world’s top Swiss MSC and Maersk’s shipping alliance ‘2M’ as clients. Terminal 5, which has a stake invested by the joint venture Terminal Link between France’s CMA-CGM and China’s China Merchants Holdings, has secured the OCEAN Alliance, which is composed of French and Chinese shipping companies.
However, Hapag-Lloyd’s withdrawal from THE Alliance could reduce its cargo volume, which will have an impact on the operators of Terminals 1, 3, and 4. Terminal 1 is operated by Pusan Newport International Terminal (PNIT), of which majority stake is held by PSA International of Singapore. Terminal 3 is operated by Hanjin Busan Container Terminal (HJNC), with Hanjin being the major shareholder. Terminal 4 is operated by HMM-PSA New Port (HPNT), which is 50% jointly owned by PSA International and HMM.
Particularly, Hanjin, which handles about half of THE Alliance’s volume at Terminal 3, is in a state of emergency by the news.
It is possible that Maersk and Hapag-Lloyd’s Gemini may collaborate with other terminals, in addition to 1-5. Dongwon Group’s DGT, which will commence full operation this year at the new port’s container terminal phase 2-5, and Busan Container Terminal (BCT), operated by HDC with the largest stake in the new port’s Terminal 6, are expected to actively compete to attract Gemini.
However, there is also a likelihood that Gemini may not designate Busan’s new port as a hub port. Busan faces the risk of being excluded as a hub port, overshadowed by major Chinese ports. As part of their plan to increase schedule reliability through a Hub and Spoke strategy, Maersk and Hapag-Lloyd will operate a streamlined mainline route between hub ports. The “Hub and Spoke” approach is a content marketing strategy that organizes content into comprehensive resources.
If Busan Port is excluded as a hub port for the Gemini Cooperation, it could lead to a drastic drop in transshipment volume, which could cause a crisis for the entire Korean shipping and logistics industry, including Busan Port. In the last 16 years, Busan Port has significantly increased its cargo volume from 10.41 million TEU in 2004 to 22.75 million TEU last year, including transshipment cargo to Japan. The transshipment volume alone has grown from 4.25 million TEU in 2004 to 12.14 million TEU last year.
