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Sinokor, Heung-A merger will have little impact on S Korean bunker market: traders

Monday, 16 April 2018 02:06

A merger of the container shipping businesses of Sinokor Merchant Marine and Heung-A Shipping is expected to have minimal impact on the South Korean bunker fuel market, trade sources said this week.

The two companies released a statement late last week announcing the merger, with Sinokor expected to be the main stakeholder of the new entity.

“There’s not likely to be a huge effect on the bunker market due to this merger,” a South Korean bunker trader said late Wednesday.

“There are no additional vessels or decrease in vessels [for the two shipping companies] currently, so we do not expect any change for bunker fuel volumes as well,” another trader said.

Sinokor and Heung-A are intra-Asia operators, mostly plying regional routes.

Industry sources estimated that Sinokor and Heung-A’s bunker fuel consumption amounts to a total of 450,000 mt/year.

South Korean traders said this week that both companies buy bunker fuel on both spot and term basis, with term volumes usually settled on a six-month or 1-year contract, which is the typical duration of term contracts in the North Asian bunker fuel market.

South Korean market participants were broadly supportive of the merger, with many saying that it would help improve the financial standing of both companies.

“Heung-A’s financial status has been of concern for some time now, and only some traders were heard giving credit to it. So I think it’s better for both companies that they are finally getting merged,” a trader said this week.

Sinokor and Heung-A signed a memorandum of understanding on Tuesday. The merger is expected to be completed by December 31, 2019.

Sinokor and Heung-A, together with Hyundai Merchant Marine’s short-haul intra-Asia business, are part of the HMM+2K consortium. The companies had signed a business cooperation agreement on March 1, 2017.

The merger of Sinokor and Heung-A was an expansion of the earlier agreement, according to the press release.