By Kim Yoo-chul
Staff Reporter
Hanjin Heavy Industries and Construction has been suffering from order cancellations from the world's third-largest container line ― CMA-CGM.
Shipbuilding sources said CMA-CGM, a French-based shipping group, has canceled a $1.1 billion contract with the South Korean shipbuilder due to the bleak market.
"As far as I know, CMA-CGM canceled the contract with Hanjin," a high-ranking industry official told The Korea Times, asking not to be identified, Friday.
In a regulatory filing to the Korea Exchange, Hanjin said an "unnamed shipping group" scrapped part of the previous deal worth 130 billion won.
In 2006, Hanjin signed a contract with CMA-CGM for four 6,500 twenty-foot equivalent units (TEU) containerships at $100 million each. The vessels had been slated for delivery in September 2009.
"Hanjin is facing other order cancellations from the French company due to the latter’s unstable positions in terms of cash-flow," the official said.
"The French company will delay the delivery of the remaining orders from Hanjin. Situations are not favorable for the Korean shipyard."
The order cancellation came in a few months after CMA-CGM was in talks to remove some "new projects" from its order-book in South Korea and delay the delivery of others.
The troubled French container line had sought a one-year debt moratorium. The family-owned group, led by Jacques Saadé, will sell a stake in exchange for any government bailout.
The liner has been struggling to manage its aggressive 10-fold expansion of its slot capacity over the last 10 years, according to market research firms.
CMA CGM has also already ordered 40 box-ships with 369,500 TEU capacities worth $5.1 billion at Asian shipyards, and amassed an estimated $5.6 billion in debt, the firm said.
Now, the carrier has been in deep talks with Asian shipyards about canceling and delaying delivery of 30 of the 45 ships it has already ordered.
Industry officials say the world's big three shipyards ― Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy ― are expected to move away from possible order cancellations as the French company has ordered highly-profitable containerships with 10,000 TEU capacities.
"In 2009, bigger container liners, including CMA-CGM, cancelled containership orders, mainly those under 10,000 TEU capacities. But the big three are still safe with their order books," another high-ranking industry official said.