A Korean

rebound
EUKOR, one of the largest vehicle shipping companies
in the world, is 80 per cent Scandinavian owned and
ships over 3 million cars annually. We visited its office
and port facilities in Seoul, to see how the company is
doing in the wake of the global depression.
TEXT & PHOTO: JOJJE OLSSON (EXCEPT WHERE NOTED)
In the outskirts of Seoul,
hundreds of Korean made
Kia cars are being loaded
onto an enormous ship with
furious speed. They are only
a fraction of the 950,000
Kia vehicles being shipped
annually from this terminal
at the port of Pyeongtaek.
nd a bit further south, in the city of Ulsan, well over

A a million Hyundai cars are being shipped out every

year to five continents. This is done almost exclu-
sively by EUKOR Car Carriers Inc (EUKOR), a Scandi-
navian company with a unique relation to the Hyundai-Kia Mo-
tors Group, one of the world’s largest carmakers.
Owned 40 per cent by Wallenius and Wilhelmsen respective-
ly, and with a 20 per cent share still in Korea, EUKOR did well
steering through the economic depression experienced by the
shipping industry from 2008:
“Even if we were clearly affected by the financial crisis, with
a sudden drop in volumes, it didn’t hit us as hard as many other
companies in the industry”, says Martin Malmfors, EUKOR’s
Head of President’s Office, stationed in Seoul.

ACCORDING TO HIM THERE are a number of reasons for this:

EUKOR’s largest customer Hyundai-Kia did impressively well
during the crisis, as it mainly produces cost efficient and cheap
cars. It even surpassed Honda in 2008, and Ford 2009, to become
the world’s fourth largest manufacturer of passenger cars.
Also, the Korean currency took a nosedive during the depres-
sion, as the won declined by almost a third to the US dollar. The
Japanese yen simultaneously hit the ceiling, which affected Ko-
rean car export in a positive way.
At the same time, Martin Malmfors says, a number of char-
ter contracts on ships operated by EUKOR ended just when the
crisis became obvious. The company could simply choose not to
renew those contracts once the export volumes started to drop:
“If one is allowed to say so, the financial crisis appeared with
good timing from EUKOR’s perspective.”
He also says the effect of a global crisis is not instantly felt
in the shipping industry, but sets in only after a while. Hence,
2008 actually came to be the year in EUKOR’s history when it
shipped most cars, 3,2 million, measured in Car Equivalent
Units, CEU, where 1 CEU equals 10 cubic metres.

THE NEXT YEAR, 2009, would however be worse for the industry.
Korean newspaper Chosun Ilbo reported that the shipment of
vehicles from Korea decreased with almost 30 per cent year-on-
year from 2008, and the global overproduction of passenger cars
reached 57 per cent.
 Entrance to the Pyeongtaek
terminal from where Kia cars are
being shipped by EUKOR.

South Korea is Asia’s fourth

largest economy. In 2010 the
country had a GDP per capita of
USD 20,590.
PHOTO: SAEBARYO/FLICKR.COM

PHOTO: ASIRAP/FLICKR.COM

Kia Motors is South Korea’s

second largest automobile
manufacturer. The headquarters
is located in Seoul.
 950,000 Kia vehicles are being shipped annually from the terminal at the port of Pyeongtaek.
Also, the global markets are changing, and in the past years
Hyundai-Kia has established an increasing number of facto-
ries outside Korea, producing cars tailored for local markets in
China, Europe, India and the US.
But according to Martin Malmfors this will not significantly
affect EUKOR’s business in the long run:
“Production of cars is far more expensive than transportation.
In China for instance, domestic regulations make it hard to set
up a factory, and the investments needed won’t always cover the
money potentially saved on lower wages and transportation.”
He says producing cars is a relatively automated process, and
the case would be different with a shipyard, which is a much
more labour intensive industry.
The cost for transporting a passenger car from Asia to Europe
would be “about 500 US dollars”, says Martin Malmfors. It is
often cheaper to re-export from overseas car plants than to pro-
duce close to the market. As an example, he points out that the
»It is o!en cheaper to re-export
from overseas car plants than to
produce close to the market«
largest car exporter from the US actually is German BMW.
Also, the world’s largest car factory, Hyundai in Ulsan, is
situated close to China, now the world’s largest car market,
further slicing transportation costs. Even from India, where
Hyundai produces small cars for the domestic market, EUKOR
ships out some 350,000 vehicles annually.
THE WAY BACK FROM the volume drop in 2009 has been quick
for EUKOR. Despite the financial crisis and the establishment
of Hyundai-Kia car factories abroad for local markets, 2010 was
the most financially successful year ever in the company’s his-
tory, according to Martin Malmfors.
 Kia cars waiting to be loaded onto EUKOR’s carriers at the Pyeongtaek terminal.
Just before the financial crisis, EUKOR placed several large ship
orders. In 2007 it had about 30 ships still waiting to be deliv-
ered, according to Swedish publication Affärsvärlden, and in
early 2008, Wallenius and Wilhelmsen placed orders for another
eight new super car carriers, worth an estimated 100 million US
dollars per ship.
Ships were obviously being delivered to EUKOR also during the
downturn, and a few of the orders made back in 2007–2008 are
yet to be delivered. But contrary to what one might believe, even
the orders placed back then came out as favourable for EUKOR:
“The new ships are needed right away, and will be in full
service from day one. At present we charter ships from about 20
different shipowners, and many of those ships are decades old.
With the new ships every trip will be more efficient”, says Mar-
tin Malmfors.
The new ships delivered in 2009 decreased the average age of
the fleet to less than ten years per ship, and increased the aver-
age capacity to over 5,300 units. The new ships delivered last
year further improved those digits, even if the new statistics are
not available yet.
MARTIN MALMFORS SAYS EUKOR has actually been experien-
cing a lack of space almost every year. Also, the ships must con-
stantly improve, as an increasing share of the cargo is made up
of buses, excavators and even high-speed trains.
EUKOR’s newest Pure Car and Truck Carriers (PCTCs) with
a capacity of over 8,000 CEU are the largest ships for vehicle
transportation in the world. They are equipped with 150-ton
heavy-duty stern ramps, and a maximum of 6,70 meter deck
clearance.
A couple of those ships, ordered back in 2008, have just been
delivered. Still another handful of ships are being built at a
shipyard in Japan, of which two are to be delivered during 2011,
and two the year after. For a company of EUKOR’s size, there
Martin Malmfors, Head of
President’s Office, at the terminal in
Pyeongtaek just outside Seoul.

EUKOR was founded in December 2002 after a somewhat unexpected outreach from the Korean
Shipping company Hyundai Merchant Marine (HMM) to Wallenius and Wilhelmsen.
»What one may anticipate in terms
of seeing the vehicle shipping mar-
ket as a very stable business, all of
a sudden might not be correct, as
huge fluctuations can appear«
will be a regular need to renew the fleet with some 4–5 ships
every year, says Martin Malmfors:
“It’s impossible to foresee highs and lows in this industry,
so we rather order new ships every year to ensure a reliable and
modern fleet. There is actually a problem to find enough berths
in shipyards for the type of ships we want to order.”
As of this year, EUKOR has around 90 ships in constant opera-
tion, of which around half are owned, and the rest chartered
according to demand. Many of the chartered ships are also
controlled by EUKOR through long-term charters, and several
include buying options, says Martin Malmfors.
The standard size for EUKOR’s ships is 6,000 CEU, and the
fleet is now calling in 220 ports in 150 countries.
EUKOR WAS FOUNDED IN December 2002, after a somewhat
unexpected outreach from Korean Shipping company Hyundai
Merchant Marine (HMM) to Wallenius in Stockholm and Wil-
helmsen in Oslo, to buy HMM’s car carrier division. Asia was
just recovering from a regional financial crisis, and many com-
panies and nations were in need of capital and investments
from abroad.
After a long process Wallenius and Wilhelmsen signed a con-
tract with HMM worth 1.3 billion dollars for the exclusive right
to ship Hyundai-Kia cars for an initial period of seven years. Of
PHOTO: SAEBARYO/FLICKR.COM
the newly founded EUKOR, 40 per cent each would belong to
Wallenius and Wilhelmsen respectively, and Hyundai and Kia
Motors each got a 10 per cent share.
EUKOR also took over debts and obligations for about 2.5 bil-
lion US dollars. The deal was the largest acquisition in Asia
2002, and the largest foreign direct investment ever in Korea.
“The deal was asset-light in nature from the beginning”, says
Martin Malmfors, adding that EUKOR chartered more than
75 per cent of the ships needed at first. As cash flow started to
increase, EUKOR could then start buying its own car carriers
in order to maximise efficiency. Ever since the business was
launched in late 2002, it has experienced a double-digit growth
annually. Even during the temporary market slump in 2009,
EUKOR was “luckily not even close to red numbers”, says Martin
Malmfors.
EUKOR’s engagements have become increasingly diversified
with time. Today shipping of Hyundai-Kia cars stands for some
60–65 per cent of the total shipping volumes, compared with
more than three quarters at the very beginning. Today EUKOR
serves most global automotive manufacturers, like Volkswa-
gen, Ford, BMW and Audi, to name a few.
As the original ocean carrier contract expired in the end of
2009, Hyundai’s in-house logistic company Glovis was given a
25 per cent share of the Hyundai and Kia export shipments in
a new contract, which stretches to 2016. This is a way for both
EUKOR and the Korean carmaker not to “put all eggs in one bas-
ket”, as Martin Malmfors puts it.
HE ALSO COMMENTS ON how the financial crisis somewhat
changed EUKOR’s strategy and way of thinking: What one may
anticipate in terms of seeing the vehicle shipping market as a very
stable business, all of a sudden might not be correct, as huge fluc-
 A stevedore in action,
instructing how to drive.

It’s not only cars that

are being shipped by
EUKOR’s car carriers.
PHOTO: EUKOR

Kia cars are being

handled inside one of
EUKOR’s carriers.

PHOTO: EUKOR
PHOTO: EUKOR
Cars are being offloaded from
one of Eukor’s car carriers.
PHOTO: EUKOR
»Although being our customers –
with an obvious wish to minimize
their supply chain costs – as share-
holders they also have a natural
vested interest in the company’s
financial success«
tuations can appear. Analyses and ten-year plans are suddenly of
little use, as one has no choice but to respect the market forces.
Hence, EUKOR will in the future strive for a more diversified
customer portfolio, as well as chartering a significant part of its
fleet, in order to minimize potential damage if a new downturn
should occur.
There are currently six major vehicle shipping companies in
the world, of which five have about 15–20 per cent each of the
market. Martin Malmfors estimates that EUKOR is one of the
two largest, and together with sister company Wallenius Wil-
helmsen Logistics, they control about a third of all ocean trans-
portation of vehicles on the planet.

IN 1999, THE SWEDISH shipping company Wallenius Lines AB,

cooperated with its competitor, Norwegian Wilh. Wilhelmsen
ASA to establish the world’s largest vehicle shipping company;
Wallenius Wilhelmsen Logistics. (WWL)
After an unexpected reach out from Korea in 2002, the Scan-
dinavians got an opportunity to include shipping of Korean cars
in its cooperation. Together with Hyundai and Kia, the two
Scandinavian companies through an acquisition acquired the
car carrier division of Hyundai Merchant Marine Co Ltd.
The newly founded EUKOR – a sister company to WWL - was
to be owned 40 percent each by Swedish Wallenius and Norwe-
gian Wilhelmsen, giving a 10 per cent share to Hyundai and
Kia respectively.
”EUKOR founds its success on the close industrial partner-
ship with the Korean carmakers both in their role as main cus-
tomers and at the same time 20 percent shareholders. Although
being our customers – with an obvious wish to minimize their
supply chain costs – as shareholders they also have a natural
vested interest in the company’s financial success”, Martin
Malmfors explains.
 He adds that Hyundai and Kia are represented on the EUKOR
Board of Directors and have full insight into its financials and
both short and long term strategic objectives.
”Even though EUKOR is 80 percent Scandinavian owned,
it’s not a subsidiary of Wallenius and Wilhelmsen, but rather
organized as an entirely independent company with our own
balance sheet to which we have the right to acquire vessels and
other fixed assets”, says Martin Malmfors.
The headquarters has been based in Seoul since the start
2002, and EUKOR has been run and governed very much like a
Korean company, which Martin Malmfors believes have con-
tributes strongly to its success.
The original deal included a seven-year sole right clause for
EUKOR to ship Hyundai and Kia cars. When a new deal was set-
tled in 2009, Hyundai’s own logistic company Glovis was given
a 25 percent share of the Hyundai-Kia shipping.
At the same time, EUKOR is also expanding its portfolio with
new customers to make it more diversified; a way for the com-
pany as well as for the Korean carmakers not to put all eggs in
the same basket.
*