Asian Shipping Companies Smiling Amid Soaring Asia-North America Freight Rates

[Asia Economy Reporter Yu Je-hoon] Despite the impact of the novel coronavirus infection (COVID-19), freight rates on routes connecting Asia and North America have continued to soar, raising expectations for improved performance of Asian shipping companies including HMM.

According to the Shanghai Containerized Freight Index (SCFI) announced by the Shanghai Shipping Exchange on the 17th, as of the 9th, the freight rate for the Asia~North America West Coast route recorded $3,848 per FEU (a unit referring to one 12m container).

This is about a 0.05% decrease compared to mid-last month when the previous record high was set, but the West Coast freight rate has maintained a high level since it first surpassed $3,000 in July.

Additionally, the freight rate for the Asia~North America East Coast route also continued its upward trend, reaching $4,622 per FEU. The East Coast route freight rate has steadily increased since breaking the $4,000 mark for the first time in five years in August.

This sharp rise in freight rates is attributed to the gradual economic reopening by the United States and China, the largest consumer and producer countries, following the COVID-19 outbreak. Industry insiders note that demand for COVID-19 prevention supplies surged mainly on the West Coast, and e-commerce demand has significantly increased ahead of the year-end. Accordingly, shipping companies have recently resumed services that were reduced due to COVID-19.

An industry official said, "The main reason is the significant increase in related demand as the U.S. reopens its economy," adding, "The active mergers and acquisitions (M&A) among global shipping companies since the 2010s, which drastically reduced the number of players, also seem to have positively influenced capacity adjustments."

The industry expects Asian shipping companies including HMM to benefit from the rising freight rates on North American routes. According to Alphaliner, the service share of Asian carriers on Asia~North America routes is relatively high compared to European carriers, with Taiwan's Yang Ming Marine Transport at 41%, Japan's ONE at 35%, and China's COSCO at 25%. HMM also deploys about 30,000 TEU (a unit referring to one 6m container), approximately 40% of its weekly service, on North American routes.

As freight rates continue to soar, shipping companies are strengthening their routes to North America. As of last month, the weekly fleet supply for the Asia~North America region was about 523,000 TEU, an increase of approximately 11.6% compared to the previous year.

However, this situation is unfavorable for domestic exporters. Shippers may face difficulties meeting delivery deadlines if they cannot secure capacity in time, along with bearing enormous logistics costs. In response, HMM is considering adding temporary direct sailings to Los Angeles (LA), USA, by the end of this month. As the largest national shipping company, it is taking steps toward mutual growth. Previously, HMM deployed temporary vessels (each with capacities of 4,600 and 5,000 TEU) twice in August and September to accommodate domestic shippers struggling with capacity shortages and high freight rates. An HMM official stated, "We intend to fulfill our responsibilities as a national shipping company," adding, "While nothing has been finalized, we are positively reviewing the plan."

This content was produced with the assistance of AI translation services.