HMM Forecasts Record-Breaking Q2 Earnings Again

Global Shipping Cargo Volume Surges
Strong Performance Expected to Continue in Q1

[Asia Economy Reporter Dongwoo Lee] Thanks to the soaring global shipping freight rates, the national shipping company HMM is expected to record its highest-ever performance again in the second quarter of this year.

According to financial information provider FnGuide on the 24th, HMM's operating profit for the second quarter of this year is estimated to be 1.0289 trillion KRW, an increase of about 1% compared to the previous quarter (1.0193 trillion KRW). Previously, HMM recorded its highest quarterly performance in its 45-year history since its predecessor Hyundai Merchant Marine in the first quarter of this year.

The record-high performance is expected to be driven by the surge in global cargo volume after COVID-19, which has pushed up maritime freight rates. The Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 maritime container shipping routes, rose by 89.16 points from the previous week to 3432.50, marking the highest level since its inception in October 2009.

The shipping industry expects the SCFI, which usually considers 800-900 points as the breakeven point, and long-term shipping (SC) contract freight rates, which determine container ship freight rates on an annual basis with major shippers, to increase by an average of 700 to 1000 USD or more compared to the previous year.

Researcher Jihwan Yang of Daishin Securities analyzed, "The SC freight rates, which are being applied sequentially from this month, are estimated to increase by more than 700 USD per 1 TEU compared to 2020, and the trend of improved performance is expected to continue until the third quarter of this year."

HMM, in particular, has driven its performance by increasing its total fleet capacity by more than 70% within a year after receiving a total of 12 vessels, starting with the world’s largest 24,000 TEU-class container ship ‘HMM Algeciras’ in April last year.

The global price competitiveness has also been strengthened due to the deployment of ultra-large vessels. As of last year, HMM saved 176.7 billion KRW in fuel costs compared to the previous year, and during the same period, it reduced 312.2 billion KRW in cargo loading and unloading costs, charter fees, and others.

Meanwhile, some advise that HMM should focus on ‘structural improvement’ rather than fleet expansion in the long term. Given the uncertainty about how long the freight rate increase due to the surge in cargo volume will last, there is a need for a new profit-generating structure such as strengthening bulk shipping.

An industry official said, "HMM’s container ships currently account for more than 90% of total sales," adding, "It is important to restructure the business, including strengthening bulk shipping, to prepare for a downturn in the market."

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