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Biz News Korea(Eng)

Drop in ocean shipping rates could affect HMM’s earnings

Collected: 2024.02.21

Distributed: 2024.02.22

Source: Go Direct

[Photo provided by HMM Co.]

Container shipping rates could start dropping following a surge triggered by Yemen’s Iran-backed Houthi rebels, who have recently turned the Red Sea into a conflict zone, according to claims by industry observers.

They expect ocean freight rates to fall because more shipping companies have diverted their fleet to the Cape of Good Hope to avoid passing through the Red Sea amid a long-lasting excess supply of container ships worldwide.

The Shanghai Containerized Freight Index (SCFI), the world’s trade index for sea freight rates from Shanghai, fell by 3.2 percent from its peak, with similar decreases in regional rates across Europe and the Americas.

Further decreases in container rates could threaten potential earnings from HMM, the largest shipping company in South Korea, which has relied on high shipping rates to back earnings growth.

The company is expected to earn 600.2 billion won ($449 million) in operating profit for the first quarter of 2024, or an expansion of 14 times from a year earlier. But potential fluctuations in freight rates could have an impact on these earnings prospects.

By Choi Hyun-jae and Han Yubin

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