Unsurprisingly, South Korea’s two largest cargo carriers Hanjin Shipping Co. and Hyundai Merchant Marine Co. reported hefty operating losses in the first quarter ending on March 31, 2016 due to slow business that translated into depressed freight rates and poor revenue, the companies said in regulatory filings on Monday.

Hanjin Shipping incurred an operating loss of 116 billion won from January to March, sharply reversing from a profit 155 billion won in the same period in 2015. Net loss reached 261.1 billion won compared with 22.9 billion won income a year ago. Sales totaled 1.59 trillion won in the first quarter, sinking from 2.15 trillion won a year ago.

Hyundai Merchant Marine reported an operating loss of 163 billion won in January-March period, compared with 4.2 billion won profit in the same period a year ago, and net loss widened to 276 billion from loss of 44.5 billion won from a year earlier. Sales totaled 1.22 trillion won, compared with 1.57 trillion won in the same period 2015.

Extended losses could bode badly for the two major shippers trying desperately to stay afloat through creditors’ bailout of debt relief and immediate cash aid. The little profit the two earned mostly went to pay overseas ship-owners charging fees four to five times higher to Korean players in their leasing contracts. The two are required to rationalize leasing terms to receive any further bailout, and failure to do so could send the shippers to seek out court protection.

Global conditions worsened their woes. Freight rates that translate into revenue and operating income for shippers sharply deteriorated. The benchmark Shanghai Containerized Freight Index (SCFI) plunged to 469 in the first week of February from 1,231 in early January. The index slipped further to 257 in the first week of March. The SCFI was measured at 1,085 and 1,153 in the first weeks of the first two months of last year, and 938 in March last year.

By Yoon Jin-ho and Kim Tae-joon

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