• HMM posted consolidated revenue of KRW 4.21 trillion (US$3.21 billion) in H1 2023, down 58% y-o-y
• Operating profit sank 92% y-o-y while net profit plunges 90% y-o-y to KRW 610 billion
• HMM blames overcapacity with the influx of new containerships ordered during the pandemic and supply chains normalizing at major ports
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Freight rates in most key trade lanes under downward pressure during H1 2023
South Korea’s global container line HMM reported consolidated revenue of KRW 4.21 trillion (US$3.21 billion) in the first half of 2023, down 58% from KRW 9.95 trillion in H1 2022, reflecting an industry-wide downturn as weak demand, supply chain disruptions and overcapacity ended a year and a half of shipping rate upsurge.
Operating profit shrank 92% year-on-year to KRW 467 billion in H1 2023, from KRW 6.09 trillion. As a result, the leading Korean ocean liner said net profit contracted 90% y-o-y to KRW 610 billion, with a margin of 14.5%, in H1 2023.
But more than economic factors, major container shipping lines and industry analysts alike attribute the industry troubles to overcapacity arising from new vessels ordered during the COVID-19 contagion began joining the fleet this year.
“The container shipping industry has been experiencing an overcapacity, mainly led by the influx of new containerships ordered during the pandemic and supply chain normalization at major ports and inland regions,” HMM said.
“The cascading effect of larger vessels from the main East-West trades onto smaller lanes intensified the imbalance between supply and demand.”
Freight rates under pressure
HMM said that, consequently, freight rates in most key trade lanes had been under downward pressure during H1 2023. The Shanghai Containerized Freight Index (SCFI) in H1 2023 was 976 points on average, significantly down 78% from 4,504 points in H1 2022.
For the second quarter, revenue dropped 58% y-o-y to KRW 2.13 trillion from KRW 5.03 trillion and operating profit plunged 95% y-o-y to KRW 160 billion from KRW6.09 trillion, HMM said.
Net profit reached KRW 313 billion, diving 89% y-o-y from KRW 2.94 trillion.
Nevertheless, HMM said its financial structure remained strong, with its debt-to-equity ratio improving slightly to 24% in June 2023 from 26% in December 2022.
The container line expects cargo volumes to recover in the near term stemming from a soft landing in the US economy.
“In the case of Transpacific trade, we expect to see a gradual recovery in cargo volumes as a rebound in inventory restocking and a soft landing for the US economy are likely to come to fruition, with no drastic changes in the supply side in the near term,” the company said.
HMM said it will continue to carry out service adjustments, such as introducing the FIM (Far East Asia, India and the Mediterranean Sea) routes, taking cost-cutting measures and enhancing operational efficiency to cope with market uncertainty.
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